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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON, D.C. 20549




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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 28,
    2002                                             

OR

|     |  |                                                                                                 
|---- |  | ------------------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
|     |  | For the transition period
    from                      to                                      

Commission File Number 333-61713

American Tire Distributors, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                           |  |                                                      
|-------------------------------------------------------------------------- |  | -----------------------------------------------------
|Delaware(State or other jurisdiction of
    incorporation or organization) |  | 56-0754594(I.R.S. Employer
    Identification Number)

12200 Herbert Wayne Court,
Suite 150

Huntersville, North Carolina 28078


(Address, including zip code, of principal
executive offices)


(704) 992-2000

(Registrants telephone number, including
area code)


Securities registered pursuant to
Section 12(b) of the Act:

None

Securities registered pursuant to
Section 12(g) of the Act:

None

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

Indicate by 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.
x

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

The aggregate market value of the voting stock
held by non-affiliates of the registrant: None

Number of common shares outstanding at
March 15, 2003: 5,086,917



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TABLE OF CONTENTS

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|PART I  
|ITEM 1.  |  | Description of Business                                                                   |  |      | 1  | 
|ITEM 2.  |  | Description of Properties                                                                 |  |      | 5  | 
|ITEM 3.  |  | Legal Proceedings                                                                         |  |      | 5  | 
|ITEM 4.  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |      | 5  | 
|PART II 
|ITEM 5.  |  | Market for Registrants Common Stock and
    Related Security Holder Matters              |  |      | 5  | 
|ITEM 6.  |  | Selected Financial Data                                                                   |  |      | 5  | 
|ITEM 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |      | 7  | 
|ITEM 7A. |  | Quantitative and Qualitative Disclosure About
    Market Risk                             |  |      | 15 | 
|ITEM 8.  |  | Financial Statements and Supplementary Data                                               |  |      | 16 | 
|ITEM 9.  |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |      | 48 | 
|PART III
|ITEM 10. |  | Directors and Executive Officers of the Registrant                                        |  |      | 48 | 
|ITEM 11. |  | Executive Compensation                                                                    |  |      | 50 | 
|ITEM 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |      | 55 | 
|ITEM 13. |  | Certain Relationships and Related Transactions                                            |  |      | 56 | 
|ITEM 14. |  | Controls and Procedures                                                                   |  |      | 59 | 
|PART IV 
|ITEM 15. |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                       |  |      | 60 | 
|         |  | Signatures                                                                                |  |      | 68 | 
|         |  | Certifications                                                                            |  |      | 69 | 



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PART I

Item 1.     Description
of Business.

General Development of Business

American Tire Distributors, Inc. (together with
its subsidiaries, the Company) (formerly Heafner
Tire Group, Inc.), is one of the largest independent suppliers
of tires to the replacement tire market in the United States.
The Company operates 62 distribution centers servicing all or
parts of 35 states. Through this distribution network, the
Company currently serves an average of 35,000 customers each
month. In addition to its tire sales, the Company is a
significant independent distributor of aftermarket wheels,
accessories and automotive service equipment.

Founded in 1935, the Company has grown over the
past five years both by consistent growth in revenues which
exceeded the industry average, and by acquisitions. The Company
acquired Winston Tire Company (formerly Oliver & Winston)
(Winston) in 1997, Speed Merchant, d/b/a Competition
Parts Warehouse (CPW) in 1998 and merged with ITCO
Logistics Corporation (ITCO) in 1998. The Company
acquired California Tire Company (California Tire)
in 1999 and in 2000, the Company acquired certain assets of Tire
Centers, LLC (TCI), the outstanding common stock of
T.O. Haas Tire Company (Haas) and the
distribution operations of Merchants, Inc., known as
American Tire Distributors (ATD).

In May 1999, the majority owners of the
Companys Class A and Class B common stock sold
their shares to Charlesbank Equity Fund IV, L.P. a
Massachusetts limited partnership. On August 20, 1999, the
Company reincorporated in Delaware (previously incorporated in
North Carolina) and simultaneously changed its name from The
J.H. Heafner Company, Inc. to Heafner Tire Group, Inc. Effective
May 30, 2002, the Company changed its name from Heafner
Tire Group, Inc. to American Tire Distributors, Inc. The new
name is part of the Companys transition from a collection
of companies joined through acquisition into a single-minded
organization with an unmatched, coast-to-coast footprint in the
distribution market. The move follows two years of
reorganization during which the Company discontinued its venture
into tire retailing.

Effective January 26, 2001, the
Companys Board of Directors authorized the exit from
retail operations and determined that it was in the
Companys best interest to concentrate solely on wholesale
distribution, which is its core business. In that regard,
effective May 15, 2001, the Company completed a transaction
pursuant to a Stock Purchase Agreement to sell all the capital
stock in Winston, its retail segment, to Performance Management,
Inc. for a purchase price of approximately $10.0 million.
Accordingly, this segment has been reflected as a discontinued
operation in the accompanying consolidated financial statements.
See Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations for
further discussion.

Industry Overview

Purchasers in the United States spent
approximately $21.6 billion on new replacement tires in
2002. Of that amount, passenger tires accounted for
approximately 60.1% of sales, light truck tires accounted for
approximately 16.2%, truck tires accounted for approximately
20.4% and farm, specialty and other types of tires accounted for
approximately 3.3%. The number of new replacement tires shipped
in the United States for passenger cars and light trucks
increased from 164.6 million tires in 1986 to
239.5 million tires in 2002. The Company believes that
increases in both the number and average age of cars as well as
passenger miles driven in the United States have contributed to
this growth.

Consumers of new replacement tires in the United
States obtain them from several principal sources, including
independent tire dealers, manufacturer-owned retail stores, mass
merchandisers such as Sears and Wal-Mart, auto supply chain
stores and wholesale clubs and discounters. Independent tire
dealers, which represent the largest customer base served by the
Company, are the largest suppliers of new replacement passenger
tires in the United States. Independent tire dealers accounted
for approximately 58.5% of retail sales of domestic replacement
passenger tires in 2002.

1



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Independent tire dealers obtain their inventory
of new replacement tires through three principal sources: tire
manufacturers, independent wholesale distributors like the
Company and dealer-owned warehouses. Other sources include
discount or price clubs and other tire outlet chains. The
Company believes that, in recent years, certain tire
manufacturers have reduced their supply to small independent
tire dealers due to the inefficiencies of supplying small
quantities of product to a large number of locations. At the
same time, manufacturers have increased their supplies to
independent wholesale distributors such as the Company, who are
able to deliver tires to a large number of independent tire
dealers with greater efficiency.

The replacement tire market for passenger cars
and light trucks consists of three primary types of tires:
flag brands, which are premium tires made by the
major tire manufacturers; associate brands, which are primarily
economy brand tires made and marketed by the major tire
manufacturers; and private-label brands, which are brands made
by tire manufacturers exclusively for and marketed by
independent tire wholesale distributors and or retailers. In
2002, flag brands constituted approximately 58% of the United
States passenger and light truck replacement tire markets,
associate brands made up approximately 18% of those markets and
private-label brands constituted approximately 24% of those
markets.

Products

The Company sells a broad selection of tires,
custom wheels, automotive service equipment and related products
manufactured by the leading manufacturers of those products. The
Companys products include flag brand tires manufactured by
Michelin, Bridgestone/Firestone and Goodyear/Dunlop as well as,
private-label products such as Regul tires, Winston tires and
Pacer and ICW custom wheels; and associate brand products such
as Monarch tires, manufactured by Goodyear. The Company also
distributes alignment service equipment manufactured by Hunter
Engineering Company and tire changers and balancers built by
Hennessey Industries, Inc. (a division of the Danaher
Corporation), both leading manufacturers in their respective
fields. The Company sells many other products, including tires
for the medium truck, farm and industrial markets, automotive
service equipment, wheel weights and tubes. Sales of tires
accounted for approximately 87.7% of sales from continuing
operations in 2002, 90.3% in 2001 and 82.0% in 2000. The
remainder of the Companys sales includes wheels, service
equipment and other automotive parts.

Suppliers

The Company purchases its products from all major
tire manufacturers as well as other suppliers. Of the
Companys principal private-label brands, Winston tires are
manufactured exclusively by Goodyear and Regul tires are
manufactured by Michelin.

There are a number of worldwide manufacturers of
wheels and other automotive products and equipment. Most of the
wheels purchased by the Company are private-label custom brands,
namely Pacer and ICW, and are produced by a variety of
manufacturers. The Company purchases equipment and other
products from multiple sources, including industry leaders such
as Hunter Engineering Company and Hennessey Industries, Inc. (a
division of the Danaher Corporation).

With the exception of a long-term contract (the
Winston Private Brand Supply Agreement) with
Kelly-Springfield, a division of Goodyear,
(Goodyear), the Companys supply arrangements
with its major suppliers generally are oral or written
arrangements which are renegotiated annually. Although there can
be no assurance that these arrangements will be renewed, or
renewed on favorable terms, the Company has conducted business
with its major tire suppliers for many years and believes that
it has strong relationships with all of its major suppliers.

The Company purchases certain private-label and
associate brand tires, including the Winston and Monarch
products, from Goodyear. Purchases under the Winston Private
Brand Supply Agreement are made at prices as specified from time
to time in the manufacturers pricing schedule. Under the
terms of the Winston Private Brand Supply Agreement, the Company
purchases all of its requirements of Winston brand tires from
Goodyear. The initial term of the Winston Private Brand Supply
Agreement expires on May 7, 2007 and the agreement is
automatically renewable for successive three-year terms
thereafter. The Winston Private Brand Supply Agreement may be
terminated by either party upon twelve months advance
notice. Goodyear is

2



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the sole holder of the Companys
Series A preferred stock and Series B preferred stock,
as discussed below under Certain Relationships and Related
Transactions  Preferred Stock.


Customers

The Company distributes tires and related
automotive products principally to independent tire dealers. The
Companys other customers include national retail chains,
service stations, general automotive repair facilities, auto
parts stores, automobile dealers and specialty automotive repair
facilities. The Company generally requires payment from its
customers within 30 days, although it may tailor programs
for its larger customers. In 2002, the Companys continuing
operations served an average of 35,000 customers each
month. The Companys largest customer accounted for less
than 1% and its top 25 customers accounted for less than 7%
of net sales from continuing operations in 2002.

Competition

The industry in which the Company operates is
highly competitive, and many of the Companys competitors
have resources significantly greater than the Company. Tire
manufacturers distribute tires to the retail market by direct
shipments to independent tire dealers, national retail chains
such as Sears and Wal-Mart and manufacturer-owned retail stores
as well as through shipments to independent wholesale
distributors. A number of independent wholesale tire
distributors also compete in the regions in which the Company
operates.

The Company believes that the principal
competitive factors in its business are reputation, breadth of
product offering, delivery frequency, price and service. The
Company believes that it competes effectively in all aspects of
its business due to its ability to offer a broad selection of
flag and private-label branded products, its competitive prices
and its ability to provide quality services in a timely manner.

Trademarks

The private-label brand names under which the
Company markets its products are trademarks of the Company.
Those private-label brand names are considered to be important
to the Companys business because they develop brand
identification and foster customer loyalty. All of the
Companys trademarks are of perpetual duration as long as
they are periodically renewed. The Company currently intends to
maintain all of them in force. The principal private-label brand
names under which the Company markets its products are:



| |   |                          
| | - | -------------------------
| |  | REGUL® tires,            
|
| |  | WINSTON® tires,          
|
| |  | DYNATRAC®,               
|
| |  | PACER® custom wheels,    
|
| |  | ICW® custom wheels, and  
|
| |  | MAGNUM® automotive lifts.

Seasonality and Inventory

The Companys operations typically
experience their highest levels of sales from March through
October of each fiscal year, with the period from November
through February generally experiencing the lowest levels of
sales. The Companys inventories generally fluctuate with
anticipated seasonal sales volumes. The Company believes it
maintains levels of inventory that are adequate to meet its
customers needs on short notice.

Since customers look to the Company to fulfill
their needs on short notice, backlog of orders is not a
meaningful statistic.

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Working Capital Practices

The Company must maintain substantial inventories
in connection with its operations. Inventory levels fluctuate
throughout the year with anticipated seasonal sales volume.
Inventories are financed through vendor credit terms and
borrowings under the Companys revolving credit facility
(Revolver). The amount of borrowings under the
Revolver fluctuates throughout the year. On December 28,
2002, total commitments by the lenders under the Companys
Revolver were $180.0 million, of which $17.0 million
was available for additional borrowings after consideration of
the Companys outstanding letters of credit totaling
$6.3 million.

Both the maintenance of substantial inventories
and the practice of seasonal borrowing are common to the
wholesale tire distribution industry.

Environmental Matters

The Companys operations and properties are
subject to federal, state and local laws, regulations and
ordinances relating to the use, storage, handling, generation,
transportation, treatment, emission, release, discharge and
disposal of certain materials, substances and wastes under which
the Company could be held strictly, jointly and severally liable
for costs associated with the investigation and clean-up of
contaminated properties. The nature of the Companys
existing and historical operations exposes it to the risk of
liabilities or claims with respect to environmental matters,
including off-site disposal matters. For example, in automotive
service operations of the discontinued retail segment, the
Company handled waste motor oil and hydraulic brake fluid, the
storage and disposal of which is strictly regulated by federal
and state authorities. The Company contracted with outside
services to handle disposal of these materials.

The Company believes that it currently complies
with all relevant environmental regulations and it does not
incur significant costs maintaining compliance with those laws.
However, the Company could incur material costs in connection
with environmental liabilities or claims. In addition, future
events such as changes in existing laws and regulations or in
their interpretation, could give rise to additional compliance
costs or liabilities that could have a material effect on the
Companys business or earnings. Expenditures related to
environmental matters have not had, and are not expected to
have, a material effect on the Companys business or
earnings.

Employees

As of December 28, 2002, the Companys
continuing operations employed approximately 1,915 people.
None of the Companys employees are represented by a union.
The Company believes its employee relations are satisfactory.

Business Subject to Governmental
Contracts

No material portion of the business of the
Company is subject to renegotiation of contracts with, or
termination by, any governmental agency.

Cautionary Statements on Forward-Looking
Information

This report contains forward-looking
statements, which are statements other than statements of
historical facts. These forward-looking statements are
principally contained under Items 1 and 7 and in statements
using phrases such as expects or
anticipates located throughout this report. The
forward-looking statements include, among other things, the
Companys expectations and estimates about its business
operations, strategy, and its expectations and estimates about
its future financial performance, including its financial
position, cash flows from continuing operations, capital
expenditures and ability to refinance indebtedness.

The forward-looking statements are subject to
risks, uncertainties and assumptions about the Company and about
the future, and could prove not to be correct. The current
economic environment continues to remain uncertain and when
combined with the uncertainties of the current crisis in Iraq,
there can be no assurances about the Companys future
business operations or financial performance. Cautionary
statements

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describing factors that could cause actual
results to differ materially from the Companys
expectations are discussed in this report, including in
conjunction with the forward-looking statements included in this
report. All subsequent written or oral forward-looking
statements attributable to the Company or to persons acting on
behalf of the Company are expressly qualified in their entirety
by those cautionary statements.


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

Item 2.     Description
of Properties.

The Companys principal properties are
geographically situated to meet sales and operating
requirements. All of the Companys properties are
considered to be adequate to meet current operating
requirements. As of December 28, 2002, the Company had a
total of 62 warehouse distribution centers located in
18 states, aggregating approximately 4.8 million
square feet. Of these centers, four are owned and the remainder
are leased.

The Company also leases its principal executive
office located in Huntersville, North Carolina.

Item 3.     Legal
Proceedings.

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

Item 4.     Submission
of Matters to a Vote of Security Holders.

Not applicable.

PART II

Item 5.     Market
for Registrants Common Stock and Related Security Holder
Matters.

Not applicable.

Item 6.     Selected
Financial Data.

The following table sets forth selected
historical consolidated financial data of the Company for the
periods indicated as restated for the presentation of Winston,
its retail segment, as a discontinued operation. The selected
historical financial data as of the end of and for the fiscal
years 1998 through 2002 is derived from the consolidated
financial statements of the Company as of and for those years.
The consolidated financial statements of the Company as of
December 29, 2001 and December 28, 2002 and for each
of the three years in the period ended December 28, 2002
are included in Item 8 of this report. The following
selected historical consolidated financial information should be
read in conjunction with Managements Discussion and

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Analysis of Financial Condition and Results of
Operations, included as Item 7, and the consolidated
financial statements of the Company and the related notes,
included as Item 8, in this report.


|                                                               |  |              |           |      |  |         |           |         |  |         |           |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------- |  | ------------ | --------- | ---- |  | ------- | --------- | ------- |  | ------- | --------- | - |  | - | ------- | - |  | - | ------- | -
|                                                               |  | 2002         |           | 2001 |  | 2000(b) |           | 1999(c) |  | 1998(e)
|                                                               |  |              |           |      |  |         |           |         |  |        
|                                                               |  |             
|                                                               |  | in thousands
|Statements of Operations Data(a):                              |  |              |           |      |  |         |           |         |  |         |           |   |  |   |         |   |  |   |         |  
|Net sales(d)                                                   |  | $            | 1,060,394 |      |  | $       | 1,107,894 |         |  | $       | 1,087,260 |   |  | $ | 908,049 |   |  | $ | 593,879 |  
|Gross profit                                                   |  |              | 197,873   |      |  |         | 210,422   |         |  |         | 199,956   |   |  |   | 159,178 |   |  |   | 102,311 |  
|Operating income                                               |  |              | 31,351    |      |  |         | 4,079     |         |  |         | 27,186    |   |  |   | 21,526  |   |  |   | 10,044  |  
|Income (loss) from continuing operations                       |  |              | 7,821     |      |  |         | (17,555   | )       |  |         | (1,555    | ) |  |   | (1,249  | ) |  |   | (2,685  | )
|Income (loss) from discontinued operations                     |  |              | (483      | )    |  |         | (769      | )       |  |         | (39,938   | ) |  |   | (5,339  | ) |  |   | 177     |  
|Loss on disposal of discontinued operations                    |  |              |          |      |  |         | (12,616   | )       |  |         | (1,200    | ) |  |   |        |   |  |   |        |  
|Income (loss) before extraordinary item                        |  |              | 7,338     |      |  |         | (30,940   | )       |  |         | (42,693   | ) |  |   | (6,588  | ) |  |   | (2,508  | )
|Extraordinary gain (charge)                                    |  |              | 30,089    |      |  |         |          |         |  |         |          |   |  |   |        |   |  |   | (2,216  | )
|Net income (loss)                                              |  |              | 37,427    |      |  |         | (30,940   | )       |  |         | (42,693   | ) |  |   | (6,588  | ) |  |   | (4,724  | )
|Balance Sheet Data:                                            |  |              |           |      |  |         |           |         |  |         |           |   |  |   |         |   |  |   |         |  
|Working capital for continuing operations                      |  | $            | 83,073    |      |  | $       | 93,670    |         |  | $       | 91,778    |   |  | $ | 82,592  |   |  | $ | 47,327  |  
|Total assets                                                   |  |              | 411,270   |      |  |         | 443,020   |         |  |         | 497,120   |   |  |   | 416,171 |   |  |   | 388,654 |  
|Total debt                                                     |  |              | 181,135   |      |  |         | 281,839   |         |  |         | 292,433   |   |  |   | 235,353 |   |  |   | 184,199 |  
|Total redeemable preferred stock                               |  |              | 11,035    |      |  |         | 24,115    |         |  |         | 11,035    |   |  |   | 11,094  |   |  |   | 11,353  |  
|Cash Flow Data:                                                |  |              |           |      |  |         |           |         |  |         |           |   |  |   |         |   |  |   |         |  
|Cash flows from continuing operating activities                |  | $            | 13,507    |      |  | $       | (1,766    | )       |  | $       | 40,575    |   |  | $ | (21,599 | ) |  | $ | (9,396  | )
|Cash flows from investing activities                           |  |              | 128       |      |  |         | 8,183     |         |  |         | (82,155   | ) |  |   | (20,688 | ) |  |   | (58,070 | )
|Cash flows from financing activities                           |  |              | (15,073   | )    |  |         | 456       |         |  |         | 53,196    |   |  |   | 44,269  |   |  |   | 71,900  |  
|Other Data:                                                    |  |              |           |      |  |         |           |         |  |         |           |   |  |   |         |   |  |   |         |  
|EBITDA from continuing operations(f)                           |  | $            | 40,249    |      |  | $       | 22,373    |         |  | $       | 42,406    |   |  | $ | 35,418  |   |  | $ | 17,773  |  
|Depreciation and amortization for continuing
    operations(g) |  |              | 8,610     |      |  |         | 17,532    |         |  |         | 14,302    |   |  |   | 11,786  |   |  |   | 6,938   |  
|Amortization of other assets(h)                                |  |              | 1,221     |      |  |         | 1,247     |         |  |         | 1,176     |   |  |   | 949     |   |  |   | 733     |  
|Capital expenditures                                           |  |              | 2,059     |      |  |         | 6,060     |         |  |         | 14,724    |   |  |   | 11,218  |   |  |   | 8,697   |  
|Ratio of earnings to fixed charges(i)                          |  |              | 1.48      |      |  |         | 0.36      |         |  |         | 1.05      |   |  |   | 1.06    |   |  |   | 0.85    |  



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Winston has been treated as a discontinued
    operation in the accompanying selected financial data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b) | In April 2000, the Company purchased certain
    assets of Tire Centers, LLC. In May 2000, the Company
    acquired T.O. Haas and in July 2000, the Company purchased the
    net assets of ATD. Each transaction was accounted for using the
    purchase method of accounting.                                                                                                                                                                                                                                                                                                                                                                    
|(c) | In January 1999, the Company acquired California
    Tire. This transaction was accounted for using the purchase
    method of accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(d) | Net sales include approximately
    $15.8 million, $60.6 million, $55.9 million and
    $27.4 million of inter-segment sales from CPW to Winston
    for 2001, 2000, 1999 and 1998, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(e) | In May 1998, the ITCO merger and the CPW
    acquisition occurred. Each transaction was accounted for using
    the purchase method of accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(f) | EBITDA represents net income before discontinued
    operations and extraordinary item plus income taxes,
    depreciation and amortization and interest expense. EBITDA is
    presented because it is a widely accepted financial indicator of
    a companys ability to generate cash flow and to service or
    incur indebtedness. EBITDA should not be considered an
    alternative to net income as a measure of operating results or
    to cash flows from operations as a measure of liquidity in
    accordance with accounting principles generally accepted in the
    United States. EBITDA as calculated and presented here may not

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|    |                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | be comparable to EBITDA as calculated and
    presented by other companies. See table below for reconciliation
    of income (loss) before discontinued operations and
    extraordinary item to EBITDA.                                                                                                  
|(g) | The Company adopted the provisions of Statement
    of Financial Accounting Standards (SFAS)
    No. 142, Goodwill and Other Intangible Assets
    effective January 1, 2002 and accordingly goodwill
    amortization was discontinued.                                                              
|(h) | Amount represents amortization of deferred
    financing charges which is included in interest expense.                                                                                                                                                                                                   
|(i) | For purposes of these ratios, (i) earnings
    have been calculated by adding interest expense and the
    estimated interest portion of rental expense to earnings before
    income taxes and extraordinary items and (ii) fixed charges
    are comprised of interest expense and capitalized interest.

Reconciliation of income (loss) before
discontinued operations and extraordinary item to EBITDA:

|                                                                        |  |              |        |      |  |      |         |      |  |      |        |   |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | - |  | - | ------ | -
|                                                                        |  | 2002         |        | 2001 |  | 2000 |         | 1999 |  | 1998
|                                                                        |  |              |        |      |  |      |         |      |  |     
|                                                                        |  |             
|                                                                        |  | in thousands
|Income (loss) before discontinued operations
    and extraordinary item |  | $            | 7,821  |      |  | $    | (17,555 | )    |  | $    | (1,555 | ) |  | $ | (1,249 | ) |  | $ | (2,685 | )
|Interest expense, net                                                   |  |              | 18,705 |      |  |      | 28,639  |      |  |      | 26,447 |   |  |   | 22,000 |   |  |   | 13,408 |  
|Provision (benefit) for income taxes                                    |  |              | 5,113  |      |  |      | (6,243  | )    |  |      | 3,212  |   |  |   | 2,881  |   |  |   | 112    |  
|Depreciation and amortization of goodwill and
    other intangibles     |  |              | 8,610  |      |  |      | 17,532  |      |  |      | 14,302 |   |  |   | 11,786 |   |  |   | 6,938  |  
|                                                                        |  |              |        |      |  |      |         |      |  |      |        |   |  |   |        |   |  |   |        |  
|EBITDA                                                                  |  | $            | 40,249 |      |  | $    | 22,373  |      |  | $    | 42,406 |   |  | $ | 35,418 |   |  | $ | 17,773 |  
|                                                                        |  |              |        |      |  |      |         |      |  |      |        |   |  |   |        |   |  |   |        |  



|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations.

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

Year Ended December 28, 2002 Compared
to the Year Ended December 29, 2001

Consolidated net sales from continuing operations
decreased by $47.5 million, or 4.3%, in 2002. Of this decrease,
approximately $20.2 million, or 1.8%, is attributable to
the sale of the Haas retail stores in October 2001. The sale of
Winston on May 15, 2001 accounted for a decline of
$15.8 million, or 1.4% from prior year. The exit of the
Companys parts product lines in the Western division in
2001 accounted for approximately $2.4 million, or a 0.2%
decrease over 2001. Other net sales declined by
$9.1 million, a 0.8% decrease from 2001. The decrease is
primarily due to weaker consumer demand in 2002 versus 2001.
Weaker consumer demand in 2002 is attributable to an overall
slower economy creating a more competitive environment. The
decline in sales from prior year experienced by the Company was
still less than that of the industry as a whole. Units of
replacement passenger and light truck tires shipped for the
industry were down approximately 2.6% for 2002 versus 2001
compared to 0.8% experienced by the Company. The current
economic environment continues to remain weak and the
uncertainties surrounding the crisis in Iraq may continue to
dampen demand in the replacement market, exacerbating an already
competitive environment.

Gross profit in 2002 decreased by
$12.5 million, or 6.0%, to $197.9 million compared to
$210.4 million in 2001 due to a decrease in gross profit as
a percentage of sales to 18.7% in 2002 compared to 19.0% in
2001. Margin for 2001 included a $5.0 million charge for
inventory impairments primarily resulting from a management
decision to exit the majority of the Companys parts
product lines in the Western division. Excluding this charge,
margin as a percentage of sales for 2002 decreased by 0.7% from
2001. Margin decreases are primarily attributable to an increase
in competitive activity.

Selling, general, and administrative expenses
were $166.5 million in 2002, representing 15.7% of sales in
2002, compared to $206.3 million and 18.6% of sales in
2001. The decrease in operating expenses is primarily due to
headcount reductions throughout the Company as well as
discontinued amortization of the Companys goodwill as
required by new accounting standards.

7



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##### 



During the current year, the Company has recorded
charges of approximately $0.3 million primarily relating to
the closure of certain of its facilities in the Western region
as a result of warehouse consolidations initiated to streamline
operations. The majority of these charges relate to estimated
future rentals on the closed facilities.

Interest expense decreased $9.9 million to
$18.7 million in 2002 compared to $28.6 million in
2001. The decrease is primarily attributable to reduced interest
cost on the Companys outstanding Series D Senior
Notes as well as a decline in interest rates on the
Companys revolving credit facility.

Pre-tax income for 2002 was $12.9 million
resulting in an income tax provision of $5.1 million
compared to a pre-tax loss of $23.8 million in 2001
resulting in a tax benefit of $6.2 million. Net income
increased $68.4 million from $(30.9) million in 2001 to
$37.4 million in 2002.

Effective May 15, 2001, the Company
completed a transaction pursuant to a Stock Purchase Agreement
to sell all the capital stock in Winston to Performance
Management, Inc. for a purchase price of approximately $11.3
million. Subsequently, the purchase price was reduced by
$1.3 million due to purchase price adjustments as specified
in the agreement. Upon closing, the Company received
$8.5 million in cash. The balance of $2.8 million was
payable May 15, 2002 for which the Company has previously
established an appropriate reserve. As of March 28, 2003
this balance remains outstanding and the Company is vigorously
pursuing collection from Performance Management, Inc. In 2002,
the Company has recorded an additional loss from discontinued
operations of approximately $0.5 million, net of income tax
benefits of $0.3 million, for a cumulative net loss of
$41.2 million, of which $0.8 million was recognized in
2001. The additional loss results primarily from adjustments to
estimated liabilities for leases where the Company is a
guarantor.

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

The Companys receivable/administrative
claim of approximately $2.0 million due from Winston was fully
recovered in third quarter of 2002 by a return of merchandise of
approximately $0.5 million and the receipt of certain
unencumbered trademark rights for the state of California as a
result of the rejection of licenses by Winston. The intangible
asset recorded for this trademark is being amortized on a
straight-line basis over a period of five years.

On September 12, 2002, the United States
Bankruptcy Court for the Central District of California approved
a sale of substantially all the assets of Winston to the
Goodyear Tire and Rubber Company, Inc., which sale closed in
late December 2002. Thereafter, in January 2003 upon motion, the
Bankruptcy Court converted the Winston bankruptcy case from a
Chapter 11 to a Chapter 7 proceeding.

Year Ended December 29, 2001 Compared
to the Year Ended December 30, 2000

Consolidated net sales from continuing operations
increased $20.6 million, or 1.9%, in 2001. The operations
acquired from Haas and ATD accounted for approximately
$101.3 million, or a 9.3% increase over 2000. The precise
effect on sales of the TCI assets acquired cannot be determined
due to the merger of these operations into various of the
Companys existing operations. These increases are offset
by a decline in inter-segment sales to Winston of approximately
$44.8 million due to the sale of Winston as of May 15,
2001 and the closing of certain Winston locations prior to the
sale. Other net sales declined by $35.9 million, a 3.3%
decrease from 2000. The decrease is attributable primarily to
weaker consumer demand in 2001 versus 2000 attributable to a
slower economy creating a more competitive environment.
Additionally, business declined significantly immediately
following the events of September 11, 2001 and did not
return to expected levels by the end of the year. Sales in 2000
were aided during the second half of the year (primarily in the
third quarter) by a very strong consumer market for replacement
tires caused by the heightened consumer awareness of tire

8



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##### 



safety issues arising from the publicity
surrounding the recall of certain Firestone brands. The decline
in sales from prior year experienced by the Company were still
less than that of the industry as a whole. Units of replacement
passenger and light truck tires shipped for the industry were
down approximately 4.4% for 2001 versus 2000 compared to 3.3%
experienced by the Company.


Gross profit increased $10.5 million to
$210.4 million in 2001 compared to $200.0 million in
2000 and gross profit as a percentage of sales increased to
19.0% in 2001 compared to 18.4% in 2000. Margin for 2001
includes a $5.0 million charge for inventory impairments
primarily resulting from a management decision to exit the
majority of the Companys parts product lines in the
Western division. Excluding this charge, margin for the year
increased 1.1 percentage points from prior year. Margin
increases of approximately 0.5% are the result of the inclusion
of $60.6 million sales to Winston in 2000, which carried
lower margins, and $15.8 million of such sales included in
2001. Other margin increases are primarily the result of price
increases and the negotiation of improved programs with vendors.

Selling, general, and administrative expenses
were $206.3 million in 2001, representing 18.6% of sales in
2001, compared to $172.8 million and 15.9% of sales in
2000. The increase in operating expenses is primarily due to the
inclusion of a full year of Haas and ATD in the current year
versus seven and five months, respectively, in the prior year.
Increased operating expenses as a percentage of sales were
principally a result of a decline in sales without the full
realization of cost cutting strategies initiated throughout the
year.

During 2001, the Company recorded charges of
approximately $1.9 million primarily relating to the
closure of certain of its facilities in the Western region as a
result of warehouse consolidations initiated to streamline
operations. The majority of these charges relates to estimated
future rentals on the closed facilities.

Interest expense increased $2.2 million to
$28.6 million in 2001 compared to $26.4 million in
2000 primarily due to higher borrowing levels on the revolving
credit facility arising from the acquired operations in 2000,
offset partially by a decline in interest rates.

Income tax benefit in 2001 totaled
$6.2 million, which is lower than would be expected based
on statutory income tax rates primarily due to non-deductible
goodwill amortization. Net loss decreased $11.8 million
from $(42.7) million in 2000 to $(30.9) million in 2001.

Effective May 15, 2001, the Company
completed a transaction pursuant to a Stock Purchase Agreement
to sell all the capital stock in Winston to Performance
Management, Inc. for a purchase price of approximately $11.3
million. Subsequently, the purchase price was reduced by
$1.3 million due to purchase price adjustments as specified
in the agreement. Upon closing, the Company received
$8.5 million in cash. The balance of $2.8 million is
payable May 15, 2002. The Company has recorded an
additional $12.6 million loss on disposal of discontinued
operations, net of income tax benefits of $3.6 million, in 2001.
The additional loss results primarily from changes in estimates
made relative to the working capital of Winston as of the sale
date as well as additional liabilities assumed as part of the
transaction not contemplated at the time of the estimate made in
the fourth quarter 2000.

Critical Accounting Policies

The consolidated financial statements are
prepared in accordance with accounting principles generally
accepted in the United States, which require the Company to make
estimates and assumptions (see Note 1 in the Notes to the
Consolidated Financial Statements included in Item 8 of
this report). The Company considers certain accounting policies,
as described below, to be critical policies due to the high
degree of judgment and complexity involved in each.

Revenue Recognition

The Company recognizes revenue upon shipment from
its distribution centers/warehouses to the customer. The Company
also permits customers from time to time to return certain
products but there is no right of return. The Company
continuously monitors and tracks such returns and records an
estimate of such future returns, based on historical experience
and actual returns experienced for a specified time following
the end of the period. While such returns have historically been
within managements expectations and the

9



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##### 



provisions established have been adequate in all
material respects, the Company cannot guarantee that it will
continue to experience the same return rates that it has in the
past. If future returns increase significantly, operating
results would be adversely affected.


Allowance for Doubtful
Accounts

The allowance for doubtful accounts provides for
losses believed to be inherent within the Companys
accounts receivable. Management evaluates both the
creditworthiness of specific customers and the overall
probability of losses based upon an analysis of the overall
aging of receivables, past collection trends and general
economic conditions. Management believes, based on its review,
that the allowance for doubtful accounts is adequate to cover
potential losses. Actual results may vary as a result of
unforeseen economic events and the impact those events could
have on our customers.

Valuation of Goodwill and Other Intangible
Assets

In July 2001, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 142 revises the accounting for purchased goodwill and
intangible assets. Under SFAS No. 142, goodwill and intangible
assets with indefinite useful lives are no longer amortized, but
are tested for impairment annually and more frequently in the
event of an impairment indicator. SFAS No. 142 also
requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives, and
reviewed for impairment at least annually. The Company adopted
the provisions of SFAS No. 142 effective December 30,
2001. The Company has completed the initial analysis effective
as of the beginning of 2002 and has determined that there is no
goodwill impairment. Future adverse developments in market
conditions or the Companys operating results could cause
the fair value of the Companys goodwill to fall below the
carrying value, requiring an impairment charge.

Deferred Taxes

The Company recognizes deferred tax assets and
liabilities based on the differences between the financial
statement carrying amounts and the tax bases of assets and
liabilities. The Company regularly reviews its deferred tax
assets for recoverability and establishes a valuation allowance
based on historical taxable income, projected future taxable
income and the expected timing of the reversals of existing
temporary differences. Management has evaluated the
Companys deferred tax assets and has concluded that the
realizability of the deferred tax assets is more likely
than not except as it relates to certain state net
operating loss carry-forwards (NOLs). Accordingly, a
valuation allowance of $2.0 million was provided at
December 29, 2001 relating to certain deferred tax assets
that in managements assessment may not be realized due to
the sale of Winston in May 2001. The valuation allowance was
reduced to $1.0 million at December 28, 2002 based on
the Companys state income tax results for fiscal 2002 and
the Companys analysis of projected utilization of the
remaining state NOL carry-forwards. This evaluation considered
the historical and long-term expected profitability of the
Companys continuing operations, the sale of the
Companys retail segment which generated the Companys
losses in 2000 and 1999, the efficiencies gained from efforts
initiated in 2001 to streamline operations and the extraordinary
gain as well as the reduction in interest expense relating to
the repurchase of the Companys Series D Senior Notes
(see discussion in Liquidity and Capital Resources
below). The Companys current year operations result in
taxable income in 2002. The Company is forecasting taxable
income in 2003. The Company believes that taxable income
generated in future years will be sufficient to utilize the
remaining net deferred tax assets. The Companys ability to
generate future taxable income is dependent on numerous factors
including general economic conditions, the state of the
replacement tire market and other factors beyond
managements control. Therefore, there can be no assurance
that the Company will meet its expectation of future taxable
income. Changes in expected future income could lead to an
additional valuation allowance against deferred tax assets.

Discontinued Operations

In the consolidated financial statements, the
Companys retail segment (Winston) has been reflected as a
discontinued operation. On January 15, 2002, Winston filed
for protection from creditors under Chapter 11 of

10



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##### 



the United States Bankruptcy Code. On
September 12, 2002, the United States Bankruptcy Court for
the Central District of California approved the sale of
substantially all the assets of Winston to Goodyear Tire and
Rubber Company, Inc., which sale closed in late December 2002.
In January 2003, upon motion, the Bankruptcy Court converted the
Winston bankruptcy case from a Chapter 11 to a
Chapter 7 proceeding. The only significant remaining
liability related to discontinued operations is the exposure
related to leases that the Company has guaranteed. However, due
to the inherent uncertainties of the bankruptcy process, the
Company may be exposed to additional liabilities, which are
currently not known or quantifiable. As of December 28,
2002, total obligations of the Company, as guarantor on the
Winston leases, is approximately $16.0 million. However,
the Company has secured assignments or sublease agreements for a
substantial amount of these commitments and considers the
likelihood of material exposure to be minimal. The accrual for
lease liabilities could be materially affected by factors such
as the credit worthiness of lessors, assignees and sublessees
and the Companys success at negotiating early termination
agreements with lessors. These factors are significantly
dependent on general economic conditions. While the Company
believes that its current estimates of discontinued operations
liabilities are adequate, it is possible that future events
could require significant adjustments to those estimates.


Liquidity and Capital Resources

At December 28, 2002 the combined net
indebtedness (net of cash) of the Company was
$178.4 million compared to $277.7 million at
December 29, 2001. Total commitments by the lenders under
the Companys Revolver were $180.0 million at
December 28, 2002, of which $17.0 million was
available for additional borrowings after consideration of the
Companys outstanding letters of credit totaling
$6.3 million.

EBITDA from continuing operations increased
$17.9 million to $40.2 million in 2002 compared to
$22.4 million in 2001. This increase in EBITDA is primarily
due to the parts-related charge of $5.0 million taken in
2001 and decreased operating expenses in 2002. EBITDA represents
net income before discontinued operations and extraordinary item
plus income taxes, depreciation and amortization and interest
expense. EBITDA is presented because it is a widely accepted
financial indicator of a companys ability to generate cash
flow and to service or incur indebtedness. EBITDA should not be
considered an alternative to net income as a measure of
operating results or to cash flows from operations as a measure
of liquidity in accordance with accounting principles generally
accepted in the United States. EBITDA as calculated and
presented here may not be comparable to EBITDA as calculated and
presented by other companies.

EBITDA from continuing operations decreased
$20.0 million to $22.4 million in 2001 compared to
$42.4 million in 2000. This decrease in EBITDA is due to
higher sales and improved margins offset by substantial
increases in selling, general and administrative expenses as a
percentage of sales.

The Companys principal sources of cash
during 2002 came from $13.3 million in net proceeds from the
sale-leaseback transaction, $28.9 million cash contributed
by certain of its principal stockholders in exchange for
Series D preferred stock, and $14.0 million net
proceeds from the Companys Revolver and other long-term
debt. Cash was used to repurchase Series D Senior Notes
($65.0 million), make principal payments on long-term debt
($6.2 million) and make capital expenditures
($2.1 million). Net working capital at December 28,
2002 totaled $83.1 million, compared to $93.7 million
at December 29, 2001, a decrease of $10.6 million.
During 2002, the Company experienced an increase in accounts
receivable ($1.1 million), an increase in inventories
($2.5 million), a decrease in current maturities of
long-term debt ($2.6 million) and a decrease in accounts
payable and accrued expenses ($7.3 million). These
increases were offset by a substantial decrease in current
deferred taxes ($23.6 million) primarily due to the
utilization of net operating loss carryforwards as it relates to
the extraordinary gain on retirement of the Series D Senior
Notes and from net income generated from continuing operations
in 2002.

Capital expenditures during 2002 of
$2.1 million were primarily for computer system upgrades,
leasehold improvements and warehouse racking.

Loans under the Revolver bear interest in 2002 at
a floating rate based upon federal funds or Eurodollar rates
plus an applicable margin. At December 28, 2002, borrowings
under the Revolver were at a weighted

11



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average interest rate of 5.4%. Loans under the
Revolver are guaranteed by all subsidiaries of the Company and
collateralized by liens on inventory and accounts receivable.


On March 18, 2002, the Company and its
lenders executed an amendment to the Revolver to, among other
things, amend the financial covenants contained therein, change
the rate at which borrowings thereunder bear interest and amend
certain definitions contained therein. In addition, the amended
facility provides for additional availability due in part to a
reduction in the minimum availability reserve (as defined in the
agreement). The minimum availability reserve increased by
$0.5 million in August 2002 and will increase each month
until the reserve reaches the original amount in August 2003. As
a result of the amendment, the applicable margins as of April 1,
2002 for Eurodollar Rate loans were increased to 3.5%. A
nonrefundable fee of approximately $0.5 million was charged
in connection with this amendment.

Effective August 22, 2002, the Company and
its lenders executed a waiver and amendment to the Revolver to
waive the effect of a failure to meet the minimum fixed charge
coverage covenant, as defined in the credit agreement, as of
June 29, 2002 and to amend certain definitions contained
therein.

On September 25, 2002, the Company and its
lenders executed an amendment to the Revolver to, among other
things, amend the financial covenants contained therein and
revise certain components of the definitions of Borrowing Base.
A nonrefundable fee of approximately $0.2 million was
charged in connection with this amendment. As of March 28,
2003, the Companys financial measures were in excess of
the minimums required, as amended, and management expects that
such amounts will remain above the minimums for the foreseeable
future.

On December 3, 2002, the Company and its
lenders further amended the Revolver to modify certain
components of the definitions of Borrowing Base. The amended
agreement provides for borrowings in the aggregate principal
amount of up to the lesser of $180.0 million or the
Borrowing Base, as defined in the agreement, which is based on
85% of eligible accounts receivable, the lesser of 65% of
eligible tire inventory plus 60% of certain secured tire
inventory (within limitations as defined in the agreement) plus
65% of eligible subordinated vendor tire inventory (within
limitations as defined in the agreement) or $100 million
and the lesser of 50% of all other eligible inventory or
$25 million less defined reserves.

The Revolver term expires in March 2005, and is
extendable by the Company and the banks for an additional five
years. Borrowings under the Revolver bear interest at
(i) the Base Rate, as defined, plus the applicable margin
(2.0% as of December 28, 2002) or (ii) the Eurodollar
Rate, as defined, plus the applicable margin (3.5% as of
December 28, 2002). These margins are subject to
performance-based step-downs resulting in margins ranging from
0.75% to 2.0% for Base Rate loans and 2.0% to 3.5% for
Eurodollar Rate loans, respectively.

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

On March 27, 2002, the Company repurchased
$121.4 million in outstanding principal amount of the 10%
Series D Senior Notes (Senior Notes) due in
2008 at a purchase price of $535 per $1,000 in face amount of
Senior Notes, plus accrued and unpaid interest of
$4.5 million. The Company funded the repurchase of the
Senior Notes through several debt restructuring transactions
(Restructuring Transactions). The Restructuring
Transactions consisted of (i) an amendment to the
Companys Revolver to provide additional availability,
(ii) a sale and leaseback of three of the Companys
tire distribution warehouses generating cash proceeds of
$13.9 million and (iii) an equity investment of
$28.9 million from the issuance of 9,637,592 shares of
Series D preferred stock to the Companys existing
stockholders. Concurrently with the repurchase of the Senior
Notes, the Company, the Subsidiary Guarantors and the Trustee
executed the

12



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##### 



Fourth Supplemental Indenture to the Indenture.
The amendments to the Indenture were effected primarily to
permit the Restructuring Transactions and make other required
modifications.


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

Contractual Commitments

As described in Notes 5 and 7 in the Notes
to Consolidated Financial Statements included in Item 8 of
this report, as of December 28, 2002, the Company had
certain cash obligations associated with contractual
commitments. The amounts due under these commitments are as
follows (in millions):

|                               |                                    |       |       |       |  |      |      |      |  |      |      |      |  |            |      |      |  |   |      |      |  |   |     |     |  |   |       |       | 
|------------------------------ | ---------------------------------- | ----- | ----- | ----- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | ---------- | ---- | ---- |  | - | ---- | ---- |  | - | --- | --- |  | - | ----- | ----- | 
|                               |                                    | Total |       | 2003  |  | 2004 |      | 2005 |  | 2006 |      | 2007 |  | Thereafter
|                               |                                    |       |       |       |  |      |      |      |  |      |      |      |  |           
|Contractual Commitments        |                                    |       |       |       |  |      |      |      |  |      |      |      |  |            |      |      |  |   |      |      |  |   |     |     |  |   |       |      
|Long term debt (variable rate) |                                    | $     | 135.0 |       |  | $    |     |      |  | $    |     |      |  | $          |     |      |  | $ |     |      |  | $ |    |     |  | $ | 135.0 |      
|Long term debt (fixed rate)    |                                    |       | 46.1  |       |  |      | 2.7  |      |  |      | 1.7  |      |  |            | 12.6 |      |  |   | 0.2  |      |  |   | 0.1 |     |  |   | 28.8  |      
|Accrued interest               |                                    |       | 1.7   |       |  |      | 1.7  |      |  |      |     |      |  |            |     |      |  |   |     |      |  |   |    |     |  |   |      |      
|Operating leases               |                                    |       | 100.1 |       |  |      | 22.2 |      |  |      | 19.6 |      |  |            | 15.6 |      |  |   | 11.1 |      |  |   | 9.7 |     |  |   | 21.9  |      
|Capital leases                 |                                    |       | 15.3  |       |  |      | 0.6  |      |  |      | 0.5  |      |  |            | 0.1  |      |  |   |     |      |  |   |    |     |  |   | 14.1  |      
|                               |                                    |       |       |       |  |      |      |      |  |      |      |      |  |            |      |      |  |   |      |      |  |   |     |     |  |   |       |      
|                               | Total contractual cash obligations |       | $     | 298.2 |  |      | $    | 27.2 |  |      | $    | 21.8 |  |            | $    | 28.3 |  |   | $    | 11.3 |  |   | $   | 9.8 |  |   | $     | 199.8 | 
|                               |                                    |       |       |       |  |      |      |      |  |      |      |      |  |            |      |      |  |   |      |      |  |   |     |     |  |   |       |      

The Company also has certain letters of credit
outstanding at December 28, 2002 in the aggregate amount of
$6.3 million.

In addition to the above, the Company has
contingent obligations relating to the redemption of its
Series A preferred stock ($7.0 million at
December 28, 2002) and Series B preferred stock
($4.0 million at December 28, 2002). In first quarter
2002, the Company amended and restated its articles of
incorporation to, among other things, eliminate the
holders redemption rights on Series C preferred stock
and Series D preferred stock (Note 12). As a result,
the Company has no contingent obligations relating to the
redemption of its Series C preferred stock and
Series D preferred stock. The Series A preferred stock
and Series B preferred stock are redeemable beginning in
December 2002 and June 2007, respectively. However, so long as
amounts are outstanding or commitments to lend have not been
terminated under the Revolver, the Senior Notes and other
agreements entered into in connection therewith, including any
replacement agreement which results in a greater principal
amount outstanding, or if any default or event of default has
occurred and is continuing under any such debt agreements or
would result from such payments, the Company may not make any
dividends or redemption payments in respect to the preferred
stock. In addition, as long as any shares of Series A
preferred stock or Series B preferred stock remain
outstanding, no dividends may be paid, nor redemption occur on
Series C preferred stock and Series D preferred stock.
The Series B stated value is reduced based upon tire
purchase credits as determined by the number of units purchased
under the Winston Private Brand Supply Agreement. See Note 11 in
the Notes to Consolidated Financial Statements included in
Item 8 of this report.

In addition, the Company is guarantor on certain
leases as discussed in Note 8 in the Notes to Consolidated
Financial Statements included in Item 8 of this report.

13



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##### 



Recently Issued Accounting
Pronouncements

In April 2002, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002. This statement contains a
number of changes under existing GAAP, including the elimination
of extraordinary item classification of debt extinguishments
that was previously required under SFAS 4. The provisions of
this statement related to the rescission of Statement 4 shall be
applied in fiscal years beginning after May 15, 2002 with
early adoption encouraged. The Company expects to adopt SFAS
No. 145 in fiscal 2003 which will require reclassification
of the Companys 2002 extraordinary gain.

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

In November 2002, the FASB issued FASB
Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others  an
interpretation of FASB Statements No. 5, 57, and 107 and a
recision of FASB Interpretation No. 34. FIN 45
elaborates on the disclosures to be made regarding obligations
under certain issued guarantees by a guarantor in interim and
annual financial statements. It also clarifies the requirement
of a guarantor to recognize a liability at the inception of the
guarantee at the fair value of the obligation. FIN 45 does not
provide specific guidance for subsequently measuring the
guarantors recognized liability over the term of the
guarantee. The provisions relating to the initial recognition
and measurement of a liability are applicable on a prospective
basis for guarantees issued or modified subsequent to
December 31, 2002. The disclosure requirements of FIN 45
are effective for interim and annual financials statements for
periods ending after December 15, 2002. The Company has
adopted the disclosure provisions of this statement effective
December 15, 2002. The Company does not expect that
adoption of the liability recognition provisions will have a
material impact on its financial position or results of
operations.

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

Cautionary Statement on Forward-Looking
Information

This report contains forward-looking
statements, which are statements other than statements of
historical facts. These forward-looking statements use phrases
such as expects or anticipates. The
forward-looking statements include, among other things, the
Companys expectations and estimates about its

14



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##### 



business operations, strategy, and its
expectations and estimates about its future financial
performance, including its financial position, cash flows from
operations, capital expenditures and ability to refinance
indebtedness. The forward-looking statements in this
Form 10-K are intended to be subject to the safe harbor
protection provided by the federal securities laws.


The forward-looking statements are subject to
risks, uncertainties and assumptions about the Company and about
the future, and could prove not to be correct. The current
economic environment continues to remain uncertain and when
combined with the uncertainties of the current crisis in Iraq,
there can be no assurances about the Companys future
business operations or financial performance. Cautionary
statements describing factors that could cause actual results to
differ materially from the Companys expectations are
discussed in this report, including in conjunction with the
forward-looking statements included in this report. All
subsequent written or oral forward-looking statements
attributable to the Company or to persons acting on behalf of
the Company are expressly qualified in their entirety by those
cautionary statements.

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

Item 7a.     Quantitative
and Qualitative Disclosure About Market Risk.

The Companys results of operations are
exposed to changes in interest rates primarily with respect to
borrowings under the Revolver, where interest rates are tied to
the prime rate or LIBOR. Under its current policies, the Company
does not use interest rate derivative instruments to manage
exposure to interest rate changes. An increase of 1% in such
interest rate percentages would increase the annual interest
expense by $1.4 million, based on borrowings at
December 28, 2002.

15



---



##### 



Item 8.     Financial
Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                                           |  |      |    | 
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|                                                                                                                                           |  | Page
|                                                                                                                                           |  |     
|American Tire Distributors, Inc. 
    Consolidated Financial Statements                                                                   |  |      |    | 
|Report of Independent Public Accountants                                                                                                   |  |      | 17 | 
|Consolidated Balance Sheets as of
    December 28, 2002 and December 29, 2001                                                              |  |      | 19 | 
|Consolidated Statements of Operations for the
    years ended December 28, 2002, December 29, 2001 and
    December 30, 2000               |  |      | 20 | 
|Consolidated Statements of Stockholders
    Investment for the years ended December 28, 2002,
    December 29, 2001 and December 30, 2000 |  |      | 21 | 
|Consolidated Statements of Cash Flows for the
    years ended December 28, 2002, December 29, 2001 and
    December 30, 2000.              |  |      | 22 | 
|Notes to Consolidated Financial Statements                                                                                                 |  |      | 23 | 

16



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##### 



Report of Independent Accountants

To the Board of Directors and Stockholders of

American Tire Distributors, Inc and Subsidiaries:


In our opinion, the consolidated financial
statements listed in the accompanying index present fairly, in
all material respects, the financial position of American Tire
Distributors, Inc and subsidiaries (the Company,
formerly Heafner Tire Group, Inc.) at December 28, 2002,
and the results of their operations and their cash flows for the
year then ended in conformity with accounting principles
generally accepted in the United States of America. These
financial statements are the responsibility of the
Companys management; our responsibility is to express an
opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of
America, which 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, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion. The Companys consolidated financial
statements as of December 29, 2001, and for each of the two
years in the period ended December 29, 2001, prior to the
revisions described in Note 1 to the consolidated financial
statements, were audited by other independent accountants who
have ceased operations. Those independent accountants expressed
an unqualified opinion on those financial statements in their
report dated March 22, 2002.

As discussed in Note 1 to these consolidated
financial statements, the Company changed its accounting for
goodwill and other intangible assets in 2002.

As discussed above, the consolidated financial
statements of the Company as of December 29, 2001, and for
each of the two years in the period ended December 29,
2001, were audited by other independent accountants who have
ceased operations. As described in Note 1, these financial
statements have been revised to include the transitional
disclosures required by Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets, which was adopted by the Company as of
December 30, 2001. We audited the transitional disclosures
described in Note 1. In our opinion, the transitional
disclosures for 2001 and 2000 in Note 1 are appropriate.
However, we were not engaged to audit, review, or apply any
procedures to the 2001 or 2000 financial statements of the
Company other than with respect to such disclosures and,
accordingly, we do not express an opinion or any other form of
assurance on the 2001 or 2000 financial statements taken as a
whole.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina

March 7, 2003


17



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##### 



Report of Predecessor Auditor (Arthur Andersen
LLP) on

Consolidated Financial Statements


THE FOLLOWING REPORT IS A COPY OF A REPORT
PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP (ANDERSEN). THIS REPORT
HAS NOT BEEN REISSUED BY ANDERSEN AND ANDERSEN DID NOT CONSENT
TO THE INCORPORATION BY REFERENCE OF THIS REPORT (AS INCLUDED IN
THIS FORM 10-K) INTO ANY OF THE COMPANYS REGISTRATION
STATEMENTS.

AS DISCUSSED IN NOTE 1, THE COMPANY HAS
REVISED ITS FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 29, 2001 AND DECEMBER 30, 2000 TO INCLUDE THE
TRANSITIONAL DISCLOSURES REQUIRED BY STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 142, GOODWILL AND INTANGIBLE
ASSETS. THE ANDERSEN REPORT DOES NOT EXTEND TO THESE CHANGES.
THE REVISIONS TO THE 2001 AND 2000 FINANCIAL STATEMENTS RELATED
TO THESE TRANSITIONAL DISCLOSURES WERE REPORTED ON BY
PRICEWATERHOUSECOOPERS LLP, AS STATED IN THEIR REPORT APPEARING
HEREIN.

Report of Independent Public
Accountants

To Heafner Tire Group, Inc. and Subsidiaries:

We have audited the accompanying consolidated
balance sheets of Heafner Tire Group, Inc. (a Delaware
Corporation) and subsidiaries as of December 29, 2001 and
December 30, 2000*, and the related consolidated statements
of operations, stockholders investment and cash flows for
each of the three years in the period ended December 29,
2001*. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
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 financial position of Heafner Tire Group, Inc. and
subsidiaries as of December 29, 2001 and December 30,
2000*, and the results of their operations and their cash flows
for each of the three years in the period ended
December 29, 2001*, in conformity with accounting
principles generally accepted in the United States.

Arthur Andersen LLP

Charlotte, North Carolina

March 22, 2002




---



|  |                                                                                                                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The Companys consolidated balance sheet as
    of December 30, 2000 and the consolidated statements of
    operations, changes in stockholders investment, and cash
    flows for the year ended December 31, 1999 are not included
    in this Form.

18



---



##### 



American Tire Distributors, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)


|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |         |         |  
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------- | ------------ | ------- | - | ------- | ------- | ------- | -
|                                                   |                                                                                                                                                    | December 28,                   |         | December 29,
|                                                   |                                                                                                                                                    | 2002                           |         | 2001        
|                                                   |                                                                                                                                                    |                                |         |             
|Assets                                             |                                                                                                                                                    |                                |         |              |         |   |         |        
|Current assets:                                    |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   | Cash and cash equivalents                                                                                                                          |                                | $       | 2,693        |         |   | $       | 4,131   |        
|                                                   | Accounts receivable, net of allowances of $1,231
    and $3,571 in 2002 and 2001, respectively                                                     |                                |         | 94,674       |         |   |         | 93,621  |        
|                                                   | Inventories                                                                                                                                        |                                |         | 156,722      |         |   |         | 154,212 |        
|                                                   | Deferred income taxes                                                                                                                              |                                |         | 3,785        |         |   |         | 27,364  |        
|                                                   | Other current assets                                                                                                                               |                                |         | 11,899       |         |   |         | 10,851  |        
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   |                                                                                                                                                    | Total current assets           |         |              | 269,773 |   |         |         | 290,179 |  
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|Property and equipment:                            |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   | Land                                                                                                                                               |                                |         | 1,603        |         |   |         | 2,293   |        
|                                                   | Buildings and leasehold improvements                                                                                                               |                                |         | 15,598       |         |   |         | 17,975  |        
|                                                   | Machinery and equipment                                                                                                                            |                                |         | 11,199       |         |   |         | 11,471  |        
|                                                   | Furniture and fixtures                                                                                                                             |                                |         | 10,420       |         |   |         | 7,174   |        
|                                                   | Vehicles and other                                                                                                                                 |                                |         | 1,150        |         |   |         | 2,195   |        
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   |                                                                                                                                                    | Total property and equipment   |         |              | 39,970  |   |         |         | 41,108  |  
|                                                   | Less  Accumulated depreciation                                                                                                                    |                                |         | (19,336      | )       |   |         | (13,622 | )      
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   |                                                                                                                                                    | Property and equipment, net    |         |              | 20,634  |   |         |         | 27,486  |  
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|Goodwill, net                                      |                                                                                                                                                    |                                | 93,940  |              |         |   | 93,940  |        
|Other intangible assets, net                       |                                                                                                                                                    |                                | 3,572   |              |         |   | 5,171   |        
|Deferred income taxes                              |                                                                                                                                                    |                                | 18,440  |              |         |   | 16,626  |        
|Other assets                                       |                                                                                                                                                    |                                | 4,911   |              |         |   | 9,618   |        
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   |                                                                                                                                                    | $                              | 411,270 |              |         | $ | 443,020 |        
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|Liabilities and Stockholders
    Investment       |                                                                                                                                                    |                                |         |              |         |   |         |        
|Current liabilities:                               |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   | Accounts payable                                                                                                                                   |                                | $       | 165,409      |         |   | $       | 170,571 |        
|                                                   | Accrued expenses                                                                                                                                   |                                |         | 18,549       |         |   |         | 20,643  |        
|                                                   | Current maturities of long-term debt                                                                                                               |                                |         | 2,742        |         |   |         | 5,295   |        
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   |                                                                                                                                                    | Total current liabilities      |         |              | 186,700 |   |         |         | 196,509 |  
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|Revolving credit facility and other long-term debt |                                                                                                                                                    |                                | 149,793 |              |         |   | 126,544 |        
|Series D Senior Notes                              |                                                                                                                                                    |                                | 28,600  |              |         |   | 150,000 |        
|Capital lease obligations                          |                                                                                                                                                    |                                | 14,709  |              |         |   | 1,346   |        
|Other liabilities                                  |                                                                                                                                                    |                                | 3,944   |              |         |   | 8,042   |        
|Commitments and contingencies                      |                                                                                                                                                    |                                |         |              |         |   |         |        
|Redeemable preferred stock (Note 11)               |                                                                                                                                                    |                                | 11,035  |              |         |   | 24,115  |        
|Stockholders investment:                          |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   | Preferred stock (Note 12)                                                                                                                          |                                |         | 46,035       |         |   |         |        |        
|                                                   | Common stock, par value $.01 per share;
    50,000,000 and 15,000,000 shares authorized; 5,086,917 and
    5,136,917 shares issued and outstanding |                                |         | 51           |         |   |         | 51      |        
|                                                   | Additional paid-in capital                                                                                                                         |                                |         | 22,388       |         |   |         | 22,751  |        
|                                                   | Warrants                                                                                                                                           |                                |         | 1,782        |         |   |         | 1,137   |        
|                                                   | Notes receivable from sale of stock                                                                                                                |                                |         | (17          | )       |   |         | (340    | )      
|                                                   | Accumulated deficit                                                                                                                                |                                |         | (53,750      | )       |   |         | (87,135 | )      
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   |                                                                                                                                                    | Total stockholders investment |         |              | 16,489  |   |         |         | (63,536 | )
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        
|                                                   |                                                                                                                                                    | $                              | 411,270 |              |         | $ | 443,020 |        
|                                                   |                                                                                                                                                    |                                |         |              |         |   |         |        

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

19



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##### 



American Tire Distributors, Inc.

Consolidated Statements of
Operations

(in thousands)


|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |         |  
|------------------------------------------------------------------------------------------------------ | ------------------------------------ | ------------------------- | --------- | ------------ | - | ------------ | --------- | ------- | - | - | --------- | ------- | -
|                                                                                                       |                                      |                          
|                                                                                                       |                                      | For the fiscal year ended
|                                                                                                       |                                      |                          
|                                                                                                       |                                      | December 28,              |           | December 29, |   | December 30,
|                                                                                                       |                                      | 2002                      |           | 2001         |   | 2000        
|                                                                                                       |                                      |                           |           |              |   |             
|Net sales                                                                                              |                                      | $                         | 1,060,394 |              |   | $            | 1,107,894 |         |   | $ | 1,087,260 |        
|Cost of goods sold                                                                                     |                                      |                           | 862,521   |              |   |              | 897,472   |         |   |   | 887,304   |        
|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |        
|                                                                                                       | Gross profit                         |                           |           | 197,873      |   |              |           | 210,422 |   |   |           | 199,956 |  
|Selling, general and administrative expenses                                                           |                                      |                           | 166,522   |              |   |              | 206,343   |         |   |   | 172,770   |        
|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |        
|                                                                                                       | Operating income                     |                           |           | 31,351       |   |              |           | 4,079   |   |   |           | 27,186  |  
|Other income (expense):                                                                                |                                      |                           |           |              |   |              |           |         |   |   |           |        
|                                                                                                       | Interest expense                     |                           |           | (18,705      | ) |              |           | (28,639 | ) |   |           | (26,447 | )
|                                                                                                       | Other income, net                    |                           |           | 288          |   |              |           | 762     |   |   |           | 918     |  
|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |        
|Income (loss) from continuing operations
    before income taxes                                       |                                      |                           | 12,934    |              |   |              | (23,798   | )       |   |   | 1,657     |        
|                                                                                                       | Provision (benefit) for income taxes |                           |           | 5,113        |   |              |           | (6,243  | ) |   |           | 3,212   |  
|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |        
|Income (loss) from continuing operations
    before extraordinary item                                 |                                      |                           | 7,821     |              |   |              | (17,555   | )       |   |   | (1,555    | )      
|Loss from discontinued operations, net of income
    tax benefit of $316, $514 and $23,154.            |                                      |                           | (483      | )            |   |              | (769      | )       |   |   | (39,938   | )      
|Loss on disposal of discontinued operations, net
    of income tax benefit of $3,606 and $800.         |                                      |                           |          |              |   |              | (12,616   | )       |   |   | (1,200    | )      
|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |        
|Income (loss) before extraordinary item                                                                |                                      |                           | 7,338     |              |   |              | (30,940   | )       |   |   | (42,693   | )      
|Extraordinary gain on repurchase of Series D
    Senior Notes, net of income tax provision of $19,670. |                                      |                           | 30,089    |              |   |              |          |         |   |   |          |        
|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |        
|Net income (loss)                                                                                      |                                      | $                         | 37,427    |              |   | $            | (30,940   | )       |   | $ | (42,693   | )      
|                                                                                                       |                                      |                           |           |              |   |              |           |         |   |   |           |        

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

20



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##### 



American Tire Distributors, Inc.

Consolidated Statements of Stockholders
Investment

(in thousands, except share amounts)


|                            |                                                  |              |           |                 |   |            |    |        |   |            |            |             |  |          |        |         |  |       |        |        |   |   |       |     |  |   |        |     |   |   |         |         |   |   |         |         |  
|--------------------------- | ------------------------------------------------ | ------------ | --------- | --------------- | - | ---------- | -- | ------ | - | ---------- | ---------- | ----------- |  | -------- | ------ | ------- |  | ----- | ------ | ------ | - | - | ----- | --- |  | - | ------ | --- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                            |                                                  |              |           |                 |   |            |    |        |   | Notes      |            |             |  |         
|                            |                                                  | Common Stock |           | Preferred Stock |   |            |    |        |   | Receivable |            |             |  |         
|                            |                                                  | Class A      |           | (Note 12)       |   | Additional |    |        |   | From       |            |             |  |         
|                            |                                                  |              |           |                 |   | Paid in    |    |        |   | Sale       |            | Accumulated |  |         
|                            |                                                  | Shares       |           | Amount          |   | Shares     |    | Amount |   | Capital    |            | Warrants    |  | of Stock |        | Deficit |  | Total
|                            |                                                  |              |           |                 |   |            |    |        |   |            |            |             |  |          |        |         |  |      
|Balance, December 31, 1999  |                                                  |              | 5,286,917 |                 |   | $          | 53 |        |   |            |           |             |  | $        |       |         |  | $     | 23,981 |        |   | $ | 1,137 |     |  | $ | (1,092 | )   |   | $ | (12,421 | )       |   | $ | 11,658  |        
|                            | Net loss                                         |              |           |                |   |            |    |       |   |            |            |            |  |          |        |        |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         | (42,693 | ) |   |         | (42,693 | )
|                            | Forgiveness of note receivable                   |              |           |                |   |            |    |       |   |            |            |            |  |          |        |        |  |       |        |       |   |   |       |    |  |   |        | 46  |   |   |         |        |   |   |         | 46      |  
|                            |                                                  |              |           |                 |   |            |    |        |   |            |            |             |  |          |        |         |  |       |        |        |   |   |       |     |  |   |        |     |   |   |         |         |   |   |         |        
|Balance, December 30, 2000  |                                                  |              | 5,286,917 |                 |   |            | 53 |        |   |            |           |             |  |          |       |         |  |       | 23,981 |        |   |   | 1,137 |     |  |   | (1,046 | )   |   |   | (55,114 | )       |   |   | (30,989 | )      
|                            | Net loss                                         |              |           |                |   |            |    |       |   |            |            |            |  |          |        |        |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         | (30,940 | ) |   |         | (30,940 | )
|                            | Repurchase of common stock                       |              |           | (175,000        | ) |            |    | (2     | ) |            |            |            |  |          |        |        |  |       |        | (1,376 | ) |   |       |    |  |   |        | 800 |   |   |         |        |   |   |         | (578    | )
|                            | Dividends on redeemable preferred stock series C |              |           |                |   |            |    |       |   |            |            |            |  |          |        |        |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         | (1,081  | ) |   |         | (1,081  | )
|                            | Other                                            |              |           | 25,000          |   |            |    |       |   |            |            |            |  |          |        |        |  |       |        | 146    |   |   |       |    |  |   |        | (94 | ) |   |         |        |   |   |         | 52      |  
|                            |                                                  |              |           |                 |   |            |    |        |   |            |            |             |  |          |        |         |  |       |        |        |   |   |       |     |  |   |        |     |   |   |         |         |   |   |         |        
|Balance, December 29, 2001  |                                                  |              | 5,136,917 |                 |   |            | 51 |        |   |            |           |             |  |          |       |         |  |       | 22,751 |        |   |   | 1,137 |     |  |   | (340   | )   |   |   | (87,135 | )       |   |   | (63,536 | )      
|                            | Net income                                       |              |           |                |   |            |    |       |   |            |            |            |  |          |        |        |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         | 37,427  |   |   |         | 37,427  |  
|                            | Repurchase of common stock                       |              |           | (50,000         | ) |            |    |       |   |            |            |            |  |          |        |        |  |       |        | (363   | ) |   |       |    |  |   |        | 323 |   |   |         |        |   |   |         | (40     | )
|                            | Issuance of warrants                             |              |           |                |   |            |    |       |   |            |            |            |  |          |        |        |  |       |        |       |   |   |       | 645 |  |   |        |    |   |   |         |        |   |   |         | 645     |  
|                            | Preferred stock  Series C                       |              |           |                |   |            |    |       |   |            |            | 1,333,334   |  |          |        | 13,080  |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         |        |   |   |         | 13,080  |  
|                            | Preferred stock  Series D                       |              |           |                |   |            |    |       |   |            |            | 9,637,592   |  |          |        | 28,913  |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         |        |   |   |         | 28,913  |  
|                            | Dividends on preferred stock series C            |              |           |                |   |            |    |       |   |            |            |            |  |          |        | 1,440   |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         | (1,440  | ) |   |         |        |  
|                            | Dividends on preferred stock series D            |              |           |                |   |            |    |       |   |            |            |            |  |          |        | 2,602   |  |       |        |       |   |   |       |    |  |   |        |    |   |   |         | (2,602  | ) |   |         |        |  
|                            |                                                  |              |           |                 |   |            |    |        |   |            |            |             |  |          |        |         |  |       |        |        |   |   |       |     |  |   |        |     |   |   |         |         |   |   |         |        
|Balance, December 28, 2002. |                                                  |              | 5,086,917 |                 |   | $          | 51 |        |   |            | 10,970,926 |             |  | $        | 46,035 |         |  | $     | 22,388 |        |   | $ | 1,782 |     |  | $ | (17    | )   |   | $ | (53,750 | )       |   | $ | 16,489  |        
|                            |                                                  |              |           |                 |   |            |    |        |   |            |            |             |  |          |        |         |  |       |        |        |   |   |       |     |  |   |        |     |   |   |         |         |   |   |         |        

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

21



---



##### 



American Tire Distributors, Inc.

Consolidated Statements of Cash
Flows

(in thousands)


|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |         |         |         |  
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------ | ------- | ------------ | ----- | ------- | ------- | ------ | ------ | ------- | ------- | ------- | -
|                                                         |                                                                                                            |                                                                    
|                                                         |                                                                                                            | For the Fiscal Year Ended                                          
|                                                         |                                                                                                            |                                                                    
|                                                         |                                                                                                            | December 28,                                                        |                                                                    | December 29, |         | December 30,
|                                                         |                                                                                                            | 2002                                                                |                                                                    | 2001         |         | 2000        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |             
|Cash flows from operating
    activities:                |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         | Net income (loss)                                                                                          |                                                                     | $                                                                  | 37,427       |         |              | $     | (30,940 | )       |        | $      | (42,693 | )      
|                                                         | Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating
    activities: |                                                                     |                                                                    |              |         |              |       |         |         |        |        |         |        
|                                                         |                                                                                                            | Loss from discontinued operations                                   |                                                                    |              | 483     |              |       |         | 769     |        |        |         | 39,938  |        
|                                                         |                                                                                                            | Loss on disposal of discontinued operations                         |                                                                    |              |        |              |       |         | 12,616  |        |        |         | 1,200   |        
|                                                         |                                                                                                            | Extraordinary gain                                                  |                                                                    |              | (30,089 | )            |       |         |        |        |        |         |        |        
|                                                         |                                                                                                            | Depreciation and amortization of goodwill and
    other intangibles |                                                                    |              | 8,610   |              |       |         | 17,532  |        |        |         | 14,302  |        
|                                                         |                                                                                                            | Amortization of other assets                                        |                                                                    |              | 1,221   |              |       |         | 1,247   |        |        |         | 1,176   |        
|                                                         |                                                                                                            | Deferred taxes                                                      |                                                                    |              | 2,900   |              |       |         | (6,809  | )      |        |         | 2,582   |        
|                                                         |                                                                                                            | Other                                                               |                                                                    |              | 237     |              |       |         | 2,887   |        |        |         | (169    | )      
|                                                         | Change in assets and liabilities:                                                                          |                                                                     |                                                                    |              |         |              |       |         |         |        |        |         |        
|                                                         |                                                                                                            | Accounts receivable, net                                            |                                                                    |              | (2,751  | )            |       |         | 7,376   |        |        |         | 440     |        
|                                                         |                                                                                                            | Inventories                                                         |                                                                    |              | (2,510  | )            |       |         | 28,016  |        |        |         | (22,550 | )      
|                                                         |                                                                                                            | Other current assets                                                |                                                                    |              | (1,692  | )            |       |         | (3,014  | )      |        |         | (9,070  | )      
|                                                         |                                                                                                            | Accounts payable and accrued expenses                               |                                                                    |              | 5,735   |              |       |         | (30,204 | )      |        |         | 54,507  |        
|                                                         |                                                                                                            | Other                                                               |                                                                    |              | (6,064  | )            |       |         | (1,242  | )      |        |         | 912     |        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         |                                                                                                            |                                                                     | Net cash provided by (used in) continuing
    operating activities |              |         | 13,507       |       |         |         | (1,766 | )      |         |         | 40,575  |  
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         |                                                                                                            |                                                                     | Net cash used in discontinued operations                           |              |         |             |       |         |         | (6,069 | )      |         |         | (14,786 | )
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|Cash flows from investing
    activities:                |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         | Mergers and acquisitions, net of cash acquired                                                             |                                                                     |                                                                    |             |         |              |       |        |         |        |        | (70,149 | )      
|                                                         | Net proceeds from sale of discontinued operations                                                          |                                                                     |                                                                    |             |         |              |       | 9,111   |         |        |        |        |        
|                                                         | Net proceeds from sale of Haas distribution
    outlets                                                    |                                                                     |                                                                    |             |         |              |       | 2,420   |         |        |        |        |        
|                                                         | Purchase of property and equipment                                                                         |                                                                     |                                                                    | (2,059       | )       |              |       | (6,060  | )       |        |        | (14,724 | )      
|                                                         | Proceeds from sale of property and equipment                                                               |                                                                     |                                                                    | 2,187        |         |              |       | 2,712   |         |        |        | 2,718   |        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         |                                                                                                            |                                                                     | Net cash provided by (used in) investing
    activities            |              |         | 128          |       |         |         | 8,183  |        |         |         | (82,155 | )
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|Cash flows from financing
    activities:                |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         | Net proceeds from (repayments of) revolving
    credit facility and other long-term debt                   |                                                                     |                                                                    | 13,960       |         |              |       | (8,947  | )       |        |        | 55,437  |        
|                                                         | Repurchase of Series D Senior Notes                                                                        |                                                                     |                                                                    | (64,959      | )       |              |       |        |         |        |        |        |        
|                                                         | Net proceeds from sale-leaseback transaction                                                               |                                                                     |                                                                    | 13,285       |         |              |       |        |         |        |        |        |        
|                                                         | Proceeds received from issuance of preferred stock                                                         |                                                                     |                                                                    | 28,913       |         |              |       | 12,000  |         |        |        |        |        
|                                                         | Principal payments on long-term debt                                                                       |                                                                     |                                                                    | (6,232       | )       |              |       | (1,350  | )       |        |        | (2,241  | )      
|                                                         | Cash paid for stock repurchase                                                                             |                                                                     |                                                                    | (40          | )       |              |       | (578    | )       |        |        |        |        
|                                                         | Cash paid for financing costs                                                                              |                                                                     |                                                                    |             |         |              |       | (702    | )       |        |        |        |        
|                                                         | Other                                                                                                      |                                                                     |                                                                    |             |         |              |       | 33      |         |        |        |        |        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         |                                                                                                            |                                                                     | Net cash provided by (used in) financing
    activities            |              |         | (15,073      | )     |         |         | 456    |        |         |         | 53,196  |  
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|Net increase (decrease) in cash and cash
    equivalents |                                                                                                            |                                                                     | (1,438                                                             | )            |         |              | 804   |         |         |        | (3,170 | )      
|Cash and cash equivalents, beginning of year             |                                                                                                            |                                                                     | 4,131                                                              |              |         |              | 3,327 |         |         |        | 6,497  |        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|Cash and cash equivalents, end of year                   |                                                                                                            | $                                                                   | 2,693                                                              |              |         | $            | 4,131 |         |         | $      | 3,327  |        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|Supplemental disclosures of cash flow
    information:   |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         | Cash payments for interest                                                                                 |                                                                     | $                                                                  | 18,234       |         |              | $     | 26,551  |         |        | $      | 24,233  |        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        
|                                                         | Cash payments for taxes, net                                                                               |                                                                     | $                                                                  | 3,230        |         |              | $     | 498     |         |        | $      | 502     |        
|                                                         |                                                                                                            |                                                                     |                                                                    |              |         |              |       |         |         |        |        |        

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

22



---



##### 



American Tire Distributors, Inc.

Notes to Consolidated Financial
Statements

1. Nature of Business and Significant
Accounting Policies:



| |                   
| | ------------------
| | Nature of Business

American Tire Distributors, Inc. (together with
its subsidiaries, the Company) (formerly Heafner
Tire Group, Inc.), is a Delaware corporation primarily engaged
in the wholesale distribution of tires and tire accessories. On
May 24, 1999, Charlesbank Equity Fund IV, L.P.
(Charlesbank), a Massachusetts limited partnership,
purchased approximately 97.8% of the Companys then issued
and outstanding shares of Class A common stock and
approximately 96.8% of its then issued and outstanding shares of
Class B common stock for a purchase price of approximately
$44.7 million. On August 20, 1999, the Company
reincorporated in Delaware (previously incorporated in North
Carolina) and simultaneously changed its name from The J. H.
Heafner Company, Inc. to Heafner Tire Group, Inc. On
May 30, 2002, the Company changed its name from Heafner
Tire Group, Inc. to American Tire Distributors, Inc.

The Company is an independent distributor of
tires, custom wheels, automotive service equipment and related
products to the replacement market. The Companys customer
base is comprised primarily of independent tire dealers with
other customers representing national retail chains, service
stations and other automotive dealer and repair facilities. The
Company operates as one business segment with 62 distribution
centers serving all or parts of 35 states located in the
Southeastern and Mid-Atlantic regions, portions of the Midwest
and the West Coast of the United States.



| |                            
| | ---------------------------
| | Principles of Consolidation

The accompanying consolidated financial
statements include the accounts of American Tire Distributors,
Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.



| |            
| | -----------
| | Fiscal Year

During 2000, the Company changed its fiscal
year-end from a calendar year to the Saturday closest to
December 31.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

The Company includes cash, demand deposits and
highly liquid investments with initial maturities of less than
three months in cash and cash equivalents in its consolidated
financial statements.



| |                                                         
| | --------------------------------------------------------
| | Revenue Recognition and Concentration of
    Credit Risk

The Company recognizes revenue upon shipment from
its distribution centers/warehouses to the customer. In the
normal course of business, the Company extends credit, on open
accounts, to its customers after performing a credit analysis
based on a number of financial and other criteria. The Company
performs ongoing credit evaluations of its customers
financial condition and does not normally require collateral;
however, letters of credit and other security are occasionally
required for certain new and existing customers. Allowances are
maintained for estimated potential credit losses.

The Company permits customers from time to time
to return certain products but there is no right of return. The
Company continuously monitors and tracks such returns and
records an estimate of such future returns, based on historical
experience and actual returns experienced for a specified time
following the end of the period.

23



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)



| |                                        
| | ---------------------------------------
| | Fair Value of Financial
    Instruments

Carrying value approximates fair value as it
relates to cash and cash equivalents, accounts receivable and
accounts payable due to the short-term maturity of those
instruments. The fair value of the Companys revolving
credit facility approximates its carrying value and the fair
value of the Companys debt is disclosed in Note 5.



| |            
| | -----------
| | Inventories

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



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment are recorded at cost and
depreciation is determined by using a combination of the
straight-line method and declining-balance method based on the
following estimated useful lives:

|                        |  |  |             | 
|----------------------- |  |  | ----------- | 
|Buildings               |  |  | 20-30 years | 
|Machinery and equipment |  |  | 3-10 years  | 
|Furniture and fixtures  |  |  | 3-7 years   | 
|Vehicles and other      |  |  | 3-5 years   | 

Leasehold improvements are amortized over the
lesser of the lease term or the estimated useful lives of the
improvements. Expenditures for repairs and maintenance are
charged to expense as incurred. Renewals or improvements of
significant items are capitalized. When assets are sold or
otherwise disposed of, the cost and related accumulated
depreciation or amortization is removed from the respective
accounts and any resulting gain or loss is recognized.



| |                         
| | ------------------------
| | Deferred Financing Costs

Costs incurred in connection with financing
activities (Notes 4 and 5) are capitalized and amortized using
the effective interest method and charged to interest expense
over the life of the associated debt in the accompanying
consolidated statements of operations. The unamortized balance
of these deferred costs included in the accompanying
consolidated balance sheets was $3.7 million and
$7.1 million at December 28, 2002 and
December 29, 2001, respectively. In connection with the
repurchase of $121.4 million in outstanding principal
amount of the 10% Series D Senior Notes (Note 9), the
Company wrote off approximately $4.0 million of unamortized
deferred financing costs associated with the 10% Series D
Senior Notes. The charge has been included in the extraordinary
gain in the accompanying consolidated statement of operations.



| |                                         
| | ----------------------------------------
| | Goodwill and Other Intangible
    Assets

In July 2001, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 141
Business Combinations and SFAS No. 142
Goodwill and Other Intangible Assets.
SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations completed after
June 30, 2001. This statement also specifies that
intangible assets acquired in a purchase method business
combination must meet certain criteria to be recognized and
reported apart from goodwill. SFAS No. 142 revises the
accounting for purchased goodwill and intangible assets. Under
SFAS No. 142, goodwill and intangible assets with
indefinite lives are no longer amortized, but are tested for
impairment annually and more frequently in the event of an
impairment indicator. SFAS No. 142 also requires that
intangible assets with

24



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

definite useful lives be amortized over their
respective estimated useful lives, and reviewed for impairment
at least annually. The Company adopted the provisions of
SFAS 142 effective December 30, 2001.

Goodwill represents the excess of the purchase
price over the fair value of the net assets of the acquired
entities. Prior to adopting SFAS No. 142, goodwill was
amortized on a straight-line basis over a period of
15 years. Although no amortization expense was recognized
in 2002, the accompanying consolidated statements of operations
include amortization of goodwill applicable to continuing
operations of $7.5 million and $6.9 million in 2001
and 2000, respectively. Accumulated amortization of goodwill at
December 28, 2002 and December 29, 2001 was
$22.6 million and $22.6 million, respectively. Prior
to adopting SFAS No. 142, the carrying amount of goodwill
was reviewed periodically based on the non-discounted cash flows
and pretax income of the acquired entity over the remaining
amortization period. During 2000, based upon such review, which
considered the significant increase in losses during fiscal 2000
and 1999 and managements outlook for the business of
Winston Tire Company (Winston), the Company wrote
off approximately $31.8 million of goodwill and other
intangibles related to this acquisition. The charge has been
included in the loss from discontinued operations in the
accompanying consolidated statement of operations. The Company
has completed its transitional goodwill impairment testing as
required by SFAS No. 142 at the beginning of fiscal 2002
and its annual goodwill impairment testing required by SFAS
No. 142 during the fourth quarter of 2002. Based on this
impairment testing, no adjustment to the recorded goodwill
balance was necessary.

Other intangible assets, which represent
noncompete agreements and other intangibles, are being amortized
on a straight-line basis over periods ranging from two to seven
years. Amortization of other intangibles applicable to
continuing operations was $3.2 million, $3.0 million
and $2.3 million in 2002, 2001 and 2000, respectively.
Accumulated amortization for continuing operations at
December 28, 2002 and December 29, 2001 was
$12.9 million and $9.7 million, respectively.

The following table illustrates the comparable
adjusted income (loss) before extraordinary item and adjusted
net income (loss) for the years ended December 28,
2002, December 29, 2001 and December 30, 2000,
respectively:

|                                                                                    |                                                      |              |        |              |  |              |         |         |   |   |         |         |  
|----------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------ | ------ | ------------ |  | ------------ | ------- | ------- | - | - | ------- | ------- | -
|                                                                                    |                                                      | December 28, |        | December 29, |  | December 30,
|                                                                                    |                                                      | 2002         |        | 2001         |  | 2000        
|                                                                                    |                                                      |              |        |              |  |             
|Reported income (loss) before extraordinary
    item                                |                                                      | $            | 7,338  |              |  | $            | (30,940 | )       |   | $ | (42,693 | )      
|Add back: goodwill amortization, net of income
    tax benefit of $0, $465 and $194 |                                                      |              |       |              |  |              | 7,083   |         |   |   | 6,727   |        
|                                                                                    |                                                      |              |        |              |  |              |         |         |   |   |         |        
|                                                                                    | Adjusted income (loss) before extraordinary
    item |              | $      | 7,338        |  |              | $       | (23,857 | ) |   | $       | (35,966 | )
|                                                                                    |                                                      |              |        |              |  |              |         |         |   |   |         |        
|Reported net income (loss)                                                          |                                                      | $            | 37,427 |              |  | $            | (30,940 | )       |   | $ | (42,693 | )      
|Add back: goodwill amortization, net of income
    tax benefit of $0, $465 and $194 |                                                      |              |       |              |  |              | 7,083   |         |   |   | 6,727   |        
|                                                                                    |                                                      |              |        |              |  |              |         |         |   |   |         |        
|                                                                                    | Adjusted net income (loss)                           |              | $      | 37,427       |  |              | $       | (23,857 | ) |   | $       | (35,966 | )
|                                                                                    |                                                      |              |        |              |  |              |         |         |   |   |         |        



| |                           
| | --------------------------
| | Concentration of Suppliers

The Company currently purchases approximately 81%
of its tire products from three tire suppliers. The Company does
not have long-term supply agreements with these vendors for its
purchases of the vendors branded products. The operating
results of the Company could be adversely affected if the
Company was unable to purchase tires from these three suppliers.
The Company has a good relationship with these suppliers and
does not anticipate a shortage in the supply of tires from these
vendors.

25



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)



| |                            
| | ---------------------------
| | Shipping and Handling Costs

Outbound shipping and handling costs are
classified as selling, general and administrative expenses in
the accompanying consolidated statements of operations. Such
expenses totaled $65.0 million, $62.2 million and
$64.4 million for the years ended December 28, 2002,
December 29, 2001 and December 30, 2000, respectively.



| |                                                   
| | --------------------------------------------------
| | Cooperative Advertising and Marketing
    Programs

The Company participates in cooperative
advertising and marketing programs (co-op) with its
vendors. Co-op funds are reported as a reduction of selling,
general and administrative expenses at the time the qualifying
advertising and marketing expenses are incurred.



| |             
| | ------------
| | Income Taxes

The Company accounts for its income taxes under
the provisions of SFAS No. 109 Accounting for Income
Taxes. This statement requires the use of the asset and
liability method of accounting for deferred 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 reporting purposes, at the applicable
enacted tax rates.



| |                                                  
| | -------------------------------------------------
| | Derivative Instruments and Hedging
    Activities

In first quarter 2001, the Company adopted SFAS
No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 137 and
SFAS No. 138. This statement establishes accounting and
reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. This statement requires
that changes in the derivatives fair value be recognized
currently in earnings unless specific hedge accounting criteria
are met and requires that a company must formally document,
designate and assess the effectiveness of transactions that
receive hedge accounting. The adoption of this statement had no
material impact on the Companys financial position and
results of operations.



| |              
| | -------------
| | Stock Options

As permitted by SFAS No. 123,
Accounting For Stock-Based Compensation, the Company
accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB No. 25) and its
related interpretations. Pursuant to APB No. 25,
compensation expense is recognized for financial reporting
purposes using the intrinsic value method when it becomes
probable that the options will be exercisable. The amount of
compensation expense to be recognized is determined by the
excess of the fair value of common stock over the exercise price
of the related option at the measurement date. Accordingly, no
compensation expense has been recorded in the consolidated
statements of operations as the exercise price of all stock
options represented fair value of the underlying common stock at
the date of grant.

SFAS No. 123 established an alternative
method of expense recognition for stock-based compensation
awards to employees based on fair values. The Company has
elected not to adopt SFAS No. 123 for expense recognition
purposes, but is required to provide certain pro forma
disclosures, which is presented below.

26



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

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

|                                                                                                                                        |  |              |        |              |  |              |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------- | - |  | - | ------- | -
|                                                                                                                                        |  |             
|                                                                                                                                        |  | Year Ended  
|                                                                                                                                        |  |             
|                                                                                                                                        |  | December 28, |        | December 29, |  | December 30,
|                                                                                                                                        |  | 2002         |        | 2001         |  | 2000        
|                                                                                                                                        |  |              |        |              |  |             
|Net income (loss)                                                                                                                       |  | $            | 37,427 |              |  | $            | (30,940 | ) |  | $ | (42,693 | )
|Deduct: Total stock-based employee compensation
    expense determined under the fair value based method for all
    awards, net of tax |  | $            | (440   | )            |  | $            | (525    | ) |  | $ | (818    | )
|                                                                                                                                        |  |              |        |              |  |              |         |   |  |   |         |  
|Pro forma net income (loss)                                                                                                             |  | $            | 36,987 |              |  | $            | (31,465 | ) |  | $ | (43,511 | )
|                                                                                                                                        |  |              |        |              |  |              |         |   |  |   |         |  



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.



| |                                              
| | ---------------------------------------------
| | Recently Issued Accounting
    Pronouncements

In April 2002, the FASB issued Statement of
Financial Accounting Standards (SFAS) No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002. This statement contains a
number of changes under existing GAAP, including the elimination
of extraordinary item classification of debt extinguishments
that was previously required under SFAS 4. The provisions
of this statement related to the rescission of Statement 4
shall be applied in fiscal years beginning after May 15,
2002 with early adoption encouraged. The Company expects to
adopt SFAS No. 145 in fiscal 2003 which will require
reclassification of the Companys 2002 extraordinary gain.

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

In November 2002, the FASB issued FASB
Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others  an
interpretation of FASB Statements No. 5, 57, and 107 and a
recision of FASB Interpretation No. 34. FIN 45
elaborates on the disclosures to be made regarding obligations
under certain issued guarantees by a guarantor in interim and
annual financial statements. It also clarifies the requirement
of a guarantor to recognize a liability at the inception of the
guarantee at the fair value of the obligation. FIN 45 does
not provide specific guidance for subsequently measuring the
guarantors recognized liability over the term of the
guarantee. The provisions relating to the initial recognition
and measurement of a liability are applicable on a prospective
basis

27



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

for guarantees issued or modified subsequent to
December 31, 2002. The disclosure requirements of
FIN 45 are effective for interim and annual financials
statements for periods ending after December 15, 2002. The
Company has adopted the disclosure provisions of this statement
effective December 15, 2002. The Company does not expect
that adoption of the liability recognition provisions will have
a material impact on its financial position or results of
operations.

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

2.     Acquisitions:

During fiscal 2000, the Company acquired the
entities described below, which were accounted for by the
purchase method of accounting. Accordingly, results of
operations for the acquired businesses have been included in the
accompanying consolidated statements of operations from the
acquisition dates.

On July 21, 2000, the Company purchased the
net assets of American Tire Distributors (ATD), the
wholesale operations of Merchants, Inc. The total purchase price
of approximately $38.6 million was funded primarily through
the Companys revolving credit facility.

On May 25, 2000, the Company purchased all
of the outstanding common stock of T.O. Haas Holding Co., Inc.
and T.O. Haas Tire Company, Inc. (collectively
Haas), a tire wholesaler and distributor, located in
Lincoln, Nebraska, as well as all of the outstanding common
stock of Haas Investment Company (Haas Investment).
In connection with the acquisition, the Company sold certain
parcels of real estate, including substantially all of the
assets of Haas Investment, and leased them back in a transaction
which closed on August 8, 2000. The net purchase price of
the Haas acquisition, giving effect to the real estate
transaction, was approximately $27.9 million (including
$1.6 million of assumed debt), of which approximately
$5.5 million was payable over a period of seven years in
the form of noncompete and stay-put payments. Subsequently
certain of these payments were accelerated as discussed in Note
14. The cash portion of the purchase price was funded through
the Companys revolving credit facility.

On April 28, 2000, the Company purchased
certain assets of Tire Centers, LLC (TCI), a
wholly-owned subsidiary of Michelin North America, Inc. The
total purchase price was approximately $4.1 million, which
was funded through the Companys revolving credit facility.

In connection with the acquisition of The Speed
Merchant, Inc. (CPW) and the merger of ITCO
Logistics Corporation and Subsidiaries (ITCO) in
fiscal 1998, the Company recorded a $1.7 million liability
for estimated costs related to employee severance and a
$3.5 million liability related to facilities closing
expense and other related exit costs. The severance costs were
primarily related to management and administrative personnel at
the corporate locations in San Jose, California and Wilson,
North Carolina. The facilities closing expense primarily relates
to the closing of acquired distribution centers due to existing
distribution centers being located in close proximity to the
acquired distribution facilities. During 2002, the Company again
revised its estimate of these reserves, resulting in a reduction
of approximately $0.1 million.

28



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

The Company has charged approximately
$0.3 million, $0.3 million and $0.8 million
against these reserves during the fiscal years 2002, 2001 and
2000, respectively. The Company has completed substantially all
facility closings and employee severance related to these
reserves. The remaining liability of $0.5 million is
primarily related to lease obligations, which will expire in
2005.

The impact of the ATD and TCI acquisitions was
not material to the Companys results of operations and
consequently, pro forma information is not presented.

3.     Income
Taxes:

The following summarizes the components of the
Companys income tax provision (benefit) on income
(loss) from continuing operations before extraordinary item
for fiscal years 2002, 2001 and 2000 (in thousands):

|          |                              |                           |       |              |       |              |        |        |        |   |       |       |       | 
|--------- | ---------------------------- | ------------------------- | ----- | ------------ | ----- | ------------ | ------ | ------ | ------ | - | ----- | ----- | ----- | 
|          |                              |                          
|          |                              | Year Ended               
|          |                              |                          
|          |                              | December 28,              |       | December 29, |       | December 30,
|          |                              | 2002                      |       | 2001         |       | 2000        
|          |                              |                           |       |              |       |             
|Federal  |                              |                           |       |              |       |              |        |        |        |   |       |      
|          | Current benefit              |                           | $     | (8           | )     |              | $      |       |        |   | $     |      |      
|          | Deferred provision (benefit) |                           |       | 4,435        |       |              |        | (5,042 | )      |   |       | 2,482 |      
|          |                              |                           |       |              |       |              |        |        |        |   |       |      
|          |                              |                           | 4,427 |              |       |              | (5,042 | )      |        |   | 2,482 |      
|State    |                              |                           |       |              |       |              |        |        |        |   |       |      
|          | Current provision            |                           |       | 573          |       |              |        | 566    |        |   |       | 630   |      
|          | Deferred provision (benefit) |                           |       | 113          |       |              |        | (1,767 | )      |   |       | 100   |      
|          |                              |                           |       |              |       |              |        |        |        |   |       |      
|          |                              |                           | 686   |              |       |              | (1,201 | )      |        |   | 730   |      
|          |                              |                           |       |              |       |              |        |        |        |   |       |      
|          |                              | Total provision (benefit) |       | $            | 5,113 |              |        | $      | (6,243 | ) |       | $     | 3,212 | 
|          |                              |                           |       |              |       |              |        |        |        |   |       |      

As discussed in Note 9, the Company reported an
extraordinary item in 2002 related to the repurchase of the
Series D Senior Notes resulting in an income tax provision
of $19.7 million.

Actual income tax expense differs from the amount
computed by applying the statutory federal income tax rate of
35% in 2002 and 2001 and 34% in 2000 as a result of the
following (in thousands):

|                                                                          |  |              |       |              |  |              |        |   |  |   |       | 
|------------------------------------------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ------ | - |  | - | ----- | 
|                                                                          |  |             
|                                                                          |  | Year Ended  
|                                                                          |  |             
|                                                                          |  | December 28, |       | December 29, |  | December 30,
|                                                                          |  | 2002         |       | 2001         |  | 2000        
|                                                                          |  |              |       |              |  |             
|Income tax provision (benefit) computed at
    the federal statutory rate |  | $            | 4,527 |              |  | $            | (8,329 | ) |  | $ | 563   | 
|Amortization of nondeductible goodwill                                    |  |              |      |              |  |              | 2,286  |   |  |   | 2,035 | 
|State income taxes, net of federal income tax
    benefit                 |  |              | 226   |              |  |              | (780   | ) |  |   | 474   | 
|Other                                                                     |  |              | 360   |              |  |              | 580    |   |  |   | 140   | 
|                                                                          |  |              |       |              |  |              |        |   |  |   |       | 
|Income tax provision (benefit)                                            |  | $            | 5,113 |              |  | $            | (6,243 | ) |  | $ | 3,212 | 
|                                                                          |  |              |       |              |  |              |        |   |  |   |       | 

29



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Deferred income taxes reflect the net tax effects
of (a) temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and
the amounts used for income tax reporting purposes and
(b) operating loss and tax credit carry-forwards. The tax
effects of the significant temporary differences which comprise
deferred tax assets and liabilities at December 28, 2002
and December 29, 2001, are as follows (in thousands):

|                           |                                                             |                                |                         |        |        |        |   |        |        |        | 
|-------------------------- | ----------------------------------------------------------- | ------------------------------ | ----------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                           |                                                             | 2002                           |                         | 2001  
|                           |                                                             |                                |                         |       
|Deferred tax assets       |                                                             |                                |                         |        |        |        |   |       
|                           | Net operating loss carry-forwards                           |                                | $                       | 11,134 |        |        | $ | 33,232 |       
|                           | Accrued expenses and liabilities                            |                                |                         | 5,160  |        |        |   | 5,984  |       
|                           | Employee benefits                                           |                                |                         | 1,735  |        |        |   | 2,733  |       
|                           | Inventory cost capitalization                               |                                |                         | 1,717  |        |        |   | 2,150  |       
|                           | Depreciation, amortization and write-off of
    intangibles |                                |                         | 1,850  |        |        |   | 3,123  |       
|                           | Other                                                       |                                |                         | 2,456  |        |        |   |       |       
|                           | Valuation allowance                                         |                                |                         | (1,044 | )      |        |   | (2,000 | )     
|                           |                                                             |                                |                         |        |        |        |   |       
|                           |                                                             | Gross deferred tax assets      |                         |        | 23,008 |        |   |        | 45,222 |       
|                           |                                                             |                                |                         |        |        |        |   |       
|Deferred tax liabilities  |                                                             |                                |                         |        |        |        |   |       
|                           | Other                                                       |                                |                         | (783   | )      |        |   | (1,232 | )     
|                           |                                                             |                                |                         |        |        |        |   |       
|                           |                                                             | Gross deferred tax liabilities |                         |        | (783   | )      |   |        | (1,232 | )     
|                           |                                                             |                                |                         |        |        |        |   |       
|                           |                                                             |                                | Net deferred tax assets |        | $      | 22,225 |   |        | $      | 43,990 | 
|                           |                                                             |                                |                         |        |        |        |   |       

The above amounts have been classified in the
accompanying consolidated balance sheets as follows (in
thousands):

|                      |            |              |        |              |  |   |        |        | 
|--------------------- | ---------- | ------------ | ------ | ------------ |  | - | ------ | ------ | 
|                      |            | December 28, |        | December 29,
|                      |            | 2002         |        | 2001        
|                      |            |              |        |             
|Deferred tax assets  |            |              |        |              |  |   |        |       
|                      | Current    |              | $      | 3,785        |  |   | $      | 27,364 | 
|                      | Noncurrent |              |        | 18,440       |  |   |        | 16,626 | 
|                      |            |              |        |              |  |   |        |       
|                      |            | $            | 22,225 |              |  | $ | 43,990 |       
|                      |            |              |        |              |  |   |        |       

Management has evaluated the Companys
deferred tax assets and has concluded that the realizability of
the deferred tax assets is more likely than not
except as it relates to certain state net operating loss
carry-forwards (NOLs). Accordingly, a valuation
allowance of $2.0 million was provided at December 29,
2001 relating to certain deferred tax assets that in
managements assessment may not be realized due to the sale
of Winston in May 2001. The valuation allowance was reduced to
$1.0 million at December 28, 2002 based on the
Companys state income tax results for fiscal 2002 and the
Companys analysis of projected utilization of the
remaining state NOL carry-forwards. This evaluation considered
the historical and long-term expected profitability of the
Companys continuing operations, the sale of the
Companys retail segment which generated the Companys
losses in 2000 and 1999 and the efficiencies gained from efforts
initiated in 2001 to streamline operations. The Companys
current year operations result in taxable income in 2002. The
Company is forecasting taxable income in 2003. The Company
believes that taxable income generated in future years will be
sufficient to utilize the remaining net deferred tax assets. The
Companys ability to generate future taxable income is
dependent on numerous factors including general economic
conditions, the state of the replacement tire market and other
factors beyond managements control. Therefore, there can
be no assurance that the Company will meet its expectation of
future taxable income.

30



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

At December 28, 2002, the Company had NOLs
for Federal income tax purposes of approximately
$25 million. These carry-forwards expire between 2019 and
2021.

Future sales of common stock by the Company or
its principal stockholders, or changes in the composition of its
principal stockholders, could constitute a change in
control that would result in annual limitations on the
Companys use of its NOLs and unused tax credits.
Management cannot predict whether such a change in
control will occur. If such a change in
control were to occur, the resulting annual limitations on
the use of NOLs and tax credits would depend on the value of the
equity of the Company and the amount of built-in
gain or built-in loss in the Companys
assets at the time of the change in control, which
cannot be known at this time.

4.     Financing
Arrangements:



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

On March 18, 2002, the Company and its
lenders executed an amendment to the revolving credit facility
(Revolver) to, among other things, amend the
financial covenants contained therein, change the rate at which
borrowings thereunder bear interest and amend certain
definitions contained therein. In addition, the amended facility
provides for additional availability due in part to a reduction
in the minimum availability reserve (as defined in the
agreement). The minimum availability reserve increased by
$0.5 million in August 2002 and will increase each month
until the reserve reaches the original amount in August 2003. As
a result of the amendment, the applicable margins as of
April 1, 2002 for Eurodollar Rate loans were increased to
3.5%. A nonrefundable fee of approximately $0.5 million was
charged in connection with this amendment.

Effective August 22, 2002, the Company and
its lenders executed a waiver and amendment to the Revolver to
waive the effect of a failure to meet the minimum fixed charge
coverage covenant, as defined in the credit agreement, as of
June 29, 2002 and to amend certain definition contained
therein.

On September 25, 2002, the Company and its
lenders executed an amendment to the Revolver to, among other
things, amend the financial covenants contained therein and
revise certain components of the definitions of Borrowing Base.
A nonrefundable fee of approximately $0.2 million was
charged in connection with this amendment. As of March 28,
2003, the Companys financial measures were in excess of
the minimums required, as amended, and management expects that
such amounts will remain above the minimums for the foreseeable
future.

On December 3, 2002, the Company and its
lenders further amended the Revolver to modify certain
components of the definitions of Borrowing Base. The amended
agreement provides for borrowings in the aggregate principal
amount of up to the lesser of $180.0 million or the
Borrowing Base, as defined in the agreement, which is based on
85% of eligible accounts receivable, the lesser of 65% of
eligible tire inventory plus 60% of certain secured tire
inventory (within limitations as defined in the agreement) plus
65% of eligible subordinated vendor tire inventory (within
limitations as defined in the agreement) or $100 million
and the lesser of 50% of all other eligible inventory or
$25 million less defined reserves.

Average borrowings under the existing loan and
security agreement were approximately $135.4 million in
2002 and $133.4 million in 2001. Total commitments by the
lenders under the Companys Revolver were
$180.0 million at December 28, 2002, of which
$17.0 million was available for additional borrowings after
consideration of the Companys outstanding letters of
credit totaling $6.3 million.

The Revolver term expires in March 2005, and is
extendable by the Company and the banks for an additional five
years. Borrowings under the Revolver bear interest at
(i) the Base Rate, as defined, plus the applicable margin
(2.0% as of December 28, 2002) or (ii) the Eurodollar
Rate, as defined, plus the applicable margin (3.5% as of
December 28, 2002). These margins are subject to
performance-based step-downs resulting in margins ranging from
0.75% to 2.0% for Base Rate loans and 2.0% to 3.5% for
Eurodollar Rate

31



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

loans, respectively. At December 28, 2002
and December 29, 2001, borrowings outstanding under the
existing loan and security agreement were at a weighted average
interest rate of 5.4% and 5.8%, respectively.

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

Capital Lease Obligations

On March 27, 2002, the Company completed an
agreement for the sale and leaseback of three of its owned
facilities generating cash proceeds of $13.9 million. The
Company reports this transaction as a capital lease using direct
financing lease accounting. As such, the Company recorded a
$14.0 million capital lease obligation during first quarter
2002. The Company has determined that all cash paid to the
lessor is properly recorded as interest expense and that the
capital lease obligation will be reduced when the Company no
longer has continuing involvement with the properties. The
initial term of the lease is for 20 years, followed by two,
10-year renewal options. The annual rent paid under the terms of
the lease is $1.6 million annually (paid quarterly) and is
adjusted for CPI changes every two years. In addition, the
purchaser received warrants to purchase 153,597 shares of the
Companys common stock. The warrants have a term of
10 years with a stated exercise price of $3.00 per warrant.

5.     Long-term
Debt:

Long-term debt consists of the following (in
thousands):

|                                                   |  |              |         |              |  |   |         |  
|-------------------------------------------------- |  | ------------ | ------- | ------------ |  | - | ------- | -
|                                                   |  | December 28, |         | December 29,
|                                                   |  | 2002         |         | 2001        
|                                                   |  |              |         |             
|Series D Senior Notes                              |  | $            | 28,600  |              |  | $ | 150,000 |  
|Revolving credit facility and other long-term debt |  |              | 152,535 |              |  |   | 131,839 |  
|                                                   |  |              |         |              |  |   |         |  
|                                                   |  |              | 181,135 |              |  |   | 281,839 |  
|Less  Current maturities                          |  |              | (2,742  | )            |  |   | (5,295  | )
|                                                   |  |              |         |              |  |   |         |  
|                                                   |  | $            | 178,393 |              |  | $ | 276,544 |  
|                                                   |  |              |         |              |  |   |         |  

Aggregate maturities of long-term debt at
December 28, 2002, are as follows (in thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|2003       |  | $ | 2,742   | 
|2004       |  |   | 1,752   | 
|2005       |  |   | 12,621  | 
|2006       |  |   | 169     | 
|2007       |  |   | 53      | 
|Thereafter |  |   | 163,798 | 
|           |  |   |         | 
|           |  | $ | 181,135 | 
|           |  |   |         | 

Senior Notes

The Series D Senior Notes (Senior
Notes) have an annual coupon of 10% and are redeemable at
the Companys option, in whole or in part, at any time, on
or after May 15, 2003, at certain redemption prices. In

32



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##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

addition, the Company can redeem up to 35% of the
original principal amount of the Senior Notes at 110% of par
with one or more public equity offerings. The Senior Notes are
due May 2008 and interest is payable semiannually on May 15
and November 15 of each year commencing November 15,
1999. The Senior Notes contain certain covenants that, among
other things, limits the ability of the Company to incur
indebtedness; make restricted payments; make certain
distributions; sell assets; enter into certain affiliate
transactions; sell or issue capital stock of restricted
subsidiaries; incur liens; enter into sale/leaseback
transactions; and engage in mergers and consolidations.

On March 27, 2002, the Company repurchased
$121.4 million in outstanding principal amount of the
Senior Notes at a purchase price of $535 per $1,000 in face
amount, plus accrued and unpaid interest of $4.5 million.
See Note 9 for more information on the repurchase of the
Senior Notes.

Using a discounted cash flow analysis, based on
the Companys current incremental borrowing rates for
similar types of borrowing arrangements, the carrying amount of
the Companys debt, excluding the Senior Notes, at December
28, 2002, approximated fair value. The fair value of the Senior
Notes is based upon quoted market price where available and
approximates $15.3 million.

6.     Employee
Benefits:

401(k) Plans

The Company maintains a qualified profit sharing
and 401(k) plan for eligible employees. All accounts are funded
based on employee contributions to the plan, with the limits of
such contributions determined by the Board of Directors.
Effective January 1, 2002, the benefit formulas for all
divisions were determined to be a match of 50% of participant
contributions, up to 6% of their compensation. In prior years,
depending on the division, the plan either matched 50% of the
participants contributions up to 6% of their compensation
or matched 50% of the first 2% of participant contributions and
6% of the remaining contribution up to a total of 6% of their
compensation. The plan also provides for contributions in such
amounts as the Board of Directors may annually determine for the
profit sharing portion of the plan. Employees will vest in this
match over a 5-year period. The amount charged to expense
applicable to continuing operations during the years ended
December 28, 2002, December 29, 2001 and
December 30, 2000, was $1.1 million, $1.1 million
and $0.9 million, respectively.

Stock Option Plans

In 1997, the Company adopted a Stock Option Plan
(the 1997 Plan) in order to attract and retain key
employees of the Company. The 1997 Plan authorizes the issuance
of up to 527,500 shares of voting common stock to be issued to
officers and key employees under terms and conditions to be set
by the Companys Board of Directors, which includes a 1998
amendment that increased the amount of shares by 262,500. All
options expire 10 years from the date of grant. In
connection with the Charlesbank purchase, which constituted a
change in control under the 1997 Plan, all outstanding options
became fully vested. Through December 28, 2002, 34,250
options had been exercised under the 1997 Plan.

In the second quarter of 1999, the Company
adopted the 1999 Stock Option Plan (the 1999 Plan)
in order to attract and retain employees (including officers),
directors and independent contractors of the Company. The 1999
Plan, as amended, authorizes the issuance of up to 1,143,550
shares of voting common stock under terms and conditions to be
set by the Companys Board of Directors. The options are
divided into three tiers that vest over varying periods of time
or upon the occurrence of certain events. All options expire
10 years from the date of grant. Shares issued upon
exercise of options are subject to the terms and conditions of a
stockholders agreement to be entered into by each recipient.
Under the 1999 Plan, 194,451 options are vested as of
December 28, 2002.

33



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##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

In the second quarter of 2002, the Company
adopted the 2002 Stock Option Plan (the 2002 Plan)
in order to attract and retain employees (including officers),
directors and independent contractors of the Company. The 2002
Plan authorizes the issuance of up to 2,269,889 shares of voting
common stock under terms and conditions to be set by the
Companys Board of Directors. In addition, 185,900
remaining options available for grant under the 1997 Plan and
712,350 remaining options available for grant under the 1999
Plan have been transferred to the 2002 Plan for a total of
3,168,139 options available for grant under the 2002 Plan. All
options expire 10 years from the date of grant. Shares
issued upon exercise of options are subject to the terms and
conditions of a stockholders agreement to be entered into by
each recipient. Under the 2002 Plan, 492,488 options are vested
as of December 28, 2002.

Stock option activity under the plans is as
follows:

|                                                           |           |           |           |           |   |   |      |      | 
|---------------------------------------------------------- | --------- | --------- | --------- | --------- | - | - | ---- | ---- | 
|                                                           |           |           |           | Weighted 
|                                                           |           |           |           | Average  
|                                                           |           | Number of |           | Exercise 
|                                                           |           | Shares    |           | Price    
|                                                           |           |           |           |          
|Outstanding at December 31, 1999 (476,927
    exercisable) |           |           | 1,100,000 |           |   | $ | 7.33 |     
|                                                           | Granted   |           |           | 273,100   |   |   |      | 9.00 | 
|                                                           | Forfeited |           |           | (14,000   | ) |   |      | 7.48 | 
|                                                           |           |           |           |           |   |   |      |     
|Outstanding at December 30, 2000 (553,535
    exercisable) |           |           | 1,359,100 |           |   |   | 7.67 |     
|                                                           | Granted   |           |           | 45,000    |   |   |      | 9.00 | 
|                                                           | Exercised |           |           | (10,000   | ) |   |      | 1.10 | 
|                                                           | Forfeited |           |           | (142,600  | ) |   |      | 7.96 | 
|                                                           |           |           |           |           |   |   |      |     
|Outstanding at December 29, 2001 (720,906
    exercisable) |           |           | 1,251,500 |           |   |   | 7.73 |     
|                                                           | Granted   |           |           | 2,462,426 |   |   |      | 1.40 | 
|                                                           | Forfeited |           |           | (566,500  | ) |   |      | 7.69 | 
|                                                           |           |           |           |           |   |   |      |     
|Outstanding at December 28, 2002 (940,739
    exercisable) |           |           | 3,147,426 |           |   | $ | 2.79 |     
|                                                           |           |           |           |           |   |   |      |     

The weighted average fair value of options
granted during 2002, 2001 and 2000 estimated on the date of
grant using the Black-Scholes option pricing model was $0.55,
$4.11 and $4.11, respectively. The fair value of options granted
in 2002, 2001 and 2000 were determined using the following
assumptions: a risk-free interest rate of 4.93%, 6.10% and
6.10%, respectively, no dividend yield, expected life of
10 years which equals the lives of the grants, and no
expected volatility.

The following is summary information about the
Companys stock options outstanding at December 28,
2002:

|         |      |                |  |              |           |          |  |                |      |          |  |   |      |  |  |  |         |  |  |   |      | 
|-------- | ---- | -------------- |  | ------------ | --------- | -------- |  | -------------- | ---- | -------- |  | - | ---- |  |  |  | ------- |  |  | - | ---- | 
|         |      |                |  | Weighted     |           | Weighted |  |                |      | Weighted
|         |      | Outstanding at |  | Average      |           | Average  |  | Exercisable at |      | Average 
|Exercise |      | December 28,   |  | Remaining    |           | Exercise |  | December 28,   |      | Exercise
|Price    |      | 2002           |  | Term (years) |           | Price    |  | 2002           |      | Price   
|         |      |                |  |              |           |          |  |                |      |         
|$        | 1.10 |                |  |              | 72,000    |          |  |                | 4.43 |          |  | $ | 1.10 |  |  |  | 72,000  |  |  | $ | 1.10 | 
|         | 1.40 |                |  |              | 2,462,426 |          |  |                | 9.46 |          |  |   | 1.40 |  |  |  | 492,488 |  |  |   | 1.40 | 
|         | 7.48 |                |  |              | 181,800   |          |  |                | 5.73 |          |  |   | 7.48 |  |  |  | 181,800 |  |  |   | 7.48 | 
|         | 9.00 |                |  |              | 431,200   |          |  |                | 6.91 |          |  |   | 9.00 |  |  |  | 194,451 |  |  |   | 9.00 | 
|         |      |                |  |              |           |          |  |                |      |          |  |   |      |  |  |  |         |  |  |   |      | 
|         |      |                |  |              | 3,147,426 |          |  |                | 8.78 |          |  | $ | 2.79 |  |  |  | 940,739 |  |  | $ | 4.12 | 
|         |      |                |  |              |           |          |  |                |      |          |  |   |      |  |  |  |         |  |  |   |      | 

34



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##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Deferred Compensation Plan

The Company has a deferred compensation plan for
its top executives and divisional employees covered by the
executive bonus plan to encourage each participant to promote
the long-term interests of the Company. Each participant is
allowed to defer portions of their annual salary as well as
bonuses received into the plan. In addition to employee
deferrals, the Company makes contributions on behalf of its top
executives and certain of the divisional employees in varying
amounts. The plan provides that an employee who becomes a
participant on or before November 23, 1998, shall be fully
vested in all amounts credited to such participants
account. The plan provides that an employee who becomes a
participant after November 23, 1998 shall be at all times
fully vested in elective deferrals into such participants
account and, as to contributions made by the Company, shall vest
at a rate of twenty percent (20%) per year as long as such
participant is an employee on January 1 of each year. The
deferred compensation plan may be altered and amended by the
Companys Board of Directors. The contributions made by the
Company on behalf of its employees were not significant in 2002,
2001 or 2000.

7.     Commitments
and Contingencies:

Leases

The Company leases land, buildings, equipment and
vehicles under various operating leases which expire between
2003 and 2019. Future minimum lease commitments for continuing
operations at December 28, 2002 are as follows (in
thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|2003       |  | $ | 22,215  | 
|2004       |  |   | 19,638  | 
|2005       |  |   | 15,595  | 
|2006       |  |   | 11,113  | 
|2007       |  |   | 9,692   | 
|Thereafter |  |   | 21,893  | 
|           |  |   |         | 
|           |  | $ | 100,146 | 
|           |  |   |         | 

Rent expense under these operating leases was
$24.7 million in 2002, $25.8 million in 2001 and
$20.8 million in 2000.

On March 27, 2002, the Company completed an
agreement for the sale and leaseback of three of its owned
facilities generating cash proceeds of $13.9 million. The
Company reports this transaction as a capital lease using direct
financing lease accounting. As such, the Company recorded a
$14.0 million capital lease obligation during first quarter
2002. See Note 4 for more information on this capital lease.
Obligations under the Companys other capital leases are
not significant.

Purchase Commitments

In May 1997, the Company entered into a purchase
agreement with a supplier (the Tire Supply
Agreement  see Note 11) which expires May
2007. Under the terms of the agreement, the Company has agreed
to purchase all requirements of its Winston brand
tires from Goodyear.

Legal Proceedings

The Company is involved from time to time in
various lawsuits, including alleged class action lawsuits
arising out of the ordinary conduct of its business. Although no
assurances can be given, management does not expect that any of
these matters will have a material adverse effect on the
Companys business or financial condition. The Company is
also involved in various proceedings incidental to the ordinary
course of its

35



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##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

business. The Company believes, based on
consultation with legal counsel, that none of these proceedings
will have a material adverse effect on its financial condition
or results of operations.

8.     Discontinued
Operations:

Effective May 15, 2001, the Company
completed a transaction pursuant to a Stock Purchase Agreement
to sell all the capital stock in Winston, its retail segment, to
Performance Management, Inc. for a purchase price of
approximately $10.0 million, of which $2.8 million was
payable May 15, 2002 for which the Company has previously
established an appropriate reserve. As of March 28, 2003
this balance remains outstanding and the Company is vigorously
pursuing collection from Performance Management, Inc.
Accordingly, this segment has been reflected as a discontinued
operation in the accompanying consolidated financial statements
and previously reported financial results for all periods have
been restated to reflect this treatment. The Company recorded a
loss of $39.9 million, net of income tax benefits of
$23.2 million in 2000, an additional $0.8 million
loss, net of income tax benefits of $0.5 million in 2001 and an
additional $0.5 million loss, net of income tax benefits of
$0.3 million in 2002.

Net sales of discontinued operations in fiscal
2001 and 2000 were approximately $48.3 million and
$178.0 million, respectively. Net sales from continuing
operations in 2001 and 2000 included approximately
$15.8 million and $60.6 million of inter-segment sales
to Winston that have not been eliminated in the accompanying
consolidated statements of operations.

The Companys receivable/administrative
claim of approximately $2.0 million due from Winston was fully
recovered in third quarter of 2002 by a return of merchandise of
approximately $0.5 million and the receipt of certain
unencumbered trademark rights for the state of California as a
result of the rejection of licenses by Winston. The intangible
asset recorded for this trademark is being amortized on a
straight-line basis over a period of five years.

On September 12, 2002, the United States
Bankruptcy Court for the Central District of California approved
a sale of substantially all the assets of Winston to the
Goodyear Tire and Rubber Company, Inc., which sale closed in
late December 2002. Thereafter, in January 2003 upon motion, the
Bankruptcy Court converted the Winston bankruptcy case from a
Chapter 11 to a Chapter 7 proceeding.

The Company remains liable as a guarantor on
certain Winston leases. As of December 28, 2002, total
obligations of the Company as guarantor on these leases is
approximately $16.0 million. The Company has secured
assignments on sublease agreements for the vast majority of
these commitments. The Company has assessed its estimated
guarantor obligations as adjusted and believes that any
potential liability has been adequately considered.

9.     Extraordinary
Item:

On March 27, 2002, the Company repurchased
$121.4 million in outstanding principal amount of the
Senior Notes due in 2008 at a purchase price of $535 per $1,000
in face amount of Senior Notes, plus accrued and unpaid interest
of $4.5 million. The Company funded the repurchase of the
Senior Notes through several debt restructuring transactions
(Restructuring Transactions). The Restructuring
Transactions consisted of (i) an amendment to the
Companys Revolver to provide additional availability,
(ii) a sale and leaseback of three of the Companys
tire distribution warehouses generating cash proceeds of $13.9
million and (iii) an equity investment of
$28.9 million from the issuance of 9,637,592 shares of
Series D preferred stock to the Companys existing
stockholders. Concurrently with the repurchase of the Senior
Notes, the Company, the Subsidiary Guarantors and the Trustee
executed the Fourth Supplemental Indenture to the Indenture. The
amendments to the Indenture were effected primarily to permit
the Restructuring Transactions and make other required
modifications.

36



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##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

The Company has accounted for the repurchase and
extinguishment of the Senior Notes as an extraordinary item. As
of December 28, 2002, the Company has recorded
approximately $30.1 million to extraordinary gain, net of
income tax provision of $19.7 million.

10.     Warrants:

In May 1997, in connection with the issuance of
Senior Subordinated Debt (Subordinated Debt), the
Company issued detachable warrants which permit the holder to
acquire up to 1,034,000 shares of the Companys common
stock at $.01 per share. The warrants became exercisable
immediately upon issuance and expire on May 7, 2007. The
warrants may be exercised in whole or in part, but in no event
later than the date of an initial public offering or a sale
transaction. The Company recorded the warrants at fair value,
which resulted in a discount on the Subordinated Debt in the
same amount.

On March 27, 2002, in connection with the
Restructuring Transactions (Note 9), the Company issued warrants
to several vendors, which permit the holders to acquire up to
307,193 shares of the Companys common stock at $.01 per
share. The warrants expire on March 27, 2005. In addition,
the Company issued warrants to the purchaser of the sale and
leaseback transaction, which permit the purchaser to acquire
153,597 shares of the Companys common stock. The warrants
have a term of 10 years with a stated exercise price of
$3.00 per warrant. The Company recorded these warrants at fair
value and has presented them as a component of
stockholders investment.

11.     Redeemable
Preferred Stock:

On May 2, 1997, the Company issued 11,500
shares of preferred stock with par value of $.01 per share to a
supplier (the Supplier). Of the 11,500 shares, 7,000
shares are designated Series A Cumulative Redeemable
Preferred Stock (the Series A preferred stock)
and 4,500 shares are designated Series B Cumulative
Redeemable Preferred Stock (the Series B preferred
stock). On March 30, 2001, the Company amended and
restated its articles of incorporation to authorize 1,344,834
shares of $.01 par value preferred stock. Of the 1,344,834
shares of preferred stock, 7,000 shares are initially designated
Series A preferred stock, 4,500 shares are initially
designated Series B preferred stock and 1,333,334 shares
are initially designated Series C preferred stock.

The Series A and B Preferred Stock each
contain a provision whereby upon the early termination of the
Tire Supply Agreement (see Note 7), the Company shall
redeem all shares of preferred stock outstanding at a price
equal to the sum of the stated value and the applicable premium,
as defined, plus all accrued and unpaid dividends. If at any
time a change of control occurs, as defined, the Supplier may
request redemption of all outstanding shares. However, so long
as amounts are outstanding or commitments to lend have not been
terminated under the Revolver, the Senior Notes and other
agreements entered into in connection therewith, including any
replacement agreement which results in a greater principal
amount outstanding, or if any default or event of default has
occurred and is continuing under any such debt agreements or
would result from such payments, the Company may not make any
dividends or redemption payments in respect to the
Series A, B , or C preferred stock.

Series A Preferred Stock

The stated value of Series A preferred stock
is $1,000 per share. Holders of Series A preferred stock
are entitled to receive, when and if declared by the Board of
Directors, cumulative cash dividends at an annual rate of 4%,
subject to adjustment based on the volume of purchases from the
Supplier. Additional dividends will accrue, when and if declared
by the Board of Directors, and are payable on the last business
day of January. For the fiscal years 2002, 2001 and 2000, the
Company declared and paid a dividend based on a 4% rate. These
amounts are included in interest expense in the accompanying
consolidated statements of operations. The Series A
preferred stock can be redeemed by the Company, beginning on the
last business day

37



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##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

of December 2002 and on the last business day of
each June and December thereafter, through June 2007. However,
due to the limitation on redemption payments discussed above, no
shares of Series A preferred stock were redeemed in
December 2002.

Series B Preferred Stock

The stated value of Series B preferred stock
is initially $1,000 per share, to be adjusted based on tire
purchase credits as determined by the number of units purchased
under the Tire Supply Agreement (see Note 7). Dividends on
Series B preferred stock are payable, when and if declared
by the Board of Directors, at the prime rate if the Company does
not meet certain tire purchase requirements. The remaining value
of Series B preferred stock shall be redeemed by the
Company on the last business day of June 2007 at a price equal
to the adjusted stated value plus all accrued and unpaid
dividends.

The following represents the Companys
issued and outstanding redeemable preferred stock, reflecting
the amendment and modifications discussed in Note 12 below (in
thousands, except share amounts):

|                                                                                                                                        |                                  |              |       |              |  |   |        |        | 
|--------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------------ | ----- | ------------ |  | - | ------ | ------ | 
|                                                                                                                                        |                                  | December 28, |       | December 29,
|                                                                                                                                        |                                  | 2002         |       | 2001        
|                                                                                                                                        |                                  |              |       |             
|Redeemable preferred stock
    Series A  4% cumulative; 7,000 shares
    authorized, issued and outstanding                            |                                  | $            | 7,000 |              |  | $ | 7,000  |       
|Redeemable preferred stock
    Series B  variable rate cumulative;
    4,500 shares authorized, issued and outstanding                 |                                  |              | 4,035 |              |  |   | 4,035  |       
|Redeemable preferred stock
    Series C  12% cumulative; 1,333,334 shares
    authorized, issued and outstanding at December 29, 2001. |                                  |              |      |              |  |   | 13,080 |       
|                                                                                                                                        |                                  |              |       |              |  |   |        |       
|                                                                                                                                        | Total redeemable preferred stock |              | $     | 11,035       |  |   | $      | 24,115 | 
|                                                                                                                                        |                                  |              |       |              |  |   |        |       

12.     Preferred
Stock:

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

Series C Preferred Stock

On April 2, 2001 the Company issued
1,333,334 shares of Series C preferred stock for
$9.00 per share in exchange for $12.0 million in cash
contributed by certain of its principal stockholders. Shares of
Series C preferred stock accrue dividends at an annual rate
of 12% and are redeemable by the Company, but not the holder, at
the initial price plus any cumulative unpaid dividends as of the
redemption date. However, as long as any shares of Series A
preferred stock or Series B preferred stock remain
outstanding, no dividends may be paid, nor redemption occur.
Shares of Series C preferred stock are convertible into
common stock at a conversion price of $3.00 per common
share.

Series D Preferred Stock

On March 27, 2002, the Company issued
9,637,592 shares of Series D preferred stock for
$3.00 per share in exchange for $28.9 million in cash
contributed by certain of its principal stockholders. The
proceeds were used to repurchase certain of the Companys
Senior Notes. Shares of Series D preferred stock accrue

38



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##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

dividends at an annual rate of 12% and are
redeemable by the Company, but not the holder, at the initial
price plus any cumulative unpaid dividends as of the redemption
date. However, as long as any shares of Series A preferred
stock or Series B preferred stock remain outstanding, no
dividends may be paid, nor can redemption occur. In addition,
shares of Series D preferred stock are convertible into common
stock at a conversion price of $3.00 per common share.

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

|                                                                                                                              |                       |              |        |              |  |   |   |   | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------ | ------ | ------------ |  | - | - | - | 
|                                                                                                                              |                       | December 28, |        | December 29,
|                                                                                                                              |                       | 2002         |        | 2001        
|                                                                                                                              |                       |              |        |             
|Preferred stock Series C  12%
    cumulative; 1,333,334 shares authorized; 1,333,334 and
    0 shares issued and outstanding |                       | $            | 14,520 |              |  | $ |  |  
|Preferred stock Series D  12%
    cumulative; 9,637,592 shares authorized; 9,637,592 and
    0 shares issued and outstanding |                       |              | 31,515 |              |  |   |  |  
|                                                                                                                              |                       |              |        |              |  |   |   |  
|                                                                                                                              | Total preferred stock |              | $      | 46,035       |  |   | $ |  | 
|                                                                                                                              |                       |              |        |              |  |   |   |  

13.     Common
Stock:

Class A and Class B Common
Stock

On March 27, 2002, the Company amended and
restated its articles of incorporation to authorize
50,000,000 shares of a single class (Class A) of
$.01 par value common stock.

Restricted Stock

The Company has given designated employees,
officers, directors and independent contractors of the Company
the opportunity to acquire restricted shares of Class A
common stock. The Companys Board of Directors administers
the restricted stock arrangements, selects eligible
participants, determines the number of shares to be offered to
each participant and sets other applicable terms and conditions.
As of December 28, 2002, a total of 80,000 restricted
shares of Class A common stock were outstanding.

Shares of restricted stock are issued by the
Company at the fair market value at the date of issuance. Some
or all of the purchase price may be paid in the form of a
promissory note given by the purchaser of the shares. In some
cases, the principal and/or interest due on the note is forgiven
over time by the Company depending upon the attainment of
certain earnings targets. All shares of restricted stock are
subject to the terms and conditions of a securities purchase and
stockholders agreement entered into by each recipient.
During 2002, the Company repurchased 50,000 restricted shares at
cost, in accordance with this agreement, from previous and
current members of management. These shares have effectively
been retired by the Company.

14.     Related Party
Transactions:

On October 12, 2001, Haas entered into an
Asset Purchase Agreement with T.O. Haas, LLC (Haas
LLC) for the sale of certain assets. The total purchase
price was approximately $5.3 million, of which the Company
received approximately $2.4 million in cash at closing.
Haas LLC was formed by, among others, one of the executives of
Haas. A portion of the purchase price for the Companys
acquisition of Haas in second quarter 2000 is payable to this
executive in the form of noncompete and stay put payments. In
connection with the sale, such noncompete payments in the amount
of $2.4 million were accelerated and such liability was
satisfied as a reduction of the purchase price. Approximately
$1.0 million of the purchase price is payable in the form
of a promissory note (the Note) due in two equal
annual installments, with first such payment paid
January 2, 2002. The Note bears interest at 6%. As of
January 3, 2003, the Note was paid in full. Stay put

39



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

payments due to the executive of
$1.6 million were accelerated to coincide with the schedule
of payments due under the Note. Liabilities assumed by the buyer
totaled $0.7 million, reflecting the remainder of the purchase
price.

In connection with the sale described above, the
Company entered into a Supply and Retail Distribution Agreement
with Haas LLC. Total sales under this agreement were
approximately $10.1 million and $2.4 million for
fiscal 2002 and 2001, respectively.

In connection with the Haas acquisition (see
Note 2), the Company sold certain parcels of real estate
and leased them back in a transaction which closed on
August 8, 2000. Total monthly payments under these leases
are approximately $72,000. The leases expire July 31, 2010.
Total rent expense of approximately $0.9 million,
$0.8 million and $0.3 million is included in the
accompanying statements of operations for fiscal years 2002,
2001 and 2000, respectively.

40



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

15.     Subsidiary
Guarantor Financial Information:

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

Condensed consolidated balance sheets as of
December 28, 2002 and December 29, 2001, are as
follows:

|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------- | ---------- | ------- | ------------ | ------- | ------------ | ------ | - | -------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                               
|                                                   |                                                                                                                       | As of December 28, 2002       
|                                                   |                                                                                                                       |                               
|                                                   |                                                                                                                       | Parent                         |         | Subsidiary |         |             
|                                                   |                                                                                                                       | Company                        |         | Guarantors |         | Eliminations |         | Consolidated
|                                                   |                                                                                                                       |                                |         |            |         |              |         |             
|Assets                                             |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|Current assets:                                    |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   | Cash and cash equivalents                                                                                             |                                | $       | 2,538      |         |              | $       | 155          |        |   | $        |        |         |   | $       | 2,693   |        
|                                                   | Accounts receivable, net                                                                                              |                                |         | 68,408     |         |              |         | 26,266       |        |   |          |        |         |   |         | 94,674  |        
|                                                   | Inventories                                                                                                           |                                |         | 110,995    |         |              |         | 45,727       |        |   |          |        |         |   |         | 156,722 |        
|                                                   | Other current assets                                                                                                  |                                |         | 14,735     |         |              |         | 949          |        |   |          |        |         |   |         | 15,684  |        
|                                                   | Intercompany receivables                                                                                              |                                |         | 52,482     |         |              |         |             |        |   |          | (52,482 | )       |   |         |        |        
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   |                                                                                                                       | Total current assets           |         |            | 249,158 |              |         |              | 73,097 |   |          |         | (52,482 | ) |         |         | 269,773 | 
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|Property and equipment, net                        |                                                                                                                       |                                | 15,786  |            |         |              | 4,848   |              |        |   |         |         |         |   | 20,634  |        
|Goodwill and other intangible assets, net          |                                                                                                                       |                                | 51,856  |            |         |              | 45,656  |              |        |   |         |         |         |   | 97,512  |        
|Investment in subsidiaries                         |                                                                                                                       |                                | 68,432  |            |         |              |        |              |        |   | (68,432  | )       |         |   |        |        
|Other assets                                       |                                                                                                                       |                                | 22,830  |            |         |              | 521     |              |        |   |         |         |         |   | 23,351  |        
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   |                                                                                                                       | $                              | 408,062 |            |         | $            | 124,122 |              |        | $ | (120,914 | )       |         | $ | 411,270 |        
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|Liabilities and stockholders
    investment       |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|Current liabilities:                               |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   | Accounts payable                                                                                                      |                                | $       | 165,216    |         |              | $       | 193          |        |   | $        |        |         |   | $       | 165,409 |        
|                                                   | Accrued expenses                                                                                                      |                                |         | 16,551     |         |              |         | 1,998        |        |   |          |        |         |   |         | 18,549  |        
|                                                   | Current maturities of long-term debt                                                                                  |                                |         | 2,742      |         |              |         |             |        |   |          |        |         |   |         | 2,742   |        
|                                                   | Intercompany payables                                                                                                 |                                |         |           |         |              |         | 52,482       |        |   |          | (52,482 | )       |   |         |        |        
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   |                                                                                                                       | Total current liabilities      |         |            | 184,509 |              |         |              | 54,673 |   |          |         | (52,482 | ) |         |         | 186,700 | 
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                                | 149,793 |            |         |              |        |              |        |   |         |         |         |   | 149,793 |        
|Series D Senior Notes                              |                                                                                                                       |                                | 28,600  |            |         |              |        |              |        |   |         |         |         |   | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                                | 14,709  |            |         |              |        |              |        |   |         |         |         |   | 14,709  |        
|Other liabilities                                  |                                                                                                                       |                                | 2,927   |            |         |              | 1,017   |              |        |   |         |         |         |   | 3,944   |        
|Redeemable preferred stock                         |                                                                                                                       |                                | 11,035  |            |         |              |        |              |        |   |         |         |         |   | 11,035  |        
|Stockholders investment:                          |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   | Intercompany investment                                                                                               |                                |         |           |         |              |         | 76,633       |        |   |          | (76,633 | )       |   |         |        |        
|                                                   | Preferred stock                                                                                                       |                                |         | 46,035     |         |              |         |             |        |   |          |        |         |   |         | 46,035  |        
|                                                   | Common stock, par value $.01 per share;
    50,000,000 shares authorized; 5,086,917 shares issued and
    outstanding |                                |         | 51         |         |              |         |             |        |   |          |        |         |   |         | 51      |        
|                                                   | Additional paid-in capital                                                                                            |                                |         | 22,388     |         |              |         |             |        |   |          |        |         |   |         | 22,388  |        
|                                                   | Warrants                                                                                                              |                                |         | 1,782      |         |              |         |             |        |   |          |        |         |   |         | 1,782   |        
|                                                   | Notes receivable from sale of stock                                                                                   |                                |         | (17        | )       |              |         |             |        |   |          |        |         |   |         | (17     | )      
|                                                   | Accumulated deficit                                                                                                   |                                |         | (53,750    | )       |              |         | (8,201       | )      |   |          | 8,201   |         |   |         | (53,750 | )      
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   |                                                                                                                       | Total stockholders investment |         |            | 16,489  |              |         |              | 68,432 |   |          |         | (68,432 | ) |         |         | 16,489  | 
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        
|                                                   |                                                                                                                       | $                              | 408,062 |            |         | $            | 124,122 |              |        | $ | (120,914 | )       |         | $ | 411,270 |        
|                                                   |                                                                                                                       |                                |         |            |         |              |         |              |        |   |          |         |         |   |         |        

41



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

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

42



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Condensed consolidated statements of
operations for the fiscal years ended December 28, 2002,
December 29, 2001 and December 30, 2000 are as
follows:

|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |         |  
|--------------------------------------------------------------- | ------------------------------------ | ----------------------- | ------- | ---------- | - | ------------ | ------- | ------------ | - | - | ------ | ------ | - | - | --------- | ------- | -
|                                                                |                                      |                        
|                                                                |                                      | For the Fiscal Year    
|                                                                |                                      | Ended December 28, 2002
|                                                                |                                      |                        
|                                                                |                                      | Parent                  |         | Subsidiary |   |             
|                                                                |                                      | Company                 |         | Guarantors |   | Eliminations |         | Consolidated
|                                                                |                                      |                         |         |            |   |              |         |             
|Net sales                                                       |                                      | $                       | 767,662 |            |   | $            | 292,732 |              |   | $ |       |        |   | $ | 1,060,394 |        
|Cost of goods sold                                              |                                      |                         | 620,429 |            |   |              | 242,092 |              |   |   |       |        |   |   | 862,521   |        
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|                                                                | Gross profit                         |                         |         | 147,233    |   |              |         | 50,640       |   |   |        |       |   |   |           | 197,873 |  
|Selling, general and administrative expenses                    |                                      |                         | 119,105 |            |   |              | 47,417  |              |   |   |       |        |   |   | 166,522   |        
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|                                                                | Operating income                     |                         |         | 28,128     |   |              |         | 3,223        |   |   |        |       |   |   |           | 31,351  |  
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|Other income (expense):                                         |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|                                                                | Interest expense                     |                         |         | (18,650    | ) |              |         | (55          | ) |   |        |       |   |   |           | (18,705 | )
|                                                                | Other income, net                    |                         |         | 11         |   |              |         | 277          |   |   |        |       |   |   |           | 288     |  
|                                                                | Equity in net income of subsidiaries |                         |         | 2,083      |   |              |         |             |   |   |        | (2,083 | ) |   |           |        |  
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|Income from continuing operations before income
    taxes       |                                      |                         | 11,572  |            |   |              | 3,445   |              |   |   | (2,083 | )      |   |   | 12,934    |        
|Provision for income taxes                                      |                                      |                         | 3,751   |            |   |              | 1,362   |              |   |   |       |        |   |   | 5,113     |        
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|Income from continuing operations before
    extraordinary item |                                      |                         | 7,821   |            |   |              | 2,083   |              |   |   | (2,083 | )      |   |   | 7,821     |        
|Loss from discontinued operations                               |                                      |                         | (483    | )          |   |              |        |              |   |   |       |        |   |   | (483      | )      
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|Income before extraordinary item                                |                                      |                         | 7,338   |            |   |              | 2,083   |              |   |   | (2,083 | )      |   |   | 7,338     |        
|Extraordinary gain on repurchase of Senior Notes                |                                      |                         | 30,089  |            |   |              |        |              |   |   |       |        |   |   | 30,089    |        
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        
|Net income                                                      |                                      | $                       | 37,427  |            |   | $            | 2,083   |              |   | $ | (2,083 | )      |   | $ | 37,427    |        
|                                                                |                                      |                         |         |            |   |              |         |              |   |   |        |        |   |   |           |        

|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |         |  
|------------------------------------------------------- | ---------------------------------- | ------------------------- | ------- | ---------- | - | ------------ | ------- | ------------ | - | - | ----- | ----- |  | - | --------- | ------- | -
|                                                        |                                    |                          
|                                                        |                                    | For the Fiscal Year Ended
|                                                        |                                    | December 29, 2001        
|                                                        |                                    |                          
|                                                        |                                    | Parent                    |         | Subsidiary |   |             
|                                                        |                                    | Company                   |         | Guarantors |   | Eliminations |         | Consolidated
|                                                        |                                    |                           |         |            |   |              |         |             
|Net sales                                               |                                    | $                         | 770,028 |            |   | $            | 337,866 |              |   | $ |      |       |  | $ | 1,107,894 |        
|Cost of goods sold                                      |                                    |                           | 622,605 |            |   |              | 274,867 |              |   |   |      |       |  |   | 897,472   |        
|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        
|                                                        | Gross profit                       |                           |         | 147,423    |   |              |         | 62,999       |   |   |       |      |  |   |           | 210,422 |  
|Selling, general and administrative expenses            |                                    |                           | 130,280 |            |   |              | 76,063  |              |   |   |      |       |  |   | 206,343   |        
|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        
|                                                        | Operating income (loss)            |                           |         | 17,143     |   |              |         | (13,064      | ) |   |       |      |  |   |           | 4,079   |  
|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        
|Other income (expense):                                 |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        
|                                                        | Interest expense                   |                           |         | (28,403    | ) |              |         | (236         | ) |   |       |      |  |   |           | (28,639 | )
|                                                        | Other income, net                  |                           |         | 715        |   |              |         | 47           |   |   |       |      |  |   |           | 762     |  
|                                                        | Equity in net loss of subsidiaries |                           |         | (9,482     | ) |              |         |             |   |   |       | 9,482 |  |   |           |        |  
|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        
|Loss from continuing operations before income
    taxes |                                    |                           | (20,027 | )          |   |              | (13,253 | )            |   |   | 9,482 |       |  |   | (23,798   | )      
|Benefit for income taxes                                |                                    |                           | (2,472  | )          |   |              | (3,771  | )            |   |   |      |       |  |   | (6,243    | )      
|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        
|Loss from continuing operations                         |                                    |                           | (17,555 | )          |   |              | (9,482  | )            |   |   | 9,482 |       |  |   | (17,555   | )      
|Loss from discontinued operations                       |                                    |                           | (769    | )          |   |              |        |              |   |   |      |       |  |   | (769      | )      
|Loss on disposal of discontinued operations             |                                    |                           | (12,616 | )          |   |              |        |              |   |   |      |       |  |   | (12,616   | )      
|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        
|Net loss                                                |                                    | $                         | (30,940 | )          |   | $            | (9,482  | )            |   | $ | 9,482 |       |  | $ | (30,940   | )      
|                                                        |                                    |                           |         |            |   |              |         |              |   |   |       |       |  |   |           |        

43



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |         |  
|---------------------------------------------------------------- | ---------------------------------- | ------------------------- | ------- | ---------- | - | ------------ | ------- | ------------ | - | - | ------ | ------ |  | - | --------- | ------- | -
|                                                                 |                                    |                          
|                                                                 |                                    | For the Fiscal Year Ended
|                                                                 |                                    | December 30, 2000        
|                                                                 |                                    |                          
|                                                                 |                                    | Parent                    |         | Subsidiary |   |             
|                                                                 |                                    | Company                   |         | Guarantors |   | Eliminations |         | Consolidated
|                                                                 |                                    |                           |         |            |   |              |         |             
|Net sales                                                        |                                    | $                         | 742,754 |            |   | $            | 344,506 |              |   | $ |       |        |  | $ | 1,087,260 |        
|Cost of goods sold                                               |                                    |                           | 603,394 |            |   |              | 283,910 |              |   |   |       |        |  |   | 887,304   |        
|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        
|                                                                 | Gross profit                       |                           |         | 139,360    |   |              |         | 60,596       |   |   |        |       |  |   |           | 199,956 |  
|Selling, general and administrative expenses                     |                                    |                           | 110,708 |            |   |              | 62,062  |              |   |   |       |        |  |   | 172,770   |        
|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        
|                                                                 | Operating income (loss)            |                           |         | 28,652     |   |              |         | (1,466       | ) |   |        |       |  |   |           | 27,186  |  
|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        
|Other income (expense):                                          |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        
|                                                                 | Interest expense                   |                           |         | (26,011    | ) |              |         | (436         | ) |   |        |       |  |   |           | (26,447 | )
|                                                                 | Other income, net                  |                           |         | 677        |   |              |         | 241          |   |   |        |       |  |   |           | 918     |  
|                                                                 | Equity in net loss of subsidiaries |                           |         | (43,483    | ) |              |         |             |   |   |        | 43,483 |  |   |           |        |  
|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        
|Income (loss) from continuing operations
    before income taxes |                                    |                           | (40,165 | )          |   |              | (1,661  | )            |   |   | 43,483 |        |  |   | 1,657     |        
|Provision for income taxes                                       |                                    |                           | 2,528   |            |   |              | 684     |              |   |   |       |        |  |   | 3,212     |        
|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        
|Loss from continuing operations                                  |                                    |                           | (42,693 | )          |   |              | (2,345  | )            |   |   | 43,483 |        |  |   | (1,555    | )      
|Loss from discontinued operations                                |                                    |                           |        |            |   |              | (39,938 | )            |   |   |       |        |  |   | (39,938   | )      
|Loss on disposal of discontinued operations                      |                                    |                           |        |            |   |              | (1,200  | )            |   |   |       |        |  |   | (1,200    | )      
|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        
|Net loss                                                         |                                    | $                         | (42,693 | )          |   | $            | (43,483 | )            |   | $ | 43,483 |        |  | $ | (42,693   | )      
|                                                                 |                                    |                           |         |            |   |              |         |              |   |   |        |        |  |   |           |        

44



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Condensed consolidated statements of cash
flows for the fiscal years ended December 28, 2002,
December 29, 2001 and December 30, 2000 are as
follows:

|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |         |        |         |  
|------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------------------- | ---------- | ------ | ------------ | ----- | ------------ | ------ | ------- | ------ | ----- | - | - | ------ | ------- | ------ | ------- | -
|                                                                                      |                                                                                   |                                      
|                                                                                      |                                                                                   | For the Fiscal Year Ended            
|                                                                                      |                                                                                   | December 28, 2002                    
|                                                                                      |                                                                                   |                                      
|                                                                                      |                                                                                   | Parent                                |                                                         | Subsidiary |        |             
|                                                                                      |                                                                                   | Company                               |                                                         | Guarantors |        | Eliminations |       | Consolidated
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |             
|Cash flows from operating
    activities:                                             |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|Net income                                                                            |                                                                                   | $                                     | 37,427                                                  |            |        | $            | 2,083 |              |        | $       | (2,083 | )     |   | $ | 37,427 |        
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|                                                                                      | Loss from discontinued operations                                                 |                                       |                                                         | 483        |        |              |       |             |        |         |        |      |   |   |        | 483     |       
|                                                                                      | Extraordinary gain                                                                |                                       |                                                         | (30,089    | )      |              |       |             |        |         |        |      |   |   |        | (30,089 | )     
|                                                                                      | Depreciation and amortization of goodwill, other
    intangibles and other assets |                                       |                                                         | 5,166      |        |              |       | 4,665        |        |         |        |      |   |   |        | 9,831   |       
|                                                                                      | Deferred taxes                                                                    |                                       |                                                         | (827       | )      |              |       | 3,727        |        |         |        |      |   |   |        | 2,900   |       
|                                                                                      | Other                                                                             |                                       |                                                         | 183        |        |              |       | 54           |        |         |        |      |   |   |        | 237     |       
|                                                                                      | Equity in net income of subsidiaries                                              |                                       |                                                         | (2,083     | )      |              |       |             |        |         |        | 2,083 |   |   |        |        |       
|                                                                                      | Change in assets and liabilities:                                                 |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |         |       
|                                                                                      |                                                                                   | Accounts receivable, net              |                                                         |            | (2,738 | )            |       |              | (13    | )       |        |       |  |   |        |         | (2,751 | )      
|                                                                                      |                                                                                   | Inventories                           |                                                         |            | (5,699 | )            |       |              | 3,189  |         |        |       |  |   |        |         | (2,510 | )      
|                                                                                      |                                                                                   | Other current assets                  |                                                         |            | (2,547 | )            |       |              | 855    |         |        |       |  |   |        |         | (1,692 | )      
|                                                                                      |                                                                                   | Accounts payable and accrued expenses |                                                         |            | 6,944  |              |       |              | (1,209 | )       |        |       |  |   |        |         | 5,735  |        
|                                                                                      |                                                                                   | Other                                 |                                                         |            | (5,798 | )            |       |              | (266   | )       |        |       |  |   |        |         | (6,064 | )      
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|                                                                                      |                                                                                   |                                       | Net cash provided by continuing operations              |            |        | 422          |       |              |        | 13,085  |        |       |   |  |        |         |        | 13,507  |  
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|Cash flows from investing
    activities:                                             |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|                                                                                      | Purchase of property and equipment                                                |                                       |                                                         | (1,364     | )      |              |       | (695         | )      |         |        |      |   |   |        | (2,059  | )     
|                                                                                      | Proceeds from sale of property and equipment                                      |                                       |                                                         | 1,555      |        |              |       | 632          |        |         |        |      |   |   |        | 2,187   |       
|                                                                                      | Intercompany                                                                      |                                       |                                                         | 12,531     |        |              |       | (12,531      | )      |         |        |      |   |   |        |        |       
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|                                                                                      |                                                                                   |                                       | Net cash provided by (used in) investing
    activities |            |        | 12,722       |       |              |        | (12,594 | )      |       |   |  |        |         |        | 128     |  
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|Cash flows from financing
    activities:                                             |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|                                                                                      | Principal payments on long-term debt                                              |                                       |                                                         | (5,188     | )      |              |       | (1,044       | )      |         |        |      |   |   |        | (6,232  | )     
|                                                                                      | Net proceeds from revolving credit facility and
    other long-term debt          |                                       |                                                         | 13,960     |        |              |       |             |        |         |        |      |   |   |        | 13,960  |       
|                                                                                      | Proceeds received from issuance of preferred stock                                |                                       |                                                         | 28,913     |        |              |       |             |        |         |        |      |   |   |        | 28,913  |       
|                                                                                      | Repurchase of Series D Senior Notes                                               |                                       |                                                         | (64,959    | )      |              |       |             |        |         |        |      |   |   |        | (64,959 | )     
|                                                                                      | Net proceeds from sale-leaseback transaction                                      |                                       |                                                         | 13,285     |        |              |       |             |        |         |        |      |   |   |        | 13,285  |       
|                                                                                      | Other                                                                             |                                       |                                                         | (40        | )      |              |       |             |        |         |        |      |   |   |        | (40     | )     
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|                                                                                      |                                                                                   |                                       | Net cash used in financing activities                   |            |        | (14,029      | )     |              |        | (1,044  | )      |       |   |  |        |         |        | (15,073 | )
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|Net decrease in cash and cash equivalents                                             |                                                                                   |                                       | (885                                                    | )          |        |              | (553  | )            |        |         |       |       |   |   | (1,438 | )      
|Cash and cash equivalents, beginning of year                                          |                                                                                   |                                       | 3,423                                                   |            |        |              | 708   |              |        |         |       |       |   |   | 4,131  |        
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        
|Cash and cash equivalents, end of
    year                                            |                                                                                   | $                                     | 2,538                                                   |            |        | $            | 155   |              |        | $       |       |       |   | $ | 2,693  |        
|                                                                                      |                                                                                   |                                       |                                                         |            |        |              |       |              |        |         |        |       |   |   |        |        

45



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |        |         |        |  
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------- | -------------------------------------------------------- | ---------- | ------- | ------------ | ------- | ------------ | ------ | ------- | ------ | ------- | - | - | ------- | ------ | ------- | ------ | -
|                                                                                              |                                                                                   |                                      
|                                                                                              |                                                                                   | For the Fiscal Year Ended            
|                                                                                              |                                                                                   | December 29, 2001                    
|                                                                                              |                                                                                   |                                      
|                                                                                              |                                                                                   | Parent                                |                                                          | Subsidiary |         |             
|                                                                                              |                                                                                   | Company                               |                                                          | Guarantors |         | Eliminations |         | Consolidated
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |             
|Cash flows from operating
    activities:                                                     |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|Net loss                                                                                      |                                                                                   | $                                     | (30,940                                                  | )          |         | $            | (10,251 | )            |        | $       | 10,251 |         |   | $ | (30,940 | )     
|Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities: |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|                                                                                              | Loss from discontinued operations                                                 |                                       |                                                          |           |         |              |         | 769          |        |         |        |        |   |   |         | 769    |        
|                                                                                              | Loss on disposal of discontinued operations                                       |                                       |                                                          | 12,616     |         |              |         |             |        |         |        |        |   |   |         | 12,616 |        
|                                                                                              | Depreciation and amortization of goodwill, other
    intangibles and other assets |                                       |                                                          | 9,893      |         |              |         | 8,886        |        |         |        |        |   |   |         | 18,779 |        
|                                                                                              | Deferred taxes                                                                    |                                       |                                                          | (6,809     | )       |              |         |             |        |         |        |        |   |   |         | (6,809 | )      
|                                                                                              | Other                                                                             |                                       |                                                          | 951        |         |              |         | 1,936        |        |         |        |        |   |   |         | 2,887  |        
|                                                                                              | Equity in net loss of subsidiaries                                                |                                       |                                                          | 10,251     |         |              |         |             |        |         |        | (10,251 | ) |   |         |       |        
|                                                                                              | Change in assets and liabilities:                                                 |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |        |        
|                                                                                              |                                                                                   | Accounts receivable, net              |                                                          |            | 5,871   |              |         |              | 1,505  |         |        |         |  |   |         |        | 7,376   |       
|                                                                                              |                                                                                   | Inventories                           |                                                          |            | 8,199   |              |         |              | 19,817 |         |        |         |  |   |         |        | 28,016  |       
|                                                                                              |                                                                                   | Other current assets                  |                                                          |            | (5,053  | )            |         |              | 2,039  |         |        |         |  |   |         |        | (3,014  | )     
|                                                                                              |                                                                                   | Accounts payable and accrued expenses |                                                          |            | (28,069 | )            |         |              | (2,135 | )       |        |         |  |   |         |        | (30,204 | )     
|                                                                                              |                                                                                   | Other                                 |                                                          |            | (660    | )            |         |              | (582   | )       |        |         |  |   |         |        | (1,242  | )     
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|                                                                                              |                                                                                   |                                       | Net cash provided by (used in) continuing
    operations |            |         | (23,750      | )       |              |        | 21,984  |        |         |   |  |         |        |         | (1,766 | )
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|                                                                                              |                                                                                   |                                       | Net cash used in discontinued operations                 |            |         |             |         |              |        | (6,069  | )      |         |   |  |         |        |         | (6,069 | )
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|Cash flows from investing
    activities:                                                     |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|                                                                                              | Net proceeds from sale of discontinued operations                                 |                                       |                                                          | 9,111      |         |              |         |             |        |         |        |        |   |   |         | 9,111  |        
|                                                                                              | Net proceeds from sale of Haas distribution
    outlets                           |                                       |                                                          |           |         |              |         | 2,420        |        |         |        |        |   |   |         | 2,420  |        
|                                                                                              | Purchase of property and equipment                                                |                                       |                                                          | (4,077     | )       |              |         | (1,983       | )      |         |        |        |   |   |         | (6,060 | )      
|                                                                                              | Proceeds from sale of property and equipment                                      |                                       |                                                          | 2,551      |         |              |         | 161          |        |         |        |        |   |   |         | 2,712  |        
|                                                                                              | Intercompany                                                                      |                                       |                                                          | 14,579     |         |              |         | (14,579      | )      |         |        |        |   |   |         |       |        
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|                                                                                              |                                                                                   |                                       | Net cash provided by (used in) investing
    activities  |            |         | 22,164       |         |              |        | (13,981 | )      |         |   |  |         |        |         | 8,183  |  
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|Cash flows from financing
    activities:                                                     |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|                                                                                              | Principal payments on long-term debt                                              |                                       |                                                          | (315       | )       |              |         | (1,035       | )      |         |        |        |   |   |         | (1,350 | )      
|                                                                                              | Net repayments of revolving credit facility                                       |                                       |                                                          | (8,947     | )       |              |         |             |        |         |        |        |   |   |         | (8,947 | )      
|                                                                                              | Proceeds received from issuance of preferred stock                                |                                       |                                                          | 12,000     |         |              |         |             |        |         |        |        |   |   |         | 12,000 |        
|                                                                                              | Cash paid for stock repurchase                                                    |                                       |                                                          | (578       | )       |              |         |             |        |         |        |        |   |   |         | (578   | )      
|                                                                                              | Cash paid for financing costs                                                     |                                       |                                                          | (702       | )       |              |         |             |        |         |        |        |   |   |         | (702   | )      
|                                                                                              | Other                                                                             |                                       |                                                          | 33         |         |              |         |             |        |         |        |        |   |   |         | 33     |        
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|                                                                                              |                                                                                   |                                       | Net cash provided by (used in) financing
    activities  |            |         | 1,491        |         |              |        | (1,035  | )      |         |   |  |         |        |         | 456    |  
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|Net increase (decrease) in cash and cash
    equivalents                                      |                                                                                   |                                       | (95                                                      | )          |         |              | 899     |              |        |         |       |         |   |   | 804     |       
|Cash and cash equivalents, beginning of year                                                  |                                                                                   |                                       | 3,518                                                    |            |         |              | (191    | )            |        |         |       |         |   |   | 3,327   |       
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       
|Cash and cash equivalents, end of
    year                                                    |                                                                                   | $                                     | 3,423                                                    |            |         | $            | 708     |              |        | $       |       |         |   | $ | 4,131   |       
|                                                                                              |                                                                                   |                                       |                                                          |            |         |              |         |              |        |         |        |         |   |   |         |       

46



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |         |         |         |  
|----------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------------------- | ---------- | ------- | ------------ | ------- | ------------ | ------ | ------- | ------ | ------- | - | - | ------- | ------- | ------- | ------- | -
|                                                                                    |                                                                                   |                                      
|                                                                                    |                                                                                   | For the Fiscal Year Ended            
|                                                                                    |                                                                                   | December 30, 2000                    
|                                                                                    |                                                                                   |                                      
|                                                                                    |                                                                                   | Parent                                |                                                         | Subsidiary |         |             
|                                                                                    |                                                                                   | Company                               |                                                         | Guarantors |         | Eliminations |         | Consolidated
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |             
|Cash flows from operating
    activities:                                           |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|Net loss                                                                            |                                                                                   | $                                     | (42,693                                                 | )          |         | $            | (43,483 | )            |        | $       | 43,483 |         |   | $ | (42,693 | )      
|Adjustments to reconcile net loss to net cash
    provided by operating activities: |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|                                                                                    | Loss from discontinued operations                                                 |                                       |                                                         |           |         |              |         | 39,938       |        |         |        |        |   |   |         | 39,938  |        
|                                                                                    | Loss on disposal of discontinued operations                                       |                                       |                                                         |           |         |              |         | 1,200        |        |         |        |        |   |   |         | 1,200   |        
|                                                                                    | Depreciation and amortization of goodwill, other
    intangibles and other assets |                                       |                                                         | 7,965      |         |              |         | 7,513        |        |         |        |        |   |   |         | 15,478  |        
|                                                                                    | Deferred taxes                                                                    |                                       |                                                         | 2,032      |         |              |         | 550          |        |         |        |        |   |   |         | 2,582   |        
|                                                                                    | Other                                                                             |                                       |                                                         | (190       | )       |              |         | 21           |        |         |        |        |   |   |         | (169    | )      
|                                                                                    | Equity in net loss of subsidiaries                                                |                                       |                                                         | 43,483     |         |              |         |             |        |         |        | (43,483 | ) |   |         |        |        
|                                                                                    | Change in assets and liabilities:                                                 |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |         |        
|                                                                                    |                                                                                   | Accounts receivable, net              |                                                         |            | 529     |              |         |              | (89    | )       |        |         |  |   |         |         | 440     |        
|                                                                                    |                                                                                   | Inventories                           |                                                         |            | (16,421 | )            |         |              | (6,129 | )       |        |         |  |   |         |         | (22,550 | )      
|                                                                                    |                                                                                   | Other current assets                  |                                                         |            | (6,404  | )            |         |              | (2,666 | )       |        |         |  |   |         |         | (9,070  | )      
|                                                                                    |                                                                                   | Accounts payable and accrued expenses |                                                         |            | 45,663  |              |         |              | 8,844  |         |        |         |  |   |         |         | 54,507  |        
|                                                                                    |                                                                                   | Other                                 |                                                         |            | 1,331   |              |         |              | (419   | )       |        |         |  |   |         |         | 912     |        
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|                                                                                    |                                                                                   |                                       | Net cash provided by continuing operations              |            |         | 35,295       |         |              |        | 5,280   |        |         |   |  |         |         |         | 40,575  |  
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|                                                                                    |                                                                                   |                                       | Net cash used in discontinued operations                |            |         |             |         |              |        | (14,786 | )      |         |   |  |         |         |         | (14,786 | )
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|Cash flows from investing
    activities:                                           |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|                                                                                    | Acquisitions, net of cash acquired                                                |                                       |                                                         | (69,449    | )       |              |         | (700         | )      |         |        |        |   |   |         | (70,149 | )      
|                                                                                    | Purchase of property and equipment                                                |                                       |                                                         | (3,849     | )       |              |         | (10,875      | )      |         |        |        |   |   |         | (14,724 | )      
|                                                                                    | Proceeds from sale of property and equipment                                      |                                       |                                                         | 2,170      |         |              |         | 548          |        |         |        |        |   |   |         | 2,718   |        
|                                                                                    | Intercompany                                                                      |                                       |                                                         | (19,541    | )       |              |         | 19,541       |        |         |        |        |   |   |         |        |        
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|                                                                                    |                                                                                   |                                       | Net cash provided by (used in) investing
    activities |            |         | (90,669      | )       |              |        | 8,514   |        |         |   |  |         |         |         | (82,155 | )
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|Cash flows from financing
    activities:                                           |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|                                                                                    | Principal payments on long-term debt                                              |                                       |                                                         | (260       | )       |              |         | (1,981       | )      |         |        |        |   |   |         | (2,241  | )      
|                                                                                    | Net proceeds from revolving credit facility and
    other long-term debt          |                                       |                                                         | 55,332     |         |              |         | 105          |        |         |        |        |   |   |         | 55,437  |        
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|                                                                                    |                                                                                   |                                       | Net cash provided by (used in) financing
    activities |            |         | 55,072       |         |              |        | (1,876  | )      |         |   |  |         |         |         | 53,196  |  
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|Net decrease in cash and cash equivalents                                           |                                                                                   |                                       | (302                                                    | )          |         |              | (2,868  | )            |        |         |       |         |   |   | (3,170  | )      
|Cash and cash equivalents, beginning of year                                        |                                                                                   |                                       | 3,820                                                   |            |         |              | 2,677   |              |        |         |       |         |   |   | 6,497   |        
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        
|Cash and cash equivalents, end of
    year                                          |                                                                                   | $                                     | 3,518                                                   |            |         | $            | (191    | )            |        | $       |       |         |   | $ | 3,327   |        
|                                                                                    |                                                                                   |                                       |                                                         |            |         |              |         |              |        |         |        |         |   |   |         |        

47



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##### 



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 contains information
regarding the directors and executive officers of the Company.
Directors hold their positions until the annual meeting of the
stockholders at which their term expires or until their
respective successors are elected and qualified. Executive
officers hold their positions until the annual meeting of the
Board of Directors or until their respective successors are
elected and qualified.

|                   |  |     |    |          |  |                                                                       
|------------------ |  | --- | -- | -------- |  | ----------------------------------------------------------------------
|Name               |  | Age |    | Position
|                   |  |     |    |         
|Richard P. Johnson |  |     | 55 |          |  | President, Chief Executive Officer and Director                       
|William E. Berry   |  |     | 48 |          |  | Executive Vice President and Chief Financial
    Officer              
|J. Michael Gaither |  |     | 50 |          |  | Executive Vice President, General Counsel,
    Treasurer and Secretary
|Daniel K. Brown    |  |     | 49 |          |  | Senior Vice President  Procurement                                   
|Phillip E. Marrett |  |     | 52 |          |  | Senior Vice President  Sales and
    Marketing                       
|Joseph P. Donlan   |  |     | 56 |          |  | Director                                                              
|Kim G. Davis       |  |     | 49 |          |  | Director                                                              
|Tim R. Palmer      |  |     | 45 |          |  | Director                                                              
|Jon M. Biotti      |  |     | 34 |          |  | Director                                                              
|Todd Krasnow       |  |     | 45 |          |  | Director                                                              
|M. Lenny Pippin    |  |     | 55 |          |  | Director                                                              

Richard P. Johnson  President,
Chief Executive Officer and Director.Mr. Johnson became President and Chief Executive Officer in
January 2001 and prior to that time, served as President of the
Companys Southeast Division. He joined ITCO as President
and Chief Operating Officer in February 1997. He served as
Senior Vice President of Albert Fisher Distribution from 1991 to
1994, and as its President and Chief Operating Officer from 1994
to 1996. Prior to that time, Mr. Johnson held a variety of
management positions with Leprino Foods, Sargento Cheese and
Kraft Foods. He holds an A.A. from Palm Beach College.

William E. Berry  Executive Vice
President and Chief Financial Officer.Mr. Berry became Executive Vice President and Chief
Financial Officer in January 2002. Mr. Berry joined the
Company in May 1998 as a result of the merger with ITCO Tire
Company and served as Senior Vice President of Finance for the
Southeast Division. Prior to that, he joined ITCO Tire Company
as Controller in 1984 and served as its Senior Vice President of
Finance until 1996. From 1996 to the merger with the Company, he
served as ITCOs Executive Vice President in charge of
business development and sales and marketing. Prior to that,
Mr. Berry held a variety of financial management positions
for a subsidiary of the Dr. Pepper Company and also spent
three years in a public accounting firm. He holds a B.S. in
Business Administration from Virginia Tech.

J. Michael Gaither  Executive
Vice President, General Counsel, Treasurer and
Secretary.Mr. Gaither became
Executive Vice President in May 1999, and prior to that time
served as the Companys Senior Vice President, General
Counsel and Secretary since joining the Company in 1991. Prior
to that time, he was a lawyer in private practice for several
years. He holds a B.A. from Duke University and received his
J.D. from the University of North Carolina-Chapel Hill.

48



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##### 



Daniel K. Brown  Senior Vice
President  Procurement.Mr. Brown joined the Company in 1975 and held various field
sales assignments before becoming Marketing Manager in 1979. He
advanced to Director of Marketing and to Vice President of
Marketing during the 1980s and was named Vice President of
Sales and Marketing in 1991, assuming responsibility for
distribution center operations. In 1997 he was named Senior Vice
President of Sales and Marketing with responsibility for vendor
relations and program negotiations as well as the sales and
marketing activities for the Company. Mr. Brown holds a
B.A. from Western Carolina University.

Phillip E. Marrett  Senior Vice
President  Sales and
Marketing.Mr. Marrett joined the
Company in 1998 as Regional Vice President in the Southeast
Division. Prior to joining the Company, Mr. Marrett worked
for ITCO Tire (1997-1998) and Dunlop Tire (1976-1996).

Joseph P.
Donlan  Director.Mr. Donlan has been a Director since May 1997. He is
Managing Director of Brown Brothers Harriman & Co. and
Co-Manager of its 1818 Mezzanine Fund, and 1818 Mezzanine Fund
II, L.P. Mr. Donlan joined Brown Brothers Harriman &
Co. in 1970 in the firms Trade Finance Group. Prior to
organizing the 1818 Mezzanine Fund, Mr. Donlan managed
Brown Brothers Harriman & Co.s New York commercial
banking activities. Previously, Mr. Donlan served as the
firms Senior Credit Officer and became a member of the
firms Credit Committee on which he continues to serve. He
is a graduate of Georgetown University and received an M.B.A.
from Rutgers University. Mr. Donlan also serves on the Board of
Directors of National Auto Finance Company, Inc., One Call
Medical, Inc., Wise Foods, Inc. and Fiber Composites, LLC.

Kim G.
Davis  Director.Mr. Davis has been a Director since May 1999. He is a
Managing Director and co-founder of Charlesbank Capital
Partners, LLC and serves as a director of Bell Sports, Inc. and
Westinghouse Air Brake Company. Prior to July 1998,
Mr. Davis was a Managing Director of Charlesbanks
predecessor firm, Harvard Private Capital Group, Inc., the
private equity and real estate investment unit of Harvard
Management Company. From 1995 through 1997, Mr. Davis was
engaged in personal investing activities. From 1988 through 1994
he was a General Partner at Kohlberg & Co. Mr. Davis
holds both B.A. and M.B.A. degrees from Harvard University.

Tim R.
Palmer  Director.Mr. Palmer has been a Director since May 1999. He is a
Managing Director and co-founder of Charlesbank Capital
Partners, LLC. From 1990 through June 1998, Mr. Palmer was
a Managing Director of Harvard Private Capital Group, Inc.
Mr. Palmer serves as a director of several private
companies. Previously, he was Manager, Business Development at
The Field Corporation, a privately held investment company.
Mr. Palmer holds a B.A. from Purdue University, a J.D. from
the University of Virginia and an M.B.A. from the University of
Chicago.

Jon
Biotti   Director.Mr. Biotti has been a Director since May 1999. He is a Vice
President at Charlesbank Capital Partners, LLC. Prior to joining
Charlesbank in July 1998, Mr. Biotti pursued postgraduate
research studies in principal investing and entrepreneurship as
an Entrepreneurial Studies Research Fellow at the Harvard
Graduate School of Business Administration. Previously, he was
affiliated with Brown Brothers Harriman & Co., Walt Disney
Company and Wasserstein Perella & Co. Mr. Biotti holds
a B.A. from Harvard University, an M.P.A. from the Kennedy
School of Government and an M.B.A. from Harvard University.

Todd
Krasnow  Director.Mr. Krasnow is the cofounder and Chief Executive Officer of
ZOOTS, The Cleaner Cleaner. Prior to ZOOTS, he was Executive
Vice President of Sales and Marketing for Staples. He joined
Staples as part of its original management team in 1986, before
it opened its first office superstore in the country. During his
12 years with Staples, Mr. Krasnow helped launch the
companys California operations, ran the companys
international joint ventures and started the companys
catalog operation. Mr. Krasnow serves on several local
non-profit boards. He graduated from Cornell University and from
Harvard Business School in 1983.

M. Lenny
Pippin  Director.Mr. Pippin is President and Chief Executive Officer of
Schwans Sales Enterprises, Inc. He earned his
bachelors degree from Florida Atlantic University in Boca
Raton, Florida and currently is a member of the Board of
Directors of Schwans Sales Enterprises, Inc. and G&K
Services. He

49



---



##### 



also serves a number of non-profit organizations
in a similar capacity, including the Tampa Bay Museum of Science
and Industry, Lowry Park Zoo, Childrens Home of Tampa and
the Florida Council of 100, an organization of the states
largest business interest.


Item 11.     Executive
Compensation.

Summary Compensation Table

The following table contains information
concerning the compensation for services in all capacities to
the Company for the fiscal years 2002, 2001 and 2000 of the
following Named Executive Officers, who are those
persons who (a) served during the fiscal year ended
December 28, 2002 as the Chief Executive Officer of the
Company and, (b) were, at December 28, 2002, the other
four most highly compensated executive officers of the Company
who earned more than $100,000 in salary and bonus in 2002.

|                            |                              |        |          |                     |  |              |         |              |  |              |         |              |  |  |   |   |  |  |         |        |  |  |        |        | 
|--------------------------- | ---------------------------- | ------ | -------- | ------------------- |  | ------------ | ------- | ------------ |  | ------------ | ------- | ------------ |  |  | - | - |  |  | ------- | ------ |  |  | ------ | ------ | 
|                            |                              |        |          |                     |  |              |         |              |  | Long-Term    |         |             
|                            |                              |        |          |                     |  | Compensation |         |             
|                            |                              |        |          | Annual Compensation |  |              |         |             
|                            |                              |        |          |                     |  | Securities   |         |             
|                            |                              | Fiscal |          |                     |  | Other Annual |         | Underlying   |  | All Other   
|                            |                              | Year   |          | Salary              |  | Bonus        |         | Compensation |  | Options/SARs |         | Compensation
|Name and Principal Position |                              | Ended  |          | ($)                 |  | ($)          |         | ($)(a)       |  | (#)(b)       |         | ($)(c)      
|                            |                              |        |          |                     |  |              |         |              |  |              |         |             
|Richard P. Johnson          |                              |        | 12/28/02 |                     |  |              | 443,846 |              |  |              | 141,730 |              |  |  |  |   |  |  | 812,601 |        |  |  | 31,300 |       
|                            | President, Chief Executive   |        |          | 12/29/01            |  |              |         | 400,000      |  |              |         | 141,730      |  |  |   |  |  |  |         |       |  |  |        | 35,325 | 
|                            | Officer                      |        |          | 12/30/00            |  |              |         | 275,000      |  |              |         | 161,975      |  |  |   |  |  |  |         | 30,000 |  |  |        | 16,000 | 
|William E. Berry            |                              |        | 12/28/02 |                     |  |              | 255,192 |              |  |              | 56,291  |              |  |  |  |   |  |  | 615,606 |        |  |  | 21,300 |       
|                            | Executive Vice President and |        |          | 12/29/01            |  |              |         | 215,000      |  |              |         | 56,291       |  |  |   |  |  |  |         |       |  |  |        | 27,040 | 
|                            | Chief Financial Officer      |        |          | 12/30/00            |  |              |         | 177,343      |  |              |         | 85,251       |  |  |   |  |  |  |         | 2,500  |  |  |        | 13,947 | 
|J. Michael Gaither          |                              |        | 12/28/02 |                     |  |              | 267,577 |              |  |              | 56,291  |              |  |  |  |   |  |  | 443,237 |        |  |  | 21,300 |       
|                            | Executive Vice President,    |        |          | 12/29/01            |  |              |         | 261,000      |  |              |         | 56,291       |  |  |   |  |  |  |         |       |  |  |        | 24,890 | 
|                            | General Counsel and          |        |          | 12/30/00            |  |              |         | 246,000      |  |              |         | 36,900       |  |  |   |  |  |  |         | 25,000 |  |  |        | 16,000 | 
|                            | Secretary                    |        |          |                     |  |              |         |              |  |              |         |              |  |  |   |   |  |  |         |        |  |  |        |        | 
|Daniel K. Brown             |                              |        | 12/28/02 |                     |  |              | 247,846 |              |  |              | 56,291  |              |  |  |  |   |  |  | 295,491 |        |  |  | 20,800 |       
|                            | Senior Vice President       |        |          | 12/29/01            |  |              |         | 242,000      |  |              |         | 56,291       |  |  |   |  |  |  |         |       |  |  |        | 27,299 | 
|                            | Procurement                  |        |          | 12/30/00            |  |              |         | 230,000      |  |              |         | 34,500       |  |  |   |  |  |  |         | 25,000 |  |  |        | 16,000 | 
|Phillip Marrett             |                              |        | 12/28/02 |                     |  |              | 198,769 |              |  |              | 56,291  |              |  |  |  |   |  |  | 295,491 |        |  |  | 4,800  |       
|                            | Senior Vice President       |        |          | 12/29/01            |  |              |         | 190,000      |  |              |         | 56,291       |  |  |   |  |  |  |         |       |  |  |        | 7,013  | 
|                            | Sales and Marketing          |        |          | 12/30/00            |  |              |         | 137,500      |  |              |         | 68,640       |  |  |   |  |  |  |         | 2,500  |  |  |        | 10,112 | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | This column includes amounts for perquisites and
    other personal benefits that, in the aggregate, did not exceed
    the reporting threshold of $50,000 or 10% of total annual salary
    and bonus.                                                                                                                                                               
|(b) |  | This column includes stock options granted in
    2000 and 2002 under the Companys stock option plans, which
    is discussed below under  Stock Option Plans.
    17,669 of the options granted in 2000 and 492,488 options
    granted in 2002 vested as of December 28, 2002. The
    remaining options vest as described in  Stock Option
    Plans, below.
|(c) |  | This column includes amounts of Company
    contributions to qualified 401(k) and deferred compensation
    plans.                                                                                                                                                                                                                                                    

50



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##### 



Option/SAR Grants in 2002

No stock appreciation rights were granted during
2002. The following table contains information concerning the
grant of stock options to each of the Named Executive Officers
during 2002:

|                   |  |                   |         |                               |  |          |      |                               |  |                               |      |        |  |  |         |  |  |   |         |  |  |   |           | 
|------------------ |  | ----------------- | ------- | ----------------------------- |  | -------- | ---- | ----------------------------- |  | ----------------------------- | ---- | ------ |  |  | ------- |  |  | - | ------- |  |  | - | --------- | 
|                   |  |                   |         |                               |  |         
|                   |  | Individual Grants |         |                              
|                   |  |                   |         | Potential Realizable Value at
|                   |  | Number of         |         | Percent of                    |  |          |      | Assumed Annual Rates of Stock
|                   |  | Securities        |         | Total Options                 |  | Exercise |      |                               |  | Price Appreciation for Option
|                   |  | Underlying        |         | Granted to                    |  | or Base  |      |                               |  | Term(b)                      
|                   |  | Options           |         | Employees in                  |  | Price    |      | Expiration                    |  |                              
|Name               |  | Granted(a)        |         | Fiscal Year                   |  | ($/Sh)   |      | Date                          |  | 5%($)                         |      | 10%($)
|                   |  |                   |         |                               |  |          |      |                               |  |                               |      |       
|Richard P. Johnson |  |                   | 812,601 |                               |  |          | 33.0 | %                             |  | $                             | 1.40 |        |  |  | 6/12/12 |  |  | $ | 715,457 |  |  | $ | 1,813,107 | 
|William E. Berry   |  |                   | 615,606 |                               |  |          | 25.0 |                               |  |                               | 1.40 |        |  |  | 6/12/12 |  |  |   | 542,012 |  |  |   | 1,373,564 | 
|J. Michael Gaither |  |                   | 443,237 |                               |  |          | 18.0 |                               |  |                               | 1.40 |        |  |  | 6/12/12 |  |  |   | 390,249 |  |  |   | 988,968   | 
|Daniel K. Brown    |  |                   | 295,491 |                               |  |          | 12.0 |                               |  |                               | 1.40 |        |  |  | 6/12/12 |  |  |   | 260,166 |  |  |   | 659,311   | 
|Phillip E. Marrett |  |                   | 295,491 |                               |  |          | 12.0 |                               |  |                               | 1.40 |        |  |  | 6/12/12 |  |  |   | 260,166 |  |  |   | 659,311   | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The securities underlying the options, which were
    granted under the stock option plan, are shares of Class A
    common stock. Under the stock option plan, 492,488 of the
    options granted to each of the Named Executive Officers in 2002
    vested as of December 28, 2002. The options vest as
    described in  Stock Option Plan, below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(b) |  | The potential realizable value columns illustrate
    the value that might be realized upon exercise of the options
    immediately prior to the expiration of their term, assuming the
    specified compound rates of appreciation of the Class A
    common stock over the term of the options. These amounts
    represent certain assumed rates of appreciation only, assuming a
    fair market value on the date of grant of $1.40 per share.
    Because the Class A common stock is privately held, a
    per-share fair market value on the date of grant of the options
    equal to $1.40 was assumed based on information available to the
    Board of Directors as of June 2002. Actual gains on the exercise
    of the options are dependent on the future performance of the
    Class A common stock. The potential values reflected in
    this table may not be the actual values ultimately realized. All
    amounts have been rounded to the nearest whole dollar.

No options to purchase common stock were
exercised by the Named Executive Officers during the
12 months ended December 28, 2002.

Stock Option Plans

The Company has adopted three stock option plans,
the Amended and Restated 1997 Stock Option Plan, the 1999 Stock
Option Plan and the 2002 Stock Option Plan, all of which are
designed to motivate designated employees, officers, directors
and independent contractors of the Company by encouraging them
to acquire a proprietary interest in the Company. The
Companys Board of Directors, acting through the
compensation committee, administers the stock option plans,
selects eligible participants, determines the number of shares
subject to each option granted under the stock option plans and
sets other terms and conditions applicable to participants in
the stock option plans. As of December 28, 2002, the
maximum aggregate number of shares which may be issued under the
stock option plans is 3,853,139 shares of Class A common
stock.

The stock option plans provide for the grant to
designated employees, officers, directors and independent
contractors of the Company of options to purchase shares of
Class A common stock. The compensation committee has sole
authority to select those individuals to whom options may be
granted and to determine the number of shares of Class A
common stock that will be issuable upon exercise of the options
granted. The purchase price for shares of Class A common
stock issuable upon exercise of the options granted is fixed by
the compensation committee, but cannot be less than the fair
market value of the Class A common stock, as determined in
good faith by the Companys Board of Directors, if the
corresponding option is intended to qualify as an incentive
stock option under the Internal Revenue Code. As of
December 28, 2002, options to purchase an aggregate of
3,147,426 shares of Class A common stock, at prices ranging
from $1.10 to $9.00 per share, were outstanding under the stock
option plans.

51



---



##### 



All options granted under the stock option plans
are subject to the terms and conditions of a stock option
agreement entered into by each option recipient. The stock
option agreement generally requires each recipient to be bound
by the terms of a stockholder agreement with the Company in the
event the recipient elects to exercise options. Options granted
under the 1997 stock option plan generally would have vested on
the first four anniversaries of the date of grant, in
installments of either (a) 10%, 20%, 30% and 40% or
(b) 20%, 20%, 20% and 40%, of the total number of
underlying shares. Options granted under the 1999 stock option
plan generally vest based on time, performance or the occurrence
of specified events, such as an initial public offering or
company sale. Time based options vest on the first four
anniversaries of the date of grant in installments of 25% per
year. Performance based options vest at the end of each year
based on the achievement of EBITDA targets for the year. Options
that vest on the basis of events such as an initial public
offering or company sale do so only to the extent that
Charlesbank has earned a specified return on its initial
investment in shares of the Company. All time based and
performance based options vest in any event on the seventh
anniversary of the date of grant. Options granted under the 2002
stock option plan generally vest based on installments of 20%
with the first 20% vesting on the date of grant and 20% on
January 1 of each year for the following four years thereafter.
Options granted under the stock option plans are generally not
transferable by the recipient other than by a will or by the
laws of descent and distribution and, during the
recipients lifetime, may only be exercised by the
recipient. Under the terms of the stock option plans, options
expire no later than the tenth anniversary of the date of grant.
Options are also subject to adjustment to avoid dilution in the
event of stock splits, stock dividends, reclassifications or
other similar changes in the capital structure of the Company.

Upon the termination of an option holders
employment the stock option agreement typically provides that
all or a portion of the option lapses unless exercised by the
option holder or his or her personal representative within a
specified period of time after the termination.

In connection with the Charlesbank purchase,
which constituted a change of control under the 1997
stock option plan, all outstanding options under the 1997 option
plan became fully vested and are currently exercisable by the
option holders.

Under the 1999 and 2002 stock option plan, each
of the following events would constitute a change of
control:



| |   |                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | at any time after an initial public offering, a
    person or entity not controlled by the Companys existing
    stockholders acquires more than 30% of the combined voting power
    of the then outstanding shares of the Companys common
    stock,
|
| |  | all or substantially all of the assets of the
    Company are sold,                                                                                                                                                                                     
|
| |  | the majority of the Companys Board of
    Directors no longer comprises persons currently serving on the
    Board or persons designated by the current Board majority,                                                                                
|
| |  | at any time prior to an initial public offering,
    Charlesbank and its affiliates collectively own less than 50% of
    the combined voting power of the then outstanding shares of
    common stock of the Company,                                  
|
| |  | the adoption of a plan relating to the
    liquidation or dissolution of the Company in connection with an
    equity investment or sale or a business combination transaction,
    or                                                                  
|
| |  | any other event or transaction that the Board of
    the Company deems to be a change of control.                                                                                                                                                     

Options outstanding under the stock option plans
would become fully vested and immediately exercisable upon any
change of control to the extent provided in the relevant stock
option agreements.

Restricted Stock

The Company has given designated employees,
officers, directors and independent contractors of the Company
the opportunity to acquire restricted shares of Class A
common stock. The Companys Board of Directors administers
the restricted stock arrangements, selects eligible
participants, determines the number of

52



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##### 



shares to be offered to each participant and sets
other applicable terms and conditions. As of December 28,
2002, a total of 80,000 restricted shares of Class A common
stock were outstanding.


Shares of restricted stock are issued by the
Company at the fair market value at the date of issuance. Some
or all of the purchase price may be paid in the form of a
promissory note given by the purchaser of the shares. In some
cases, the principal and/or interest due on the notes is
forgiven over time by the Company as determined by the
Companys Board of Directors.

All shares of restricted stock are subject to the
terms and conditions of a securities purchase and
stockholders agreement (the restricted stock
agreement) entered into by each option recipient. The
restricted stock agreement prohibits the transfer of restricted
shares except for transfers:



| |   |                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to the Company upon the termination of employment
    of a participating stockholder,                                                                                                                                                                       
|
| |  | to other management employees who have executed
    and delivered agreements substantially similar to the restricted
    stock agreement,                                                                                                                   
|
| |  | by will or by the laws of descent or
    distribution, or                                                                                                                                                                                                   
|
| |  | if and to the extent repurchase rights in favor
    of the Company on termination of employment have not been
    exercised, to third parties, subject to rights of first refusal
    in favor of the Company and the other holders of restricted
    stock.

The Company has the right to repurchase all of a
participating stockholders shares upon the termination of
that stockholders employment by the Company due to cause
or by the stockholder other than for good reason (each as
defined in the restricted stock agreement) or the death of the
participating stockholder. A participating stockholder may
require the Company to repurchase all of such stockholders
shares if that stockholder is terminated by the Company without
cause or terminates his or her employment for good reason (as
defined in the restricted stock agreement). The repurchase price
for shares of stock subject to the restricted stock agreement is
generally their original purchase price or fair market value.
The repurchase price for shares of stock subject to the
restricted stock agreement in the case where a stockholder is
terminated for certain specified cause events or violates his or
her confidentiality or noncompete obligations is either their
original purchase price or a price derived from the
Companys Net Equity Value (as defined in the
restricted stock agreement) at the time of repurchase, whichever
is lower. Under the restricted stock agreements entered into in
May 1999, the repurchase rights described in this paragraph are
exercisable by Charlesbank and other principal stockholders to
the extent not exercised by the Company. The restricted stock
agreements terminate on the earlier to occur of a public
offering that meets specified conditions and the tenth
anniversary of the date of the agreement.

Compensation of Directors

During the year ended December 28, 2002,
directors who were not employees of the Company, nominees of The
1818 Mezzanine Fund, or Charlesbank Capital were paid a fee of
$2,000 for each board meeting attended.

Compensation Committee Interlocks and Insider
Participation

During 2002, Kim Davis and M. Lenny Pippin served
on a compensation committee of the Companys Board of
Directors, which reviewed and recommended executive compensation
for the Named Executive Officers and other executives of the
Company. All compensation recommendations of the executive
committee were reviewed by and subject to the approval of the
full Board of Directors of the Company.

Board Compensation Committee Report on
Executive Compensation

The compensation committee, at the direction of
the Board of Directors of the Company, recommends the
compensation of the Named Executive Officers and other
executives of the Company. In addition, the compensation
committee administers the Companys compensation and stock
option plans.

53



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##### 



The key components of the compensation packages
of the Companys executive officers are annual salary,
bonuses dependent upon the Companys performance, deferred
compensation, and long-term, stock-based incentives. In
addition, the Companys executive officers receive health,
accident, and life insurance, retirement, and other personal
benefits typically offered to executives by other corporations
equivalent in size.

Historically, the Company has entered into
executive severance agreements with its senior executive
officers which fix their minimum annual salaries and bonuses.
The compensation philosophy of the Companys Board of
Directors is that the compensation of the Companys
executives and key managers should be designed to promote
achievement of the Companys business and financial
objectives; to provide pay that is externally competitive and
internally equitable, which will allow the Company to attract,
retain, and motivate the executives and key managers necessary
to accomplish its business objectives; and to reward exceptional
performance. The compensation committee reviews the salaries
provided for in the employment agreements with its senior
executive officers, as well as the salaries of the
Companys other officers, once a year, and recommends
changes to the Board of Directors.

Bonuses are paid on the basis of the
Companys and/or the individual divisions
profitability results versus the pre-established targets. The
compensation committee of the board recommends the
performance-based targets for these bonuses and for each
participant or group of participants in the divisions. The Board
of Directors must approve these targets.

The program consists of specific payment levels
0-IV. Within each level, there are established percentage
payouts, which will not begin until the threshold performance is
met. As the Companys performance increases over the
threshold, the payout percentage also increases until
performance reaches 100% of the plan. Once the Companys
performance reaches 100% of the planned performance, the payout
percentage will continue to increase proportionally until a
maximum is reached.

Bonuses are subject to reduction or cancellation
on the basis of a participants individual performance or
in the event of conduct by a participant detrimental to the
Company. Bonuses are payable in cash.



| |                           
| | --------------------------
| | THE COMPENSATION COMMITTEE
| | Kim G. Davis              
| | M. Lenny Pippin           

Indemnification of Officers and
Directors

The Companys articles of incorporation
provide for the release of any person serving as a director of
the Company from liability to the Company or its stockholders
for damages for breach of fiduciary duty and for the
indemnification by the Company of any person serving as a
director, officer, employee or agent or other authorized person
to the fullest extent permissible under the North Carolina
Business Corporation Act. In addition, the Company has purchased
a directors and officers insurance policy covering
officers and directors of the Company for liabilities that they
may incur as a result of any action, or failure to act, by such
officers and directors in their capacity as officers and
directors.

Employment and Severance Agreements

The Company has entered into executive severance
agreements with each of Messrs. Johnson, Berry, Gaither,
Brown and Marrett, providing for annual base salaries as listed
in the summary compensation table above. The agreements each
provide for additional compensation in the form of participation
in the Companys executive bonus plan and participation in
the Companys deferred compensation program.

The severance agreements may be terminated at any
time by the Company or the employee. Upon termination of
employment for any reason, the employee is entitled to receive a
basic termination payment equal to (a) his base salary
earned through the date of termination and (b) the previous
years bonus if the termination is after December 31
and before bonus has been awarded. If the employee is terminated
by the Company without cause or if the employee leaves for good
reason (each as defined in his severance

54



---



##### 



agreement), he is entitled to an additional
severance payment based on a multiple of his base salary and
plan bonus. The multiple used for determining the additional
severance payment is increased if termination occurs in
connection with a change of control of the Company (as defined
in his severance agreement).


The severance agreements each contain
confidentiality and noncompete provisions.

Executive Bonus Plan

Bonuses are paid on the basis of the
Companys and/or the individual divisions
profitability results versus the pre-established targets. The
compensation committee of the board recommends the
performance-based targets for these bonuses and for each
participant or group of participants in the divisions. The Board
of Directors must approve these targets.

The program consists of specific payment
levels 0-IV. Within each level, there are established
percentage payouts, which will not begin until the threshold
performance is met. As the Companys performance increases
over the threshold, the payout percentage also increases until
performance reaches 100% of the plan. Once the Companys
performance reaches 100% of the planned performance, the payout
percentage will continue to increase proportionally until a
maximum is reached.

Deferred Compensation Plan

In 1999, the Company established a deferred
compensation plan for its top executives and divisional
employees covered by the executive bonus plan to encourage each
participant to promote the long-term interests of the Company.
Each participant is allowed to defer portions of their annual
salary as well as bonuses received into the plan. In addition to
employee deferrals, the Company makes contributions on behalf of
its top executives and certain of the divisional employees in
varying amounts. The plan provides that an employee who becomes
a participant on or before November 23, 1998, shall be
fully vested in all amounts credited to such participants
account. The plan provides that an employee who becomes a
participant after November 23, 1998 shall be at all times
fully vested in elective deferrals into such participants
account and as to contributions made by the Company shall vest
at a rate of twenty percent (20%) per year as long as such
participant is an employee on January 1 of each year. The
deferred compensation plan may be altered and amended by the
Companys Board of Directors.

Item 12.     Security
Ownership of Certain Beneficial Owners and
Management.

The following table sets forth certain
information regarding the beneficial ownership of the
Companys common stock as of March 15, 2003 of:



| |   |                                                                                                   
| | - | --------------------------------------------------------------------------------------------------
| |  | each person known by the Company to own
    beneficially more than 5% of the Class A common stock,
|
| |  | each director,                                                                                    
|
| |  | the Named Executive Officers and                                                                  
|
| |  | all directors and executive officers of the
    Company as a group.                               

55



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##### 



|                                                                                |  |                  |           |                |  |  |      |  
|------------------------------------------------------------------------------- |  | ---------------- | --------- | -------------- |  |  | ---- | -
|                                                                                |  | Number of Shares |           | Percent of    
|                                                                                |  | Beneficially     |           | Class A Common
|Name and Address of Beneficial Owner(a)                                         |  | Owned            |           | Stock(b)      
|                                                                                |  |                  |           |               
|Charlesbank Equity Fund IV, Limited Partnership                                 |  |                  | 4,961,734 | (c)            |  |  | 97.5 | %
|The 1818 Mezzanine Fund, L.P.                                                   |  |                  | 1,034,000 | (d)            |  |  | 16.9 |  
|Joseph P. Donlan                                                                |  |                  | 1,034,000 | (d)            |  |  | 16.9 |  
|Kim G. Davis                                                                    |  |                  | 4,961,734 | (c)            |  |  | 97.5 |  
|Tim R. Palmer                                                                   |  |                  | 4,961,734 | (c)            |  |  | 97.5 |  
|Jon M. Biotti                                                                   |  |                  |          | (e)            |  |  |     |  
|Todd Krasnow                                                                    |  |                  | 20,000    | (f)            |  |  | 0.4  |  
|M. Lenny Pippin                                                                 |  |                  | 20,000    | (f)            |  |  | 0.4  |  
|Richard P. Johnson                                                              |  |                  | 413,237   | (g)            |  |  | 7.6  |  
|William E. Berry                                                                |  |                  | 272,440   | (h)            |  |  | 5.1  |  
|J. Michael Gaither                                                              |  |                  | 276,215   | (i)            |  |  | 5.2  |  
|Daniel K. Brown                                                                 |  |                  | 217,117   | (j)            |  |  | 4.1  |  
|Phillip E. Marrett                                                              |  |                  | 126,322   | (k)            |  |  | 2.4  |  
|All directors and executive officers of the
    Company as a group (11 persons) |  |                  | 7,341,066 |                |  |  | 99.6 |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Unless otherwise indicated, the address for each
    person listed in the table is in care of American Tire
    Distributors, Inc., 12200 Herbert Wayne Court, Suite 150,
    Huntersville, North Carolina 28078.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) |  | Shares beneficially owned, as recorded in this
    table, are expressed as a percentage of the shares of
    Class A common stock. For purposes of computing the
    percentage of outstanding shares held by each person or group of
    persons named in this table, any securities which that person or
    group of persons has the right to acquire within 60 days of
    March 15, 2003 are deemed to be outstanding for purposes of
    computing the percentage ownership of such person or persons,
    but are not deemed to be outstanding for the purpose of
    computing the percentage ownership of any other person. As of
    March 15, 2003, 5,086,917 shares of Class A common
    were issued and outstanding.                                                                                                                           
|(c) |  | Represents (i) 4,846,179 shares of
    Class A common stock owned by Charlesbank Equity
    Fund IV, Limited Partnership, (ii) 4,444 shares of
    Class A common stock owned by its affiliate, Charlesbank
    Coinvestment Partners, LLC, and (iii) 111,111 shares of
    Class A common stock owned by an affiliate of Bain Capital
    and voted by Charlesbank pursuant to an irrevocable proxy.
    Messrs. Davis and Palmer are Managing Directors of
    Charlesbank Capital Partners, LLC, which has the indirect
    authority to vote and exercise investment power over shares of
    Class A common stock beneficially owned by Charlesbank.
    Since neither of Messrs. Davis and Palmer individually have
    the power to vote and exercise investment power over the shares,
    each of them disclaims beneficial ownership of the shares.
|(d) |  | Represents shares issuable upon the exercise of
    Warrants, as discussed below. Mr. Donlan is the co-manager
    of The 1818 Mezzanine Fund, L.P. and in that capacity will have
    authority to vote and exercise investment power over the shares.
    See Certain Relationships and Related
    Transactions  Warrants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(e) |  | Mr. Biotti is a Vice President of
    Charlesbank Capital Partners, LLC and has no authority to vote
    or exercise investment power over shares of Class A common
    stock beneficially owned by Charlesbank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(f) |  | Includes 20,000 shares of Class A common
    stock issuable upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(g) |  | Includes 386,127 shares of Class A common
    stock issuable upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(h) |  | Includes 254,367 shares of Class A common
    stock issuable upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(i) |  | Includes 251,215 shares of Class A common
    stock issuable upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(j) |  | Includes 192,117 shares of Class A common
    stock issuable upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(k) |  | Includes 126,322 shares of Class A common
    stock issuable upon the exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

Item 13.     Certain
Relationships and Related Transactions.

Warrants

In connection with the incurrence of subordinated
debt to finance the acquisition of Winston in May 1997, the
Company issued to The 1818 Mezzanine Fund, L. P. (the 1818
Fund) warrants (the

56



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##### 



Warrants) to purchase shares of the
Companys common stock. Joseph P. Donlan, a member of
the Companys Board of Directors, is a Managing Director of
Brown Brothers Harriman & Co., the 1818 Funds
general partner. Mr. Donlan and Robert R. Gould, a Partner
of Brown Brothers Harriman & Co., are co-managers of the
1818 Fund, and in that capacity they exercise voting and
investment power over the 1818 Funds shares. The Warrants
are exercisable for 1,034,000 shares of Class A common
stock. The Warrants may be exercised, in whole or in part, at
any time prior to the earliest of:




| |   |                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | May 7, 2007,                                                                                                                                                                                                      
|
| |  | the date of an initial public offering of
    Class A common stock yielding gross proceeds of at least
    $25.0 million or representing at least 20% of the
    Class A common stock on a fully-diluted basis, or
|
| |  | the Companys merger or consolidation with
    or into another entity or the sale of all or substantially all
    of the Companys assets.                                                                        

The number of shares issuable upon the exercise
of the Warrants is subject to adjustment from time to time to
reflect stock dividends, splits, combinations and
reclassifications. The Company has no right to call for the
redemption of the Warrants.

The Company and the 1818 Fund are also parties to
a warrant holder agreement, dated as of May 21, 1999, which
contains provisions restricting the transferability of the
Warrants, including a right of first offer in favor of the
Company, and grants registration rights with respect to shares
of Class A common stock issuable upon exercise of the
Warrants.

Preferred Stock

Series A Preferred Stock and
Series B Preferred Stock

In connection with entering into the Winston
Private Brand Supply Agreement, Goodyear purchased from the
Company 7,000 newly issued shares of the Companys
Series A Cumulative Redeemable Preferred Stock, par
value $.01 (the Series A preferred stock),
and 4,500 newly issued shares of the Companys
Series B Cumulative Redeemable Preferred Stock, par
value $.01 (the Series B preferred stock),
for an aggregate purchase price of $11.5 million. Goodyear
is the sole holder of each series of preferred stock. Each
series of the preferred stock has a stated value and liquidation
preference equal to $1,000 per share, except the liquidation
preference of the Series B preferred stock is reduced from
time to time based upon purchases by the Company of certain
types of tires from Goodyear.

Goodyear is entitled to receive monthly dividends
on the liquidation preference of the Series A preferred
stock at a rate of 4% per year, which may be increased if the
Companys annual tire purchases from Goodyear fall below
certain levels. The Company is not required to pay dividends on
the Series B preferred stock unless its annual tire
purchases from Goodyear fall below certain levels.

Subject to the limitations summarized below,
beginning in December 2002 and ending in June 2007, the Company
is required to redeem 700 shares of Series A preferred
stock each year on a semi-annual basis at 100% of the
liquidation preference of such shares plus all accrued and
unpaid dividends. As of December 2002, the Company was
restricted by these limitations and no shares of Series A
preferred stock was redeemed. Subject to the same limitations,
the Company is required to redeem all of the outstanding shares
of Series B preferred stock in June 2007 at the same
redemption price. Unless restricted by the limitations
summarized below, the Company is also required to redeem all the
preferred stock if the Winston Private Brand Supply Agreement is
terminated or, at the request of Goodyear, if a change of
control of the Company occurs and Goodyear requests a
termination of the Winston Private Brand Supply Agreement. Each
series of preferred stock also is redeemable at any time at the
Companys option.

57



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So long as any amounts are outstanding under the
Companys Revolver or subordinated notes, or any amending
or replacing agreement for that debt, or any commitments to lend
exist under such debt, the Company is prohibited from:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | making any payment in respect of any mandatory or
    optional redemption of either series of preferred stock, or                                                                                                                                                                                                                                                                                                    
|
| |  | declaring, making or paying any dividend or
    distribution in respect of either series of preferred stock, if
    any default or event of default under any such debt, or any
    event which upon notice or lapse of time, or both, would
    constitute an event of default, has occurred or is continuing or
    would result from that event and has not been cured or waived in
    accordance with such debt.

Series C Preferred Stock

On April 2, 2001 the Company issued
1,333,334 shares of Series C preferred stock for $9.00 per
share in exchange for $12.0 million in cash contributed by
certain of its principal stockholders. Shares of Series C
preferred stock accrue dividends at an annual rate of 12% and
are redeemable by the Company, but not the holder, at the
initial price plus any cumulative unpaid dividends as of the
redemption date. However, as long as any shares of Series A
preferred stock or Series B preferred stock remain
outstanding, no dividends may be paid, nor redemption occur.
Shares of Series C preferred stock are convertible into
common stock at a conversion price of $3.00 per common share.

Series D Preferred Stock

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

Monitoring Fee

The Company expects to pay an advisory and
monitoring fee not to exceed $200,000 annually to Charlesbank
Capital Partners, LLC. None has been paid through
December 28, 2002.

Related Party Transactions

On October 12, 2001, Haas entered into an
Asset Purchase Agreement with T.O. Haas, LLC (Haas
LLC) for the sale of certain assets. The total purchase
price was approximately $5.3 million, of which the Company
received approximately $2.4 million in cash at closing.
Haas LLC was formed by, among others, one of the executives of
Haas. A portion of the purchase price for the Companys
acquisition of Haas in second quarter 2000 is payable to this
executive in the form of noncompete and stay put payments. In
connection with the sale, such noncompete payments in the amount
of $2.4 million ($1.2 million net of income taxes)
were accelerated and such liability was satisfied as a reduction
of the purchase price. Approximately $1.0 million of the
purchase price is payable in the form of a promissory note (the
Note) due in two equal annual installments, with
first such payment paid January 2, 2002. The Note bears
interest at 6%. As of January 3, 2003, the Note was paid in
full. Stay put payments due to the executive of
$1.6 million were accelerated to coincide with the schedule
of payments due under the Note. Liabilities assumed by the buyer
totaled $0.7 million, reflecting the remainder of the
purchase price.

In connection with the sale described above, the
Company entered into a Supply and Retail Distribution Agreement
with Haas LLC. Total sales under this agreement were
approximately $10.1 million and $2.4 million for
fiscal 2002 and 2001, respectively.

58



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In connection with the Haas acquisition in 2000,
the Company sold certain parcels of real estate and leased them
back in a transaction which closed on August 8, 2000. Total
monthly payments under these leases are approximately $72,000.
The leases expire July 31, 2010.

The Company believes that the above transactions
were on terms no less favorable to it than could have been
obtained from an independent third party.

Item 14.     Controls
and Procedures.

Evaluation of Disclosure Controls and
Procedures

Based on their evaluation as of a date within
90 days of the filing date of this report on
Form 10-K, the Companys principal executive officer
and principal financial officer have concluded that the
Companys disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934 (the Exchange Act)) are
effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange
Commission rules and forms.

Changes in Internal Controls

There were no significant changes in the
Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

59



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PART IV

Item 15.     Exhibits,
Financial Statement Schedules and Reports on
Form 8-K.

(a) Documents filed as part of this Report:



| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | 1. The following items, including
    consolidated financial statements of the Company, are set forth
    at Item 8 of this report:



| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Public Accountants                                                                                                  
|
| |  | Consolidated Balance Sheets as of
    December 28, 2002 and December 29, 2001                                                             
|
| |  | Consolidated Statements of Operations for the
    years ended December 28, 2002, December 29, 2001 and
    December 30, 2000              
|
| |  | Consolidated Statements of Stockholders
    Investment for the years ended December 28, 2002,
    December 29, 2001 and December 30, 2000
|
| |  | Consolidated Statements of Cash Flows for the
    years ended December 28, 2002, December 29, 2001 and
    December 30, 2000              
|
| |  | Notes to Consolidated Financial Statements                                                                                                

2. Financial Statement Schedules

Report of Independent Public Accountants (set
forth on following page)

60



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##### 



SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

For the Years Ended December 28, 2002,
December 29, 2001 and December 30, 2000


(in thousands)


|                                           |  |           |       |            |  |          |       |            |  |             |     |     |  |  |         |      |  |   |       | 
|------------------------------------------ |  | --------- | ----- | ---------- |  | -------- | ----- | ---------- |  | ----------- | --- | --- |  |  | ------- | ---- |  | - | ----- | 
|                                           |  |           |       |            |  |          |       |           
|                                           |  |           |       | Additions  |  |          |       |           
|                                           |  |           |       |            |  |          |       |           
|                                           |  | Balance   |       | Charged to |  | Charged  |       |            |  |            
|                                           |  | Beginning |       | Costs and  |  | to Other |       |            |  | Balance End
|                                           |  | of Year   |       | Expenses   |  | Accounts |       | Deductions |  | of Year    
|                                           |  |           |       |            |  |          |       |            |  |            
|2002                                       |  |           |       |            |  |          |       |            |  |             |     |     |  |  |         |      |  |   |       | 
|Allowance for doubtful accounts            |  | $         | 3,571 |            |  | $        | 2,036 |            |  |             |    |     |  |  | $(4,376 | )(2) |  | $ | 1,231 | 
|Acquisition exit cost reserves(3)          |  |           | 1,149 |            |  |          | (199  | )          |  |             |    |     |  |  | (497    | )    |  |   | 453   | 
|Valuation allowance on deferred tax assets |  |           | 2,000 |            |  |          |      |            |  |             |    |     |  |  | (956    | )    |  |   | 1,044 | 
|Inventory reserves                         |  |           | 5,796 |            |  |          | 1,108 |            |  |             |    |     |  |  | (5,940  | )(4) |  |   | 964   | 
|2001                                       |  |           |       |            |  |          |       |            |  |             |     |     |  |  |         |      |  |   |       | 
|Allowance for doubtful accounts            |  | $         | 1,877 |            |  | $        | 3,125 |            |  |             |    |     |  |  | $(1,431 | )(2) |  | $ | 3,571 | 
|Acquisition exit cost reserves(3)          |  |           | 1,833 |            |  |          | 245   |            |  |             |    |     |  |  | (929    | )    |  |   | 1,149 | 
|Valuation allowance on deferred tax assets |  |           |      |            |  |          | 2,000 |            |  |             |    |     |  |  |        |      |  |   | 2,000 | 
|2000                                       |  |           |       |            |  |          |       |            |  |             |     |     |  |  |         |      |  |   |       | 
|Allowance for doubtful accounts            |  | $         | 2,057 |            |  | $        | 658   |            |  | $           | 396 | (1) |  |  | $(1,234 | )(2) |  | $ | 1,877 | 
|Acquisition exit cost reserves(3)          |  |           | 2,173 |            |  |          | 536   |            |  |             | 459 |     |  |  | (1,335  | )    |  |   | 1,833 | 



---



|    |                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes amounts for Haas as of the May 25,
    2000 acquisition date.                                                                                                                                                                                    
|(2) | Accounts written off during the year, net of
    recoveries.                                                                                                                                                                                              
|(3) | Relates to the acquisition of ITCO, CPW and ATD.
    Amounts represent facilities closing cost of acquired
    distribution centers due to existing distribution centers being
    located in close proximity to the acquired distribution
    facilities.
|(4) | Amount includes inventory reserves relating to
    the exit of the Companys parts product line in the Western
    division in 2002.                                                                                                                      

Schedules not included herein are omitted because
they are not applicable or the required information appears in
the financial statements or notes thereto.

61



---



##### 



REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL
STATEMENT SCHEDULE

To the Board of Directors and Stockholders of

American Tire Distributors, Inc and Subsidiaries:


Our audit of the December 28, 2002
consolidated financial statements referred to in our report
dated March 7, 2003 appearing in this Annual Report on
Form 10-K of American Tire Distributors, Inc. (the
Company, formerly Heafner Tire Group, Inc.) also
included an audit of the December 28, 2002 financial
statement schedule information listed in Item 15 of this
Form 10-K. In our opinion, this 2002 financial statement
schedule information presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related financial statements. The 2001 and 2000 financial
statement schedule information of the Company was audited by
other independent accountants who have ceased operations. Those
independent accountants expressed an unqualified opinion on that
financial statement schedule information in their report dated
March 22, 2002.

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina

March 7, 2003


62



---



##### 



REPORT OF PREDECESSOR AUDITOR (ARTHUR ANDERSEN
LLP)

ON FINANCIAL STATEMENT SCHEDULE


THE FOLLOWING REPORT IS A COPY OF A REPORT
PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN
REISSUED BY ARTHUR ANDERSEN LLP. THIS REPORT APPLIES TO
SUPPLEMENTAL SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 29, 2001
AND DECEMBER 30, 2000.

To Heafner Tire Group, Inc. and Subsidiaries:

We have audited, in accordance with auditing
standards generally accepted in the United States, the
consolidated financial statements of Heafner Tire Group, Inc.
and subsidiaries included in this Form 10-K, and have
issued our report thereon dated March 22, 2002. Our audits
were made for the purpose of forming an opinion on those
financial statements taken as whole. The schedule listed in
Item 14(a)* of this Form 10-K is the responsibility of
the Companys management and is presented for purposes of
complying with the Securities and Exchange Commissions
rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic
financial statements taken as a whole.

Arthur Andersen LLP

Charlotte, North Carolina

March 22, 2002




---



|  |                                                                                  
|- | ---------------------------------------------------------------------------------
|* | Such information is presented in Item 15(a)
    in the current year presentation.

63



---



##### 





| |    |          
| | -- | ---------
| | 3. | Exhibits:

(a) Exhibits:

| |      |  |  |                                                                                                                                                                                                                                                                                                                                                          
| | ---- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1  |  |  | Restated Certificate of Incorporation of Heafner
    Tire Group, Inc. (the Company)*                                                                                                                                                                                                                                                                   
| | 3.2  |  |  | Second Restated Certificate of Incorporation of
    Heafner Tire Group,
    Inc.±                                                                                                                                                                                                                                                                        
| | 3.3  |  |  | Certificate of Amendment to the Second Restated
    Certificate of Incorporation of Heafner Tire Group, Inc., as
    filed with the Secretary of State of the State of Delaware on
    May 30, 2002#                                                                                                                                                     
| | 3.4  |  |  | Third Restated Certificate of Incorporation of
    American Tire Distributors, Inc.                                                                                                                                                                                                                                                                      
| | 3.5  |  |  | Certificate of Correction Filed to Correct a
    Certain Error in the Certificate of American Tire Distributors,
    Inc.**                                                                                                                                                                                                                              
| | 3.6  |  |  | By-laws of the Company*                                                                                                                                                                                                                                                                                                                                  
| | 3.7  |  |  | Articles of Incorporation of The Speed Merchant,
    Inc.*                                                                                                                                                                                                                                                                                               
| | 3.8  |  |  | By-laws of The Speed Merchant, Inc.*                                                                                                                                                                                                                                                                                                                     
| | 3.9  |  |  | Articles of Incorporation of Phoenix Racing, Inc.*                                                                                                                                                                                                                                                                                                       
| | 3.10 |  |  | By-laws of Phoenix Racing, Inc.*                                                                                                                                                                                                                                                                                                                         
| | 3.11 |  |  | Articles of Incorporation of California Tire
    Company                                                                                                                                                                                                                                                                                               
| | 3.12 |  |  | By-laws of California Tire Company                                                                                                                                                                                                                                                                                                                     
| | 3.13 |  |  | Articles of Incorporation of T.O. Haas Holding
    Co., Inc.?                                                                                                                                                                                                                                                                                            
| | 3.14 |  |  | Amended By-laws of T.O. Haas Holding Co., Inc.?                                                                                                                                                                                                                                                                                                          
| | 3.15 |  |  | Articles of Incorporation of T.O. Haas Tire Co.,
    Inc.?                                                                                                                                                                                                                                                                                               
| | 3.16 |  |  | By-laws of T.O. Haas Tire Co., Inc.?                                                                                                                                                                                                                                                                                                                     
| | 4.1  |  |  | Indenture, dated as of December 1, 1998,
    among the Company, First Union National Bank, as Trustee (the
    Trustee), and Oliver & Winston, Inc., ITCO
    Logistics Corporation, ITCO Holding Company, Inc., ITCO Tire
    Company, ITCO Tire Company of Georgia, The Speed Merchant, Inc.,
    and Phoenix Racing, Inc. (the Series D Indenture)+
| | 4.2  |  |  | Supplemental Indenture to the Series D
    Indenture, dated as of February 22, 1999, among the
    Company, the Trustee, Oliver & Winston, Inc., The Speed
    Merchant, Inc., Phoenix Racing, Inc. and California Tire
    Company                                                                                                                    
| | 4.3  |  |  | Second Supplemental Indenture to the
    Series D Indenture, dated as of May 14, 1999, among
    the Company, the subsidiary guarantors party thereto and First
    Union National Bank, as Trustee#                                                                                                                                                     
| | 4.4  |  |  | Third Supplemental Indenture to the Series D
    Indenture, dated as of May 25, 2000, among the Company, the
    subsidiary guarantors party thereto and First Union National
    Bank, as Trustee-                                                                                                                                                      
| | 4.5  |  |  | Fourth Supplemental Indenture to the
    Series D Indenture, dated as of March 27, 2002, among
    the Company, the subsidiary guarantors party thereto and First
    Union National Bank, as
    Trustee±                                                                                                                                               
| | 4.6  |  |  | Form of Series C and Series D Note
    (attached as Exhibit A to the Series D Indenture)+                                                                                                                                                                                                                                                                
| | 4.7  |  |  | Share Purchase Agreement, dated as of
    March 30, 2001, among Heafner Tire Group, Inc., a Delaware
    corporation and the parties listed on Schedule I.?                                                                                                                                                                                              
| | 4.8  |  |  | Share Purchase Agreement, dated as of
    March 27, 2002, among Heafner Tire Group, Inc., a Delaware
    corporation and the Investors named
    therein.±                                                                                                                                                                                               
| | 4.9  |  |  | Agreement, dated May 13, 2002, among the
    stockholders of Heafner Tire Group, Inc., a Delaware corporation
    named on the signature pages
    hereto.±±                                                                                                                                                                                             

64



---



##### 



| |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ----- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1  |  |  | Second Amended and Restated Loan and Security
    Agreement, dated as of March 6, 2000, among the Company,
    Winston Tire Company, The Speed Merchant, Inc. and California
    Tire Company as Borrowers, and Fleet Capital Corporation, as
    Administrative Agent (the Administrative Agent),
    Bank of America, N.A., as Syndication Agent (the
    Syndication Agent), FleetBoston Robertson Stephens
    Inc., as Arranger (the Arranger) and the financial
    institutions party from time to time party thereto, as Lenders+/-
| | 10.2  |  |  | Amendment No. 1 to Second Amended and
    Restated Loan and Security Agreement-                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.3  |  |  | Amendment No. 2 to Second Amended and
    Restated Loan and Security Agreement-                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.4  |  |  | Amendment No. 3 to Second Amended and
    Restated Loan and Security Agreement-                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.5  |  |  | Amendment No. 4 and Waiver to Second Amended
    and Restated Loan and Security Agreement?                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.6  |  |  | Amendment No. 5 to Second Amended and
    Restated Loan and Security Agreement-                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.7  |  |  | Amendment No. 6 to Second Amended and
    Restated Loan and Security Agreement=                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.8  |  |  | Amendment No. 7 to Second Amended and
    Restated Loan and Security Agreement-                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.9  |  |  | Amendment No. 8 and Waiver to Second Amended
    and Restated Loan and Security Agreement **                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 10.10 |  |  | Amendment No. 9 to Second Amended and
    Restated Loan and Security Agreement?                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 10.11 |  |  | Amendment No. 10 to Second Amended and
    Restated Loan and Security
    Agreement▪                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 10.12 |  |  | Letter, dated March 6, 2000, from the
    Company to the Administrative Agent+/-                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 10.13 |  |  | Amended and Restated Registration Rights
    Agreement, dated as of May 21, 1999, between and among the
    Company, The 1818 Mezzanine Fund, L.P., and Charlesbank Equity
    Fund IV, Limited Partnership#                                                                                                                                                                                                                                                                                                                                     
| | 10.14 |  |  | Warrantholder Agreement, dated as of May 21,
    1999, between the Company, The 1818 Mezzanine Fund, L.P. and
    Charlesbank Equity Fund IV, Limited Partnership#                                                                                                                                                                                                                                                                                                                                                                               
| | 10.15 |  |  | Amended and Restated Warrant No. 2
    exercisable for 1,034,000 shares of Class A Common Stock in
    the name of The 1818 Mezzanine Fund, L.P.#                                                                                                                                                                                                                                                                                                                                                                                                
| | 10.16 |  |  | Securities Purchase Agreement, dated as of
    May 7, 1997, between The J. H. Heafner Company, Inc. and
    The Kelly-Springfield Tire and Rubber Company*                                                                                                                                                                                                                                                                                                                                                                                       
| | 10.17 |  |  | Amendment to Securities Purchase Agreement, dated
    as of May 21, 1999, between and among the Company and The
    Kelly-Springfield Tire Company, a division of The Goodyear Tire
    and Rubber Company#                                                                                                                                                                                                                                                                                                                                      
| | 10.18 |  |  | Termination and Release Agreement, dated as of
    May 22, 1999, among the Company and the Class B
    stockholders party thereto#                                                                                                                                                                                                                                                                                                                                                                                                               
| | 10.19 |  |  | The J.H. Heafner Company Amended and Restated
    1997 Stock Option Plan#                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 10.20 |  |  | Heafner Tire Group 1999 Stock Option Plan+/-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 10.21 |  |  | American Tire Distributors, Inc. 2002 Stock
    Option Plan▪                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 10.22 |  |  | Stock Option Agreements, dated as of
    June 12, 2002, between the Company and each of Richard P.
    Johnson, William E. Berry, J. Michael Gaither, Daniel K. Brown
    and Phillip E. Marrett▪                                                                                                                                                                                                                                                                                                                                                
| | 10.23 |  |  | The J.H. Heafner Company 1997 Restricted Stock
    Plan*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 10.24 |  |  | Securities Purchase and Stockholders Agreement,
    dated as of May 28, 1997, among the Company and various
    management stockholders*                                                                                                                                                                                                                                                                                                                                                                                                         
| | 10.25 |  |  | Securities Purchase and Stockholders
    Agreement, dated as of May 24, 1999, between the Company
    and each of Donald C. Roof, J. Michael Gaither, Daniel K. Brown
    and Richard P. Johnson#                                                                                                                                                                                                                                                                                                                                               

65



---



##### 



| |       |  |  |                                                                                                                                                                                                                            
| | ----- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.26 |  |  | Executive Severance Agreement, dated as of
    May 24,1999, between the Company and Donald C. Roof#                                                                                                                        
| | 10.27 |  |  | Amended and Restated Executive Severance
    Agreement, dated as of December 5, 2001, between the
    Company and J. Michael Gaither-                                                                                      
| | 10.28 |  |  | Amended and Restated Executive Severance
    Agreement, dated as of December 5, 2001, between the
    Company and Richard P. Johnson-                                                                                      
| | 10.29 |  |  | Amended and Restated Executive Severance
    Agreement, dated as of December 5, 2001, between the
    Company and Daniel K. Brown-                                                                                         
| | 10.30 |  |  | Executive Severance Agreement, dated
    December 5, 2001, between the Company and William E. Berry-                                                                                                                       
| | 10.31 |  |  | Executive Severance Agreement dated July 24,
    2000, between the Company and Phillip E. Marrett-                                                                                                                         
| | 10.32 |  |  | Stock Purchase Agreement dated April 14,
    2000, between Heafner Tire Group Inc., T.O. Haas Holding Co.,
    Randall M. Haas and Ricky L. Haas+/-+/-                                                                     
| | 10.33 |  |  | Stock Purchase Agreement, dated May 4, 2001,
    by and among Performance Management, Inc., Heafner Tire Group,
    Inc., as sole shareholder of Winston Tire Company, Winston Tire
    Company and Charles Bryant Kountz##
| | 12.1  |  |  | Statement re: Computation of
    Ratios▪                                                                                                                                                                                   
| | 21.1  |  |  | Chart of Subsidiaries of the
    Company▪                                                                                                                                                                                  
| | 99.1  |  |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of
    2002▪                                                                                                                
| | 99.2  |  |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of
    2002▪                                                                                                                
| | 99.3  |  |  | Letter to the Securities and Exchange Commission
    regarding Arthur Andersen LLP audit-                                                                                                                                  



---

|       |  |                                                                                                                
|------ |  | ---------------------------------------------------------------------------------------------------------------
|*      |  | Incorporated by reference to the Companys
    Registration Statement on Form S-4 filed on August 18,
    1998.
|+      |  | Incorporated by reference to the Companys
    Form 8-K filed on December 15, 1998.                            
|     |  | Incorporated by reference to the Companys
    Registration Statement on Form S-4 filed on March 31,
    1999. 
|#      |  | Incorporated by reference to the Companys
    Registration Statement Form S-4 filed on June 9, 1999.          
|+/-    |  | Incorporated by reference to the Companys
    10-K, filed on March 30, 2000.                                  
|+/-+/- |  | Incorporated by reference to the Companys
    8-K, filed on November 14, 2000.                                
|?      |  | Incorporated by reference to the Companys
    10-K, filed on April 9, 2001.                                   
|##     |  | Incorporated by reference to the Companys
    10-Q, filed on May 15, 2001.                                    
|=      |  | Incorporated by reference to the Companys
    10-Q, filed on November 13, 2001.                               
|-      |  | Incorporated by reference to the Companys
    10-K, filed on March 26, 2002.                                  
|±      |  | Incorporated by reference to the Companys
    8-K, filed on April 11, 2002.                                   
|±±     |  | Incorporated by reference to the Companys
    10-Q, filed on May 14, 2002.                                    
|ß      |  | Incorporated by reference to the Companys
    8-K, filed on June 18, 2002.                                    
|^      |  | Incorporated by reference to the Companys
    10-Q, filed on August 12, 2002.                                 
|**     |  | Incorporated by reference to the Companys
    10-Q, filed on November 12, 2002.                               
|▪      |  | Filed herewith.                                                                                                

66



---



##### 



(b) Reports on Form 8-K

Report on Form 8-K was filed on
April 11, 2002 related to the consummation of several debt
restructuring transactions.

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

67



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March
28, 2003.



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



| |     |                       
| | --- | ----------------------
| | By: | /s/ RICHARD P. JOHNSON

| |                                             
| | --------------------------------------------
| |                                             
| | Name: Richard P. Johnson                    
| | Title: President and Chief Executive Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, this report has been signed by
the following persons on behalf of the Registrant and in the
capacities indicated on March 28, 2003.

|                                         |  |                                                                        |  |                |  | 
|---------------------------------------- |  | ---------------------------------------------------------------------- |  | -------------- |  | 
|                                         |  |                                                                        |  |               
|Signature                                |  | Title                                                                  |  | Date          
|                                         |  |                                                                        |  |               
|                                        
|/s/ RICHARD P. JOHNSONRichard P. Johnson |  | Director, President and Chief Executive Officer                        |  | March 28, 2003
|                                        
|/s/ WILLIAM E. BERRYWilliam E. Berry     |  | Executive Vice President and Chief Financial
    Officer               |  | March 28, 2003
|                                        
|/s/ J. MICHAEL GAITHERJ. Michael Gaither |  | Executive Vice President, General Counsel,
    Treasurer and Secretary |  | March 28, 2003
|                                        
|/s/ JOSEPH P. DONLANJoseph P. Donlan     |  | Director                                                               |  | March 28, 2003
|                                        
|/s/ JON M. BIOTTIJon M. Biotti           |  | Director                                                               |  | March 28, 2003
|                                        
|/s/ KIM G. DAVISKim G. Davis             |  | Director                                                               |  | March 28, 2003
|                                        
|/s/ TIM R. PALMERTim R. Palmer           |  | Director                                                               |  | March 28, 2003
|                                        
|/s/ M. LENNY PIPPINM. Lenny Pippin       |  | Director                                                               |  | March 28, 2003
|                                        
|/s/ TODD KRASNOWTodd Krasnow             |  | Director                                                               |  | March 28, 2003

68



---



##### 



CERTIFICATIONS

I, Richard P. Johnson, President and Chief
Executive Officer of American Tire Distributors, Inc., certify
that:

1. I have reviewed this annual report on
Form 10-K of American Tire Distributors, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of circumstances under which such statements were made,
not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b. evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c. presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function);



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b. any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |     |                       
| | --- | ----------------------
| | By: | /s/ RICHARD P. JOHNSON

| |                                          
| | -----------------------------------------
| |                                          
| | Richard P. Johnson                       
| | President and Chief Executive
    Officer

Date: March 28, 2003

69



---



##### 



CERTIFICATIONS

I, William E. Berry, Executive Vice President and
Chief Financial Officer of American Tire Distributors, Inc.,
certify that:

1. I have reviewed this annual report on
Form 10-K of American Tire Distributors, Inc.;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of circumstances under which such statements were made,
not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial
statement, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b. evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c. presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b. any fraud, whether or not material, that
    involves management of other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether
there were significant changes in internal controls or in other
factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



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

| |                             
| | ----------------------------
| |                             
| | William E. Berry            
| | Executive Vice President and
| | Chief Financial Officer     

Date: March 28, 2003

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