SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934

      FOR THE FISCAL YEAR ENDED JANUARY 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 022318

                           APS HOLDING CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                   DELAWARE                         76-0306940
        (STATE OR OTHER JURISDICTION OF          (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)          IDENTIFICATION NO.)

                    15710 JOHN F. KENNEDY BLVD., SUITE 700
                          HOUSTON, TEXAS  77032-2347
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

                                (713) 507-1100
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE SECURITIES EXCHANGE ACT:

                                               NAME OF EACH EXCHANGE
              TITLE OF EACH CLASS               ON WHICH REGISTERED
      $.01 PAR VALUE CLASS A COMMON STOCK              NONE

  SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE SECURITIES EXCHANGE
                                  ACT: NONE

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 the 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. [ ]

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

There were 13,790,110 shares of the Registrant's Class A Common Stock
outstanding as of the close of business on May 1, 1998. The aggregate market
value of the Registrant's Class A Common Stock held by non-affiliates was
$10,664,316 (based upon the price of $1.13 on May 1, 1998 as reported on the
OTC bulletin board system.

                  DOCUMENTS INCORPORATED BY REFERENCE - NONE
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                                    PART I

ITEM 1. BUSINESS

COMPANY OVERVIEW

      APS Holding Corporation ("APS Holding") and its subsidiaries (collectively
referred to as the "Company") is a leading warehouse distributor of automotive
replacement parts in the United States, supplying over 1,650 parts stores owned
by associated jobbers and 273 Big-A Company-owned stores and 214 Installers
Service Warehouses ("ISWs") as of January 31, 1998 ("Fiscal Year 1998"). The
Company principally serves the wholesale segment of the automotive parts
aftermarket. As of January 31, 1998, the Company has a network of 27
distribution centers in 26 states. The distribution centers offer over 160,000
stock keeping units ("SKUs"), including a broad array of nationally recognized
replacement parts, tools, equipment, supplies and accessories under its Big-A(R)
brand name, private label name as well as manufacturers' brand names.

      The Company's Big-A program offers a number of benefits to stores owned by
independent automotive parts store operators ("jobbers") that participate in the
program, including (i) a broad selection of product lines; (ii) brand name
identity, including national advertising programs; (iii) access to flexible
purchasing programs; (iv) overnight delivery of parts; and (v) a comprehensive
package of services, including assistance in marketing, cataloging, inventory
control, accounting, management and employee training. Many of the Company's
associated jobbers and Big-A Company-owned stores are located in communities
with populations of less than 25,000 people. The Company believes that jobbers
located in smaller communities are well suited to the Big-A program because the
customer base within these communities generally is not large enough to support
the investment necessary to enable a jobber to obtain on its own the benefits of
the Big-A program. In contrast, ISW targets customers in larger metropolitan
areas typically not served by the Company's associated jobbers or Big-A
Company-owned stores. The ISWs have been designed to meet the needs of their
targeted customer base - the professional installer.

      The ISWs were originally opened as a two-step distribution system as a
separate operating unit within the Company. During the latter half of Fiscal
Year 1998, the Company made the decision to integrate the ISWs into the existing
Big-A system and operate both Big-A units and ISW units as a single business
unit with a single management. This integration is intended to change the ISW
units from two to three step distribution and allow for greater cost
efficiencies by operating as a single business unit. At year-end a majority of
this consolidation had taken place. The Company expects that greater cost
savings should continue to accrue throughout the year ended January 30, 1999
("Fiscal Year 1999").

      APS Holding, which was formed in 1989 to acquire A.P.S., Inc. ("APS") from
Wickes Companies, Inc. ("Wickes"), first offered its Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), to the public in September
1993.

CHAPTER 11 REORGANIZATION

      On February 2, 1998, APS Holding Corporation, its subsidiary APS and each
of the principal subsidiaries of APS filed petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). Each of such
corporations is presently operating its business as a debtor in possession in
such proceedings (the "Chapter 11 Proceedings").

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EVENTS LEADING TO THE FILING

      Since its initial public offering in 1993, the Company pursued aggressive
acquisition and ISW expansion programs in order to obtain increased market
share. These programs (including the acquisition of Parts, Inc. which is
described below) consumed significant financial resources and resulted in the
Company becoming highly leveraged. The Company had attempted to address these
problems during Fiscal Year 1998 by closing unprofitable locations, reducing
headcount and reducing inventory. Notwithstanding these initiatives, however,
these problems, in conjunction with competitive pressures in the industry,
shrinking cash flow, and large debt payments, led the Company to file Chapter
11.

EFFECT OF CHAPTER 11 PROCEEDINGS

      The matters described in this Annual Report on Form 10-K, to the extent
that they relate to future events or expectations, may be significantly affected
by the Chapter 11 Proceedings. Those proceedings will involve or result in
various restrictions on the Company's activities, limitations on financing, the
need to obtain Bankruptcy Court approval for various matters and uncertainty as
to relationships with vendors, suppliers, customers and others with whom the
Company may conduct or seek to conduct business. In particular, many vendors are
providing less favorable terms and contractual benefits, including cash
discounts than those existing prior to the Chapter 11 Proceedings and the
Company's key vendors, representing more than 80% of the Company's annual
purchases, are requiring cash payments. While the Company will seek to obtain
more advantageous terms as the proceedings progress, there can be no assurance
that it will be successful in this regard.

      The Company has undertaken a number of activities since the bankruptcy
filing that are intended to address industry-wide and Company specific problems.
Among the initiatives developed are: programs to better manage credit policy and
accounts receivable collection, programs to reduce selling, general and
administrative expense throughout the Company, and consideration of possible
store, ISWs and distribution center closings.

LIQUIDITY ISSUES

      As described elsewhere in this document, the Company obtained a $100
million Debtor-In-Possession financing facility from a bank group for which The
Chase Manhattan Bank, the agent for the Company's pre-petition bank lender
group, acts as agent. Interim financing of $45 million was approved pursuant to
a first day bankruptcy order on February 2, 1998. The Company received final
approval of the entire facility on February 26, 1998. The amount of new loans
that may be outstanding at any time may not exceed a maximum that varies from
month to month, ranging from $40 million to $65 million (exclusive of letters of
credit).

THE PI ACQUISITION

      On January 25, 1996, the Company acquired all of the outstanding stock of
Parts, Inc. ("PI"), an automotive parts distributor, from GKN Parts Industries
Corporation ("GKN Parts") for a purchase price, as adjusted, of $74.9 million
(the "PI Acquisition"). At the time of the PI Acquisition, the PI distribution
network was comprised of approximately 850 parts stores owned by PI's associated
jobbers and more than 125 Big-A Company-owned stores, all of which were serviced
through PI's 14 distribution centers. PI's customer base at such time was
primarily located in markets where the Company had a relatively minor presence,
including Arkansas, Oklahoma, Texas, Tennessee, Kentucky, Mississippi, Alabama,
West Virginia and Michigan.

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INTEGRATION PLAN

      During the fiscal year ended January 25, 1997 ("Fiscal Year 1997"), the
Company implemented an aggressive plan to integrate PI's operations with those
at the Company. This integration plan called for the closure of numerous PI
facilities, including nine distribution centers and 27 stores, as well as the
closure of two APS distribution centers. As a result of such closures and the
sale of certain store facilities in Mississippi and Florida, there were five PI
distribution centers and 64 PI Big-A Company-owned stores remaining at January
31, 1998.

      In addition, the integration plan called for the changeover of PI's
product lines from Parts Plus to Big-A brands, which was completed during Fiscal
Year 1998. In accordance with the Company's PI integration plans, approximately
half of the more than 125 Big-A Company-owned stores were closed or sold and
approximately one-third of the over 850 former PI associate jobbers were not
changed over to the Company's product lines. The majority of such jobbers were
intentionally not changed over to the Company's product lines because they did
not meet the Company's standards for sales volume and profitability or were in
markets already serviced by Big-A jobbers.

      The Company also negotiated deferred payment terms, changeover and
acquisition incentives and other one-time special privileges from its suppliers
in connection with the integration of PI and the changeover of product lines.
Such deferred payment terms, which allowed the Company to defer the payment of
certain accounts payable, required the Company to make payments beginning in the
Fiscal Year 1997 continuing through the following two fiscal years. However, as
a result of the Chapter 11 Proceedings, these deferred payments represent
prepetition claims and the actual amounts to be paid and the timing of such
payments will be determined through Bankruptcy Court proceedings. The Company's
costs of integrating PI and changing over product lines were offset by
changeover and acquisition incentives. In addition to offsetting direct
integration costs, the Company used a portion of such incentives to offset
indirect costs, operational inefficiencies and general business disruption
resulting from the PI integration during Fiscal Year 1997.

      Integration efforts and the changeover of PI's product line to the
Company's product line consumed financial and operating resources and demanded
extensive managerial focus and attention, which contributed to the Company's
operating problems during Fiscal Years 1997 and 1998.

INDUSTRY OVERVIEW

      The total market for automotive replacement parts (excluding tires and
service) was approximately $100.7 billion (based upon the price paid by end
users) in 1997 as measured by Lang Marketing Resources, Inc. ("Lang"). (Unless
otherwise indicated, the industry size and growth, market share and competitive
position data contained in this Form 10-K are based on retail sales by dollar
amount.) The market is composed of two basic segments: Passenger car and light
truck products, a market accounting for sales of $72.5 billion in 1997, and
heavy duty truck and other products, a market accounting for sales of $28.2
billion in 1997. The Company principally operates in the passenger car and light
truck market, and currently does not have a significant presence in the heavy
duty truck market.

      The market for passenger car and light truck products has two basic sales
channels: (i) wholesale or installed parts service, serving professional
installers, vehicle dealers, retail auto parts stores and other distributors,
and (ii) retail, serving do-it-yourself retail customers. The wholesale segment
is the Company's primary area of focus. Based on Lang data, the Company believes
that the wholesale segment represents over two-thirds of sales, or approximately
$52.9 billion, of the passenger car and light truck product market (based upon
the price paid by end-

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users), while the retail segment accounts for the remaining approximately $19.6
billion.

      The size of the entire automotive parts aftermarket has continued to
increase in recent years. In addition, according to industry sources, revenues
generated by sales to professional installers have grown more quickly during
this period than revenues from the do-it-yourself sector. The Company believes
that this growth is attributable in part to several favorable market trends,
including the following (i) continuing growth in the size of the national fleet
of vehicles; (ii) growth in the miles driven each year; (iii) growth in the
number of vehicles in the prime repair age range of five to ten years old, and
the continued aging of the U.S. vehicle fleet; (iv) proliferation of the number
of automotive parts resulting from an increase in the number of domestic and
imported automotive vehicle models; and (v) increasing complexity of vehicles
and the maturing of the population (and related increase in purchasing power),
which the Company believes will lead to an increasing propensity for vehicle
owners to favor installed parts service over do-it-yourself repairs. The
increasing quality of new vehicles and extended manufacturers' warranties,
however, are reducing the impact of these trends on the growth of the automotive
parts aftermarket.

WHOLESALE DISTRIBUTION

      The Company has principally operated in the wholesale distribution
segment. Traditionally, this segment has distributed automotive parts using a
three-step distribution process. With three-step distribution, parts
manufacturers deliver parts to warehouse distributors ("WDs"), who then deliver
to local jobbers who sell individual parts to end users. Three-step distribution
allows jobbers to provide rapid parts availability to local area professional
installers, including service stations, garages and national accounts such as
Firestone Service Centers and Sears Tire Group. Three-step distribution is
characterized at the WD level by large product assortments. By making available
lower-turnover SKUs from a WD on a next-day basis, the jobber provides local
professional installers with timely access to the specific assortment of parts
they need to complete repair jobs as they arise.

      The proliferation of the number of vehicle models, resulting in an
increase in the number of automotive parts, has created large inventory
requirements which, in turn, have had dramatic effects on both WDs and jobbers.
Increased inventory typically translates into slower inventory turnover and a
larger working capital investment. In recent years in order to compete
effectively, WDs and jobbers require more capital to fund the purchase of
additional inventory and to invest in other expenditures which improve
productivity. As a result, many less well-capitalized WDs and jobbers have sold
or merged their businesses with WDs and jobbers with greater access to capital.
As an alternative to selling or combining their businesses, WDs and jobbers have
joined programmed distribution groups. Programmed distribution groups are
largely comprised of WDs, independently-owned jobbers and jobber chains who join
together in order to benefit from purchasing efficiencies, increased
informational and financial support, and services including marketing,
cataloging, accounting, management, employee training and inventory control. The
Company's competitors include several national programmed distribution groups as
well as a number of regional programmed distribution groups. Three leading,
nationally recognized programmed distribution groups are National Automotive
Parts Association ("NAPA"), APS/Big-A and Carquest. The Company competes with
NAPA, Carquest and other programmed distribution groups on the basis of product
availability, service and price.

RETAIL DISTRIBUTION

      The retail segment of aftermarket distribution channels has undergone
significant changes in recent years as a result of, among other factors,
intensified competitive pressures, parts proliferation and computer-driven
efficiencies. Jobbers have tended not to focus on or market effectively to the
retail or do-it-yourself customer. In response, companies such as AutoZone have
developed an effective alternative to the traditional jobber for the retail

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customer by emphasizing convenient locations, advertising and product lines
focused on the retail customer.

      The wholesale segment, as previously mentioned, accounts for over
two-thirds of the automotive parts aftermarket, while the retail segment
accounts for the remainder. In the past several years, certain retailers such as
AutoZone and CSK Auto Corporation have added programs that are intended to add
the professional installer to their customer profile. Typically, in order to
serve the professional (or wholesale) market, a retailer has to provide
experienced customer service, rapid delivery, more extensive inventory directed
toward professional installers and merchandise credit. The extent to which
retailers will be able to make inroads into the wholesale market will be
dependent upon whether they are able to provide the best availability, service,
quality and price.

THE BIG-A PROGRAM AND ASSOCIATED JOBBERS

      The Company provides the associated jobbers that participate in the Big-A
program with (i) brand name recognition as well as a private label; (ii) access
to flexible purchasing programs; and (iii) a comprehensive package of services,
including assistance in marketing, cataloging, accounting, management and
employee training and inventory control. The cornerstones of the Company's Big-A
program merchandising strategy include Big-A brand name and private label parts,
a national cooperative advertising program, a store merchandising assistance
program and Big-A store identification.

      The jobbers that participate in the Big-A program generally operate
independently owned, full-line automotive parts stores that sell parts to a wide
variety of customers, including service stations, repair shops, garages,
dealers, farmers, fleet operators and "do-it-yourself " retail customers.
Management estimates that the average associated jobber purchases from the
Company approximately 80 percent of its inventory in the product lines carried
by the Company. While in general, associated jobbers are not contractually
obligated to buy all of their products from the Company or to maintain their
relationships with the Company, a number of associated jobbers, including new
associated jobbers, have entered into agreements to purchase their inventory
from the Company. Such agreements typically have five year terms and require the
associated jobber to purchase an average of 80% of their inventory from the
Company. The Company's traditional jobber base has been composed predominantly
of single-store jobbers, a majority of which have been located in rural and
suburban areas.

      While the total number of associated jobber stores that participate in the
Big-A program increased significantly as a result of the PI Acquisition, the
Company typically gains and loses associated jobber stores during any given
year. Associated jobber stores are typically lost or removed by the Company as a
result of store closures or inadequate financial performance. Associated jobbers
are also lost because they change distributors, become independent or are
purchased by one of the Company's competitors. Per store average annual
purchases made by the associated jobber stores that have been added to the Big-A
program since January 1993, excluding PI jobber stores, have been higher than
those of the stores that were lost during the same period. Since the bankruptcy
filing, the Company has experienced a higher level of jobber loss compared to
Fiscal Year 1998 losses, while the addition of new jobbers has slowed. The
Company may lose further jobber business as a result of the Chapter 11
Proceedings, which losses could materially impact the Company's revenues.

      As part of the Big-A program, the Company has assisted a number of its
associated jobbers in establishing Installers' Express outlets. An Installers'
Express outlet utilizes a modified two-step distribution arrangement, in which
approximately one-half of the inventory sold to it by the Company (including
most high volume product lines) is shipped to it directly from manufacturers,
and the remainder is delivered by the Company's distribution centers. This
distribution format provides the high volume jobber with the cost benefits of
two-step distribution for its highest volume product lines, while also providing
the product selection and depth of three-step distribution. At January 31, 1998,
there were 121 Installers' Express outlets operated by associate jobbers.

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      The Company also has an on-line point-of-sale ordering system that enables
each distribution center to receive daily orders from most of the Company's
Big-A associated jobbers and Big-A Company-owned stores. At January 31, 1998,
over 87% of the Company's Big-A jobbers and Big-A Company-owned stores were
directly connected to their sponsoring distribution center by computer, thus
minimizing order processing time and improving the Company's ability to control
its inventory. The Company provides overnight delivery on almost all orders to
its associated jobbers. During Fiscal Year 1998, the average order fill rate was
approximately 92.5%.

      The Company also offers inventory management and accounting services to
each associated jobber as part of the Big-A program. The Company's Autopoint
software package and other Company-developed software packages provide the Big-A
associated jobber with a variety of management reports. In addition, each such
associated jobber is assigned a Company territory sales manager. In conjunction
with the Company's classification/obsolescence program, which recommends what
parts the jobber should stock to best serve its market, territory sales managers
review the inventory position of each of the jobbers. In addition to providing
marketing advice and merchandising assistance, the territory sales managers
recommend to the jobber the parts and products it should return to the Company.
During Fiscal Year 1998, Big-A associated jobbers returned approximately 12% of
their annual purchases to the Company (in addition to returns of defective and
recyclable products and returns in connection with changeovers of jobber
inventory to the lines carried by the Big-A program). Most such returns were
either resold or returned to the Company's suppliers. While the returns policies
of the Company's suppliers vary, most permitted returns, prior to the Company's
Chapter 11 Proceedings. Currently, such returns are being held for resale. The
Company is currently negotiating with vendors to restore returns priviledges to
its pre-bankruptcy levels although the success of such negotiations cannot be
assumed.

      Over 200 manufacturers' representatives work exclusively with Big-A
jobbers and call on independent professional mechanics to promote Big-A brand
products and provide technical support. In addition, there are over 750
non-exclusive manufacturers' representatives promoting both Big-A or
manufacturers' national brand products through the Big-A network. This marketing
approach develops "pull-through" at the installer level and keeps the
independent mechanic abreast of changes in products, competitive circumstances
and business building opportunities. Subsequent to year end, two major
manufacturers began reviewing their programs and may reduce this service to
their customers in the future.

BIG-A COMPANY-OWNED STORES AND INSTALLERS' SERVICE WAREHOUSES

      As indicated above, the Company has pursued aggressive acquisition and ISW
expansion programs over the last four years, since its initial public offering
in 1993. Such programs and, particularly with regard to Fiscal Year 1997,
integrating PI into the Company's business consumed significant financial
and operating resources and demanded extensive managerial focus and attention.
During Fiscal Year 1998, the Company re-focused its efforts and resources from
such aggressive growth programs to improving both the execution of its business
strategy and its management information systems. In conjunction with such
efforts, the Company commenced implementation of a comprehensive restructuring
program focused on the goals of reducing costs, improving cash flow and
achieving profitability. Through January 31, 1998 this program has included the
consolidation of its ISW and Big-A Company-owned store operations under one
management group, other operational changes in the ISW business, the closure of
approximately 100 Big-A Company-owned stores and ISW units, implementation of
Company-wide cost control and cost reduction programs (including field and
corporate level staff reductions) and implementation of new management
information systems pursuant to a multi-year plan developed with outside
consultants. During the quarter ended July 25, 1997, the Company recognized a
charge of approximately $8.7 million for restructuring costs associated with
such program. Additionally, charges for inventory write-offs and incremental bad
debt expense of $1.3 million and $1.8 million,

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respectively, were recorded during such quarter to cost of goods sold and
selling, general and administrative expenses, respectively, in connection with
facility closures designated in such program.

      Historically, operating results for the ISW division have been below those
of the Company's traditional businesses and the ISW division has generally
experienced operating losses. During Fiscal Year 1998, the Company has shifted
its focus from aggressive growth of the ISW business to refining and improving
both the execution of this division's business strategy and its systems. To that
end, the Company has significantly reconfigured its ISW business as part of the
comprehensive restructuring program discussed above. During the quarter ended
October 25, 1997, the Company consolidated the operations, management and sales
forces of the ISW and Company-owned store divisions. The Company has also begun
to broaden the product offerings at the ISW units while at the same time the
Company is steadily reducing average inventory levels in ISW locations. The
Company has also largely completed its program to supply such units from the
Company's distribution centers as it has traditionally done for its Big-A
Company-owned stores. Such consolidation of the Company-owned store and ISW
operations and other operational changes in the ISW business are expected to
reduce both inventory and selling, general and administrative expenses.
Management's inventory reduction initiatives reduced the Company's inventory
approximately $41.9 million between the end of the first quarter and fourth
quarter of Fiscal Year 1998, primarily at the ISW business.

      The Company continually reviews the position of its Big-A Company-owned
stores in the respective markets in which they operate. This review process has
led and will continue to lead to the rationalization of stores whose performance
does not achieve targeted return on investment objectives. At January 31, 1998,
the number of Big-A Company-owned stores and ISWs is 273 and 214, respectively,
down from 300 and 270, respectively, at January 25, 1997.

THE COMPANY'S PRODUCTS

      The Company's current Big-A program inventory system contains over 160,000
SKUs, which are sourced from over 100 suppliers. It carries a diverse line of
high quality automotive replacement parts marketed by the Company under the
nationally recognized brand name Big-A. These parts include brakes, belts,
hoses, filters, temperature control parts, tune-up parts, shock absorbers,
batteries, exhaust systems and remanufactured alternators, water pumps, clutches
and starters. The Company also distributes various related products, including
tools, equipment, supplies and accessories. In addition, the Company carries a
more limited line of lower priced automotive replacement parts and related
products distributed under the brand name AutoPro (R). For Fiscal Year 1998,
approximately 64% of the Company's net sales were derived from the Big-A product
line and related Company private label brand names. The remainder of the
Company's net sales were derived from manufacturers' branded products.

SUPPLIERS

      Most major categories of automotive replacement parts have more than one
competitive supplier. However, the Company typically sources each of its Big-A
program product lines from one supplier. The Company's management believes that
the Company's status as a key customer has historically led suppliers to provide
flexible pricing and delivery terms and substantial marketing support, as well
as service, training and other inducements. Prior to the Chapter 11 Proceeding,
the Company's suppliers allowed the Company to defer payment for certain product
lines for several months or longer, typically in connection with an acquisition
and the related changeover of a group of auto parts stores to the Big-A program
product lines. For example, the Company negotiated significant deferred payment
terms and other changeover incentives from its suppliers in connection with the
PI Acquisition. From time to time, the Company was also extended deferred
payment terms in connection with 

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promotional programs or seasonal products, in which case the Company generally
then offered the same terms to its customers. However, as a result of the
Chapter 11 Proceedings, the Company's key vendors are requiring cash in advance
and are withholding purchasing support while other suppliers have shortened
payment terms from the levels offered pre-petition. While the Company will seek
to obtain more advantageous terms as the proceedings progress, there can be no
assurance that it will be sucessful in this regard. The Company has a central
purchasing department which deals directly with manufacturers, and also has a
computerized inventory control program for its distribution centers that tracks
sales and recommends adjustments to inventory levels as needed.

      During Fiscal Year 1998, Cooper Industries, Inc. (including its Wagner
Brake business unit), Standard Motor Products, Inc. ("Standard Motor") and
Federal-Mogul Corporation accounted for approximately 14%, 13% and 11%,
respectively, of all of the Company's product purchases. While no other single
supplier supplies more than 10% of the Company's products, approximately 69% of
the Company's products are provided by ten suppliers. Management believes that
alternative sources are available for each of the Company's Big-A program
product lines. The Company's suppliers are generally able to meet the Company's
demand for products.

JOBBER FINANCING

      APS's wholly owned subsidiary, Autoparts Finance Company, Inc. ("AFCO"),
provides loans to Big-A associated jobbers and assists jobbers in obtaining
appropriate financing from banks and other third party lenders subject to
limitations contained in its bank financing agreement.

      At January 31, 1998, AFCO's average principal loan balance was
approximately $165,000. All AFCO loans are collateralized by substantially all
of the assets of the borrower, including inventories, and generally by personal
guarantees from principals of the borrowers. At January 31, 1998, AFCO had 146
loans in its portfolio with an aggregate principal balance of $24.0 million. A
majority of these loans are amortizing and have a seven-year maturity with a
variable interest rate tied to a prime rate. During Fiscal Year 1998, total loan
losses attributable to AFCO after liquidation of collateral were equivalent to a
loan loss ratio of approximately 0.91%.

      At January 31, 1998, the largest loans in AFCO's loan portfolio were to
three of the Company's Big-A associate jobbers, who had, in the aggregate,
outstanding principal balances of $2.5 million, $0.8 million and $0.7 million,
respectively. The Company expects to continue to provide loans, subject to the
availability of funds and as permitted by covenant restrictions .

      Through a bank loan program sponsored by PI (the "PI Loan Program"), PI
historically provided its associated jobbers with assistance in obtaining
financing in order to fund the operation and expansion of such jobbers'
businesses. The Company had guaranteed the jobbers' obligations under the PI
Loan Program and had secured its guarantee with a letter of credit. At January
31, 1998, there were 8 loans outstanding under the PI Loan Program, having an
original aggregate principal amount of $2.8 million and an outstanding aggregate
principal amount of $0.3 million. However, subsequent to year end, on February
10, 1998 the letter of credit was exercised by First Tennessee Bank N.A and the
Company purchased the loans from First Tennessee Bank N.A. for $0.3 million.
Such loans are collateralized by substantially all of the assets of each
borrower, including inventories, and bear interest at a rate tied to a prime
rate. These loans are generally for a term of eleven months, although the terms
of these loans are often extended (at the Company's option) from year to year
and they generally amortize over a period of from 60 months to 84 months. The
Company does not intend to guarantee any additional jobber loans in the future
under the PI loan program.

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      The Company has also helped to finance a small number of Big-A associate
jobbers through equity investments. In such instances, the Company may have been
required to buy out the individual stockholder's equity interest under certain
circumstances. The Company's total exposure under these buy-out arrangements was
approximately $818,000 at January 31, 1998. The Company also enters into
arrangements with third party lenders to jobbers whereby APS agrees in most
cases to repurchase, under certain circumstances, inventory purchased by the
jobber from the Company at approximately the same price the Company would
purchase the items in such inventory from third party suppliers. Based on
previous history, occasions on which the Company has been called upon to
repurchase such inventory have been infrequent, and, on such occasions, the
Company has successfully resold the inventory that it repurchased. The Company
believes any future performance required under these repurchase agreements will
not have a material adverse affect on its financial condition.

COMPETITION

      The automotive parts replacement after market is highly fragmented and
competitive. The Company competes most directly with national and regional
warehouse distribution networks. Based on available statistics and other
published data covering the automotive aftermarket industry, the Company
believes that the largest warehouse distribution network is NAPA, the largest
member of which is Genuine Parts Company. The warehouse distribution market
contains numerous other participants, including program distribution groups such
as Carquest. These program distribution groups are collections of distribution
companies that have joined together to gain purchasing power and to benefit from
supplier concessions. The Company competes with these groups on the basis of
product availability, service and price. The Company believes that there are
several program distribution groups whose members have combined sales that are
comparable to, or greater than, those of the Company.

      The Company also faces competition from national and regional retail chain
stores and, to a lesser extent, from oil companies, automobile dealers,
independent jobbers and installers who sometimes skip the warehouse distribution
level and purchase directly from manufacturers. In particular, certain retail
chain stores such as AutoZone and Pep Boys have added programs that are
specifically designed to add the professional installer to their customer
profile. In these instances, the Company believes that such retail chain stores
have increased their share of both the retail and wholesale automotive parts
aftermarket, which has tended to occur at the expense of traditional jobbers
located in the markets in which they have competed. The Company believes that
such trends have resulted in pressures on warehouse distributors to sell
products to jobbers at lower prices in order to replace lost sales volume. The
Company has also focused on assisting its associated jobbers in meeting the
demands of an increasingly competitive market through improved pricing,
marketing and merchandising.

      One current industry trend arises from the increase in the number of
domestic and imported automotive vehicle models in the United States, which has
resulted in the proliferation in the number of automotive replacement parts
supplied by distributors. The Company believes that it is at a competitive
advantage to certain of its regional competitors which are not able to carry the
range of supplies of automotive replacement parts and related products stocked
by the Company. The Company also believes that industry trends toward
consolidation at the warehouse and at the jobber levels, and for independent
jobbers to become associated with program distributors, may provide the Company
with a competitive advantage over independent warehouse distributors. However,
some of the Company's competitors are larger and have access to greater
financial resources than the Company, are not as leveraged as the Company, and
do not have restrictions imposed on them as a result of filing Chapter 11.
Accordingly, these competitors may be able to take greater advantage of market
and industry trends.

                                       10
<PAGE>
TRADEMARKS

      The Big-A (including design)(R), Big-A Plus (including design)(R), ISW
(including design)(R), Installers' Express(R), Installers' Service Warehouse(R),
APS(R) and AutoPro(R) trade and service marks, which are registered in the
United States Patent and Trademark Office, and the Big-A Auto Parts trade name,
are considered material to the Company's business.

      In February 1996, the Company sold its interest in the Parts Plus group of
marks, which had been acquired by the Company in the PI Acquisition, to the
Association of Automobile Aftermarket Distributors ("AAAD") for cash
consideration of $3.5 million. PI had previously licensed the same marks to AAAD
for a small yearly license fee.

EMPLOYEES

      At January 31, 1998, the Company employed approximately 4,000 full-time
employees and approximately 1,400 part-time employees, of which approximately
160 are represented by unions. The Company believes its labor relations
generally to be good. The Company has made increasing use of part-time
employees, which has afforded it greater operating flexibility and reduced its
labor and benefit costs.

ITEM 2. PROPERTIES

      The Company's primary distribution system consists of 27 distribution
centers located in 26 states, each delivering parts daily to the jobbers and
Big-A Company-owned stores within its service area. In addition, certain of the
distribution centers have stores within the distribution facilities that sell
parts directly to customers. Each distribution center supports an average of 79
auto parts stores and carries between 49,000 and 83,000 SKUs. The locations and
sizes of the Company's distribution centers are indicated in the following
table.

            LOCATION                                 SQUARE FOOTAGE
         (d)Birmingham, Alabama.......................   53,250   
            Phoenix, Arizona..........................   42,500
            Fairfield, California.....................   59,500
            Riverside, California.....................   70,034
         (a)Denver, Colorado..........................  116,000
            Manchester, Connecticut...................   50,000
            Ocala, Florida............................  100,000
            Atlanta, Georgia..........................   53,000
            East Moline, Illinois.....................  105,600
            Indianapolis, Indiana.....................  104,688
         (a)Great Bend, Kansas........................   62,748
            Monroe, Louisiana.........................   76,000
            Peabody, Massachusetts....................   42,132
            Minneapolis, Minnesota....................   63,420
            Jackson, Mississippi......................  100,118
      (a)(b)St. Louis, Missouri.......................   52,480
            Omaha, Nebraska...........................   61,750
         (a)Albuquerque, New Mexico...................   40,000
            Latham, New York..........................   36,000
            Charlotte, North Carolina.................   76,310
         (d)Columbus, Ohio............................   53,000   
            Gallipolis, Ohio..........................  110,600

                                       11
<PAGE>
            Tulsa, Oklahoma...........................   87,453
            Malvern, Pennsylvania.....................   52,400
            Memphis, Tennessee........................  131,000
            Carrolton, Texas..........................   88,500
         (a)Salt Lake City, Utah......................   40,000
         (a)Winchester, Virginia......................   52,500
         (c)Seattle, Washington.......................   39,168

 (a)These locations are owned by the Company or are held pursuant to leases
    that were entered into in connection with industrial development bond
    financings that grant the Company an option to acquire the property at a
    nominal price when the bonds are paid. The remaining locations are occupied
    pursuant to leases having remaining terms that, at January 31, 1998, varied
    from two months to ten years, three months. At January 31, 1998, the annual
    rentals payable under such leases totaled approximately $4,134,837, with no
    facility having an annual rental in excess of $325,950. The Company expects
    that it will be able either to renew such leases as they expire, to lease
    alternative premises or to consolidate operations, as appropriate. All of
    these leases are operating leases, other than those covering the Phoenix and
    Charlotte distribution centers.

(b)Subsequent to year end, the Company consolidated the customers of the St.
   Louis distribution center into the East Moline, Indianapolis and Memphis
   operations. The St. Louis facility will operate in the future as a
   re-distribution center serving the distribution center network.

(c)Subsequent to year end, the Company made the decision to close the Seattle
   distribution center and the Big-A Company owned store units supplied by the
   Seattle warehouse.

(d)These locations operate as re-distribution centers, serving the distribution
   center network.

          Each distribution center is linked to a computer at the Company's data
processing center in Houston, Texas. As of January 31, 1998, the Company also
leases approximately 280 store facilities, including 17 closed stores, in 26
states with square footage ranging from approximately 2,400 to 39,105 square
feet per store. In addition, the Company leases approximately 253 ISW
facilities, including 39 closed ISWs, in 30 states with square footage ranging
from approximately 2,275 to 12,236 square feet per ISW. Subsequent to the
Chapter 11 Proceedings, the Company has begun to utilize its options offered
under Chapter 11 to reject leases where appropriate, including the closed
locations. The Company's corporate headquarters' offices are located in a
facility in Houston, Texas, in which the Company currently has approximately
56,250 square feet under the lease agreements. As of January 31, 1998, the
Company also operates 2 redistribution centers to assist in the process of
reducing inventory. Management believes that the stores, ISW facilities ,
distribution centers and corporate headquarters are currently adequate for the
intended purposes and provide sufficient capacity.

ITEM 3.  LEGAL PROCEEDINGS

      On February 2, 1998 (the "Filing Date"), APS Holding Corporation, its
subsidiary A.P.S., and each of the principal subsidiaries of A.P.S. filed
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the District of Delaware. Each of
such corporations is presently operating its business as a debtor in possession.
See Item 1 - Business and Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations. Upon the commencement of the
Chapter 11 Proceedings, an automatic stay went into effect which enjoins most
forms of civil litigation (including those by private parties) which either were
pending on the Filing Date or which have yet to be commenced but relate to
liabilities incurred prior to the Filing Date.

      The Company is involved in various claims and disputes arising in the
normal course of business, including in the matter of BARRY S. LAMM AND LAMM
AUTO STORES, INC. V. PARTS, INC., PARTS PLUS, ET AL, which was filed in The

                                       12
<PAGE>
Circuit Court of Mobile County, Alabama on June 21, 1996. The plaintiff in such
case seeks both compensatory and punitive damages in making a number of claims,
including both willful and reckless misrepresentation, suppression of material
fact and promissory fraud (all in violation of the Code of Alabama), and
conspiracy, breach of contract and intentional interference with contractual or
business relationships, all in connection with the operation of an automotive
parts business by the plaintiff while a customer of Parts, Inc. The Company
entered into an agreement with the plaintiff's counsel to settle this action for
a payment of $2.35 million. As a result of the Company's bankruptcy proceeding,
no payment was paid and this action, as to the Company, is now stayed. The
Company believes that the costs of defending such action, as well as the
settlement, are the subject of a contractual indemnification by GKN Parts. The
Company has made a claim for indemnity to GKN Parts, which has been denied.

      APS and its subsidiaries are subject to regulation at the U.S. federal,
state and local levels and are required to obtain permits from governmental
agencies in order to conduct certain of their operations. Compliance by the
Company with the federal, state and local environmental protection laws has had
no material adverse effect upon the Company, and the Company believes that its
operations are in material compliance with all applicable permits and
environmental regulations. The Company cannot presently determine the full
consequences to it of compliance in the future with the environmental
regulations and standards that have been, and may, be issued. However, based on
current laws and regulations and the interpretation thereof, the Company has no
reason to believe that the costs of future environmental compliance would be
likely to materially adversely affect its business, results of operations, cash
flows or financial position.

      The Company has been notified that it is considered a potentially
responsible party in connection with federal or state environmental clean-up
investigations at a landfill location, which is a "Superfund" site identified on
the National Priorities List of the Environmental Protection Agency in
connection with the Comprehensive Environmental Response, Compensation and
Liability Act of 1980. The Company has not incurred, and does not expect to
incur, any material liability, either individually or in the aggregate, in
connection with this site, although no assurance can be given in this regard.

      In addition, the Company is aware of investigations of two other
locations, including one site previously operated by a former APS subsidiary. In
part because these investigations are in the preliminary stages, the Company
cannot currently estimate what liabilities, if any, it may have with respect to
these matters. The Company believes that, pursuant to an agreement with Wickes
(which is now an indirect wholly owned subsidiary of Collins & Aikman
Corporation), Wickes will be required to indemnify the Company against any
liabilities associated with such former APS subsidiary's operations. Since the
divestiture from Wickes, the Company has not incurred any material liabilities
in connection with any matter for which Wickes has indemnified the Company, nor
has the Company experienced any difficulties in obtaining appropriate
indemnification for such matters as they have arisen. The Company believes,
however, that Wickes may be a highly leveraged entity, and there can be no
assurance that the Company will not experience any such difficulties in the
future.

                                       13
<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          None.

EXECUTIVE OFFICERS OF THE REGISTRANT

          Set forth below are the names, ages and present positions of the
executive officers of APS Holding as of April 25 , 1998.

NAME                                          AGE  POSITION

Bettina M. Whyte..........................    49   President & Chief Executive 
                                                   Officer
David C. Barbeau..........................    50   Senior Vice President
John L. Hendrix...........................    49   Senior Vice President & Chief
                                                   Financial Officer
E. Eugene Lauver..........................    51   Senior Vice President & 
                                                   Secretary
Charles M. Popik..........................    48   Senior Vice President
Michael L. Preston........................    53   Senior Vice President

      BETTINA M. WHYTE was elected President and Chief Executive Officer of the
Company on February 4, 1998. She is a principle with Jay Alix & Associates, a
leading professional services firm in the area of corporate turnarounds and
restructuring. Ms. Whyte was with Price Waterhouse LLP from 1990 to 1997 and was
National Director of Business Turnaround Services when she left them to join Jay
Alix & Associates in April 1997. She has spent more than fifteen years leading
turnarounds of under-performing and financially troubled companies.

      DAVID C. BARBEAU has been Senior Vice President of Distribution Operations
since January 1993. He had been Vice President, Treasurer and Chief Financial
Officer prior to 1993.

      JOHN L. HENDRIX has been Senior Vice President - Finance and Chief
Financial Officer since March 1997. He joined the Company in October 1996 as
Vice President - Finance and Chief Financial Officer. From prior to 1993 until
joining the Company he held various positions, most recently Senior Vice
President, Chief Financial Officer, Treasurer, and Secretary, with Kay-Bee Toy
Stores, a national retail organization.

      E. EUGENE LAUVER has been Senior Vice President, Secretary and General
Counsel of APS Holding since September 1997. He held the position of Vice
President, Secretary and General Counsel since prior to 1993.

      CHARLES M. POPIK has been Senior Vice President - Purchasing since April
1998. He previously served as Vice President - Purchasing since March 1995. From
prior to 1993 until joining the Company he held various purchasing positions,
most recently Vice President of Purchasing, with Parts Depot Company, L.P., a
distributor of automotive parts.

      MICHAEL L. PRESTON has been Senior Vice President - Sales/Product
Management since April 1998. He previously served as Senior Vice President of
Sales & Business Development since January 1993. He had been Vice President of
New Market Development since prior to 1993.

                                       14
<PAGE>
                                   PART II

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

      APS Holding's Class A Common Stock, which began trading in the
over-the-counter market on September 24, 1993, was quoted in the NASDAQ National
Market System under the symbol "APSI" until APRIL 1, 1998, as of which date such
stock was delisted from the NASDAQ National Market System due to not meeting
NASDAQ'S requirements for net tangible assets. Currently, the Company's stock
trades on the OTC bulletin board system. At January, 31, 1998, there were
approximately 710 holders of record of APS Holding's Class A Common Stock. At
January 31, 1998, no shares of APS Holding's Class B Common Stock had been
issued.

      The following table sets forth the high and low sales prices for the
quarters indicated as reported on the NASDAQ National Market System:

FISCAL YEAR 1998:                               HIGH        LOW

First Quarter.............................     10 1/2      6 7/8
Second Quarter............................     10 5/8      7 1/8
Third Quarter.............................      9 3/8      6 7/8
Fourth Quarter............................      7 5/8        7/8

FISCAL YEAR 1997:

First Quarter.............................     18 3/4      14 3/4
Second Quarter............................     23 3/4      18
Third Quarter.............................     29 1/4      20
Fourth Quarter............................     23 1/4      8 1/2

      No dividends have been paid by APS Holding on any class of its common
stock. As a result of the Chapter 11 Proceedings, the Company will not pay cash
dividends in the foreseeable future. The Company's bank credit agreement and
subordinated note indenture contain covenants which indirectly restrict the
declaration and payment of dividends on APS Holding's common stock.


ITEM  6.   SELECTED FINANCIAL DATA

      The following table sets forth certain selected historical financial data
of the Company on a consolidated basis. The selected consolidated financial data
was derived from the consolidated financial statements of the Company. The
selected consolidated financial data should be read in conjunction with the
consolidated financial statements of the Company appearing elsewhere in this
Form 10-K. Certain reclassifications have been made to the prior years'
financial statements to conform to the current year presentation. The
reclassifications did not affect net income (loss), stockholders' equity or cash
flows for any period.

                                       15
<PAGE>
                  SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
                                       YEAR ENDED  YEAR ENDED    YEAR ENDED    YEAR ENDED  YEAR ENDED
                                        JAN. 31,     JAN. 25,     JAN. 27,     JAN. 28,     JAN. 29,
                                         1998         1997         1996         1995         1994
                                       ---------    ---------    ---------    ---------    ---------
                                                    (in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
<S>                                    <C>          <C>          <C>          <C>          <C>      
Net Sales ..........................   $ 812,942    $ 858,739    $ 603,737    $ 523,508    $ 438,298
Cost of goods sold .................     553,596      583,146      397,164      344,845      297,150
                                       ---------    ---------    ---------    ---------    ---------
Gross profit .......................     259,346      275,593      206,573      178,663      141,148
Selling,  general and administrative
expenses ...........................     276,943      271,754      171,210      145,722      119,304

Asset  impairment and  restructuring
charge .............................      28,969         --         11,224         --           --
                                       ---------    ---------    ---------    ---------    ---------
Operating income (loss) ............     (46,566)       3,839       24,139       32,941       21,844
Interest income ....................       5,300        5,609        5,265        3,896        3,023

Other income .......................         200        1,765        1,535        1,535        1,277
                                       ---------    ---------    ---------    ---------    ---------
Income (loss) before writedown on
 available-for-sale securities,
 interest expense, income taxes,
 extraordinary item and cumulative
 effect of accounting change .......     (41,066)      11,213       30,939       38,372       26,144
Writedown on available-for-sale
 securities ........................       1,916         --           --           --           --
Interest expense ...................      32,590       27,296       16,256       10,500       22,039
                                       ---------    ---------    ---------    ---------    ---------
Income (loss) before income taxes,
 extraordinary item and cumulative
 effect of accounting change .......     (75,572)     (16,083)      14,683       27,872        4,105
Provision (benefit) for income taxes      19,721       (5,247)       5,447       (4,495)      (1,550)
                                       ---------    ---------    ---------    ---------    ---------
Income (loss)  before  extraordinary
 item and cumulative effect of
 accounting change .................     (95,293)     (10,836)       9,236       32,367        5,655
Extraordinary item .................        --           --         (2,468)        --        (14,404)
Cumulative effect of accounting
 change ............................        --           --           --           --         (2,330)
                                       ---------    ---------    ---------    ---------    ---------
Net income (loss) ..................   $ (95,293)   $ (10,836)   $   6,768    $  32,367    $ (11,079)
                                       =========    =========    =========    =========    =========
BASIC:
Income (loss) before extraordinary
 item and accounting change ........   $   (6.91)   $   (0.79)   $    0.67    $    2.39    $    0.65
Extraordinary item .................        --           --          (0.18)        --          (1.65)
Accounting Change ..................        --           --           --           --          (0.27)
                                       ---------    ---------    ---------    ---------    ---------
Net Income (loss) ..................   $   (6.91)   $   (0.79)   $    0.49    $    2.39    $   (1.27)
                                       =========    =========    =========    =========    =========
DILUTED:
Income (loss) before extraordinary 
 item and accounting change ........   $   (6.91)   $ (0.79)     $    0.66    $    2.36    $    0.65
Extraordinary item .................        --           --          (0.18)        --          (1.65)
Accounting change ..................        --           --           --           --          (0.27)
                                       ---------    ---------    ---------    ---------    ---------
Net Income (loss) ..................   $   (6.91)   $   (0.79)   $    0.48    $    2.36    $   (1.27)
                                       =========    =========    =========    =========    =========
Basic weighted average shares
 outstanding .......................      13,782       13,741       13,725       13,524        8,715

Dilutive impact of stock options ...        --           --            176          197         --
                                       ---------    ---------    ---------    ---------    ---------
Dilutive weighted average shares
 outstanding .......................      13,782       13,741       13,901       13,721        8,715
                                       =========    =========    =========    =========    =========
Balance Sheet Data:
Working capital (deficit) ..........   $ (86,991)   $ 293,623    $ 302,684    $ 176,176    $ 102,984
Total assets .......................     486,911      598,205      600,159      387,062      251,224
Long-term debt .....................       1,207      305,941      302,512      158,965      117,132
Total stockholders' equity .........      18,614      114,569      124,030      117,218       76,761
</TABLE>
                                       16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

      Since its initial public offering in 1993, the Company pursued aggressive
acquisition and ISW expansion programs in order to obtain increased market
share. These programs consumed significant financial resources and resulted in
the Company becoming highly leveraged. The Company had attempted to address
these problems, particularly early during fiscal 1998, by closing
unprofitable locations, reducing headcount and reducing inventory.
Notwithstanding these initiatives, however, these problems, in conjunction with
competitive pressures in the industry, shrinking cash flow, and large debt
payments, led the Company to file a voluntary petition under Chapter 11 of the
United States Bankruptcy Code in the United States District Court for the
District of Delaware on February 2, 1998. The Company is presently operating its
business as a debtor in possession in such proceedings (the "Chapter 11
Proceedings").

RESULTS OF OPERATIONS

      The following table sets forth certain data (in thousands) from the
Consolidated Statements of Operations of the Company for the fiscal years ended
January 31, 1998 ("Fiscal Year 1998"), January 25, 1997 ("Fiscal Year 1997") and
January 27, 1996 ("Fiscal Year 1996").
<TABLE>
<CAPTION>
                            FISCAL                FISCAL                FISCAL 
                           YEAR 1998      %      YEAR 1997       %     YEAR 1996    %
                           ---------    -----    ---------    -----    --------   -----
<S>                        <C>          <C>      <C>          <C>      <C>        <C>  
Net sales ..............   $ 812,942    100.0    $ 858,739    100.0    $603,737   100.0
Cost of goods sold .....     553,596     68.1      583,146     67.9     397,164    65.8
Gross margin ...........     259,346     31.9      275,593     32.1     206,573    34.2
Selling, general and
 administrative expenses     276,943     34.1      271,754     31.6     171,210    28.3
Asset impairment and
 restructuring charge ..      28,969      3.6         --       --        11,224     1.9
Operating income (loss)      (46,566)    (5.7)       3,839      0.4      24,139     4.0
Net income (loss) ......     (95,293)   (11.7)     (10,836)    (1.3)      6,768     1.1
</TABLE>
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997

      Net sales for Fiscal Year 1998 decreased $45.8 million (5.3%) from the
prior fiscal year. Such decreases were primarily due to facility closures and a
decline in same store sales in the traditional company owned store division due
to a continuing general softness in demand for the Company's products and
increasing competitive pressures. Additionally, the decrease in sales was
attributable in part to the loss of sales to stores owned by independent
automotive parts store operators ("jobbers") that were formerly associated with
Parts, Inc. ("PI") in connection with the integration into the Company's
operations of PI, which was acquired by the Company on January 25, 1996 (the "PI
Acquisition").

      Cost of goods sold consists primarily of the purchase cost of products
sold. Cost of goods sold for Fiscal Year 1998 decreased $29.6 million (5.1%)
from the prior fiscal year. The dollar decreases in cost of goods sold
principally resulted from the decrease in sales discussed above. In addition,
during the fourth quarter of Fiscal Year 1997, the Company recorded a charge of
approximately $11.8 million for an inventory loss adjustment for the ISW
business. Cost of goods sold for Fiscal Year 1998 includes a charge in the
amount of approximately $1.3 million which was recorded during the quarter ended
July 25, 1997 for inventory write-offs expected in connection with facility
closures. The Company intends to continue adding jobbers to sales programs
offering reduced selling prices and fewer services and, consequently, gross
profit margins in its traditional businesses could continue to decrease in
future periods, although the Company's ability to add and keep current jobbers
may be limited due to the Chapter 11 Proceedings.

                                       17
<PAGE>
      Selling, general and administrative expenses, which include depreciation
and amortization, for Fiscal Year 1998 increased by $5.2 million (1.9%) compared
to Fiscal Year 1997. The dollar increases in selling, general and administrative
expenses primarily resulted from the absence in the current fiscal period of
one-time supplier changeover incentives recognized in Fiscal Year 1997 which
were received in connection with the PI Acquisition to offset the impact of
one-time expenses related to the integration of PI into the Company and the
changeover of PI stores and distribution centers to the Company's product lines.
In addition to offsetting direct integration and changeover costs, such
incentives were used to offset indirect costs, operational inefficiencies and
general business disruption relating to the changeover and integration process.
In addition, selling, general and administrative expenses for Fiscal Year 1998
includes a $1.8 million charge recorded during the quarter ended July 25, 1997
for incremental bad debt in connection with certain future facility closures,
increased professional fees, increased accounting costs related to ISWs, offset
by a decrease in selling general and administrative expenses related to facility
closures. Selling, general and administrative expenses as a percentage of sales
also increased over the prior year due to continuing performance and execution
issues in the ISW business, the increase in bad debt expense, and increased
professional fees, in addition to the absence of the one-time supplier
change-over incentives discussed above.

       During the quarter ended July 25, 1997, the Company commenced
implementation of a restructuring program focused on the goals of reducing
costs, improving cash flow and achieving profitability. Such programs through
Fiscal Year 1998, included the consolidation of redundant administrative
functions and closure of certain under-performing facilities, including 50 ISW
units and 15 Big-A Company-owned stores. In accordance with this program, the
Company closed 50 ISW units and 11 Big-A Company-owned stores during Fiscal Year
1998. As a result of such program, during the three months ended July 25, 1997,
the Company recorded a restructuring charge of approximately $8.7 million. Such
charge consisted of approximately $2.2 million for estimated costs to close
facilities, approximately $1.4 million of employee severance benefits related to
personnel reductions of approximately 570 employees, approximately $3.2 million
for future lease and related obligations and approximately $1.9 million of asset
impairments. During the year ended January 31, 1998, the Company charged
approximately $4.1 million against these reserves, including approximately $1.1
million for employee severance benefits.

      In the fourth quarter of Fiscal Year 1998, the Company recorded non-cash
charges of $15.8 million and $4.5 million for writedowns of intangible assets
and property and equipment. The intangible assets writedown consisted of
approximately $14.5 million related to excess of purchase price over fair value
of net assets acquired and $1.3 million related to the associate jobber network.
The intangible assets and property and equipment writedowns were based on
estimated future cash flows, which were impacted by management's review of
certain Company-owned stores, ISW's and distribution centers that potentially
could be closed

      Operating loss for Fiscal Year 1998 was $46.6 million (5.7% of net sales)
compared to $3.8 million (.4% of sales) operating income in the prior year. The
decrease is primarily due to the factors discussed above.

      During the fourth quarter of Fiscal Year 1998, the Company realized a $1.9
million loss on the write down of its available-for-sale investment in one of
its jobbers. The investment had an other than temporary decline in the fair
value of its publicly traded stock below the Company's purchase price of $2.5
million.

      Interest expense for Fiscal Year 1998 was $32.6 million (4.0% of net
sales) compared to $27.3 million (3.2% of net sales) for the prior year. The
increase in interest expense was principally due to the Company's higher average
borrowings under the previous revolving credit facility and increased interest
rates. The increase in interest rates resulted in part from an increase in the
margins applicable to various types of loans under the Company's senior bank
credit agreement due to the decline of certain of the Company's financial ratios
and, to a lesser extent, from an

                                       18
<PAGE>
increase in the prime rate charged by the Company's bank lenders. The extent of
future increases in interest expense will depend on a number of factors,
including the magnitude of changes in borrowing levels, changes in interest
rates and the terms of any financing agreements to which the Company is a party.
See "Liquidity and Capital Resources-Debtor in Possession Financing and Previous
Bank Credit Agreement", below.

      Income taxes were an expense of $19.7 million compared to an income tax
benefit of $5.2 million for the prior year. During the fourth quarter of Fiscal
Year 1998, the Company established a valuation allowance to writedown deferred
tax assets recorded at January 31, 1998 to zero, due to the level of uncertainty
surrounding the Company's ability to generate sufficient future taxable income.

      Net loss for Fiscal Year 1998 was $95.3 million compared to net loss of
$10.8 million for the prior year. The decrease in net income was primarily a
result of the factors discussed above.

FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996

      Net sales for Fiscal Year 1997 increased $255.0 million or 42.2% from the
prior fiscal year. Such increase was primarily attributable to the PI
Acquisition and, to a lesser extent, to increased sales generated by new ISW
locations and increasing sales at existing ISWs. The Company believes that sales
from its traditional businesses (i.e. distribution centers and Big-A
Company-owned stores) were lower than expected due to increasing competitive
pressures, business disruption resulting from the PI Acquisition and a general
sluggishness being experienced nationwide in the automotive aftermarket.

      Cost of goods sold consists primarily of the purchase cost of products
sold. Cost of goods sold for Fiscal Year 1997 increased $186.0 million or 46.8%
from the prior fiscal year. The dollar increase in cost of goods sold
principally resulted from increased sales volume generated by the PI Acquisition
and the growth of the ISW business. Cost of goods sold as a percentage of net
sales for Fiscal Year 1997 increased compared to Fiscal Year 1996 principally as
a result of pretax charges to cost of goods sold, in the amount of approximately
$17.1 million, recorded in the fourth quarter of Fiscal Year 1997. Such charges
principally consisted of an inventory loss adjustment for the ISW business in
the amount of approximately $11.8 million (some of which may be attributable to
earlier quarters of the fiscal year). The remaining $5.3 million in charges to
cost of goods sold consisted primarily of inventory loss adjustments for the
Company's traditional businesses, the write-off of certain receivables from
suppliers for returned goods, and adjustments to inventory pricing reserves.
Excluding the approximately $17.1 million of charges discussed above, cost of
goods sold as a percentage of sales would have remained relatively constant
between the two fiscal years. Lower gross profit margins at the Company's
traditional businesses (primarily resulting from additional sales programs
offering reduced selling prices and fewer services) were offset to some extent
by the impact of the sales mix containing more ISW sales, which have higher
gross profit margins than the Company's traditional businesses.

      Selling, general and administrative expenses, which include depreciation
and amortization, for Fiscal Year 1997 increased $100.5 million or 58.7%
compared to Fiscal Year 1996. The dollar increase in selling, general and
administrative expenses principally resulted from the increased sales volume
generated by the PI Acquisition and the growth of the ISW business. Selling,
general and administrative expenses as a percentage of net sales increased over
the prior year, principally as a result of pretax charges in the amount of $13.0
million, higher distribution center operating costs of the PI business when
compared to those of the Company's other traditional business operations, costs
incurred in integrating PI into the Company, and, to a lesser extent, the
operation of more ISWs (which have, and are expected to continue to have, higher
operating costs as a percentage of net sales than the Company's traditional
businesses). The pretax charges consisted primarily of a reserve for costs
related to facility closures and consolidations, an increase in the bad debt
provision (primarily for the ISW business), and accrued 

                                       19
<PAGE>
costs of returning excess and slow moving ISW inventories. The impact of
increased selling, general and administrative expenses relating to the
integration of the PI business was offset by the recognition of one-time
supplier changeover and acquisition incentives in the amount of approximately
$12.1 million. Such incentives were provided by the Company's major vendors in
connection with the PI Acquisition to offset the impact of one-time expenses
related to the integration of PI into the Company and the changeover of PI
stores and distribution centers to the Company's product lines. In addition to
offsetting direct integration and changeover costs, approximately $4.9 million
of such incentives were used to offset indirect costs, operational
inefficiencies and general business disruption relating to the changeover and
integration process. Furthermore, such incentives improved the Company's
liquidity during the integration and changeover process.

      Operating income for Fiscal Year 1997 decreased $20.3 million or 84.1%, to
$3.8 million in Fiscal Year 1997 from $24.1 million in Fiscal Year 1996. The
primary causes of the decrease were the fourth quarter Fiscal Year 1997 pretax
charges and costs incurred in Fiscal Year 1997 in connection with integrating PI
into the Company in each case as discussed above. Such charges and costs were
offset in part by the PI Acquisition-related supplier changeover incentives
discussed above and the absence in Fiscal Year 1997 of the $11.2 million asset
impairment and restructuring charge, incurred in the prior fiscal year. In
addition, during Fiscal Year 1997, the Company refined the estimated rate used
to capitalize overhead costs incurred by the Company's distribution centers in
preparing and shipping inventory to Big-A Company-owned stores. Such change in
the Company's estimate resulted in an increase in operating income for Fiscal
Year 1997 of approximately $1.7 million.

      Interest income for Fiscal Year 1997 was $5.6 million (0.7% of sales)
compared to $5.3 million (0.9% of sales) for Fiscal Year 1996. The dollar
increase in interest income is due principally to the interest income from past
due accounts receivable, partially offset by decreases in interest income
resulting from lower notes receivable balances.

      Other income for Fiscal Year 1997 was $1.8 million (0.2% of sales)
compared to $1.5 million (0.3% of net sales) for Fiscal Year 1996. Other income
for Fiscal Year 1997 included a gain of approximately $1.3 million from the
sales of certain stores in Mississippi and Florida. In addition, both years
include the portion allocable to such years ($0.4 million in Fiscal Year 1997
and $1.5 million in Fiscal Year 1996) of the $6.0 million payment received from
a supplier for entering into a ten year supply agreement in April 1993 (the
"Supply Agreement"). Such payment was deferred and is being recognized as income
on an accelerated basis over the term of the Supply Agreement; thus, when
compared to previous periods, the amount of revenue recognized from such payment
has declined.

      Interest expense for Fiscal Year 1997 was $27.3 million (3.2% of net
sales) compared to $16.3 million (2.7% of net sales) for Fiscal Year 1996. The
$11.0 million increase in interest expense is principally due to the Company's
higher borrowing levels resulting from the Company's investment in acquisitions
(primarily the PI Acquisition) and the expansion of its ISW business.

      Income taxes for Fiscal Year 1997 was a benefit of $5.2 million, compared
to tax expense of $5.4 million for Fiscal Year 1996.

      Net loss for Fiscal Year 1997 was $10.8 million compared to net income of
$6.8 million for Fiscal Year 1996. The decrease in net income was primarily a
result of the $30.1 million of pretax charges discussed above, offset by the
absence in Fiscal Year 1997 of the $11.2 million asset impairment and
restructuring charge, incurred in the prior fiscal year.

                                       20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

      CHAPTER 11 PROCEEDINGS. The matters described under this caption
"Liquidity and Capital Resources", to the extent that they relate to future
events or expectations, may be significantly affected by the Chapter 11
Proceedings. Those proceedings will involve, or result in, various restrictions
on the Company's activities, limitations on financing, the need to obtain
Bankruptcy Court approval for various matters and uncertainty as to
relationships with vendors, suppliers, customers and others with whom the
Company may conduct or seek to conduct business. In particular, many vendors are
providing less favorable terms than those existing prior to the Chapter 11
Proceedings and the Company's key vendors, representing a majority of the
Company's annual purchases are requiring cash payments. These less favorable
terms include shortening and in some cases, elimination of payment terms and
reduction in various other purchasing conditions and support. While the Company
will seek to obtain more advantageous terms as the proceedings progress, there
can be no assurance that it will be successful in this regard.

      CASH FLOWS. For Fiscal Year 1998, operating activities provided net cash
of approximately $2.1 million, due primarily to decreases in inventory resulting
largely from facility closures and working capital initiatives. Such decreases
in inventory were offset by decreases in accounts payable resulting from
facility closures, working capital initiatives, and from payments to the
Company's suppliers pursuant to the expiration of deferred payment terms
obtained in connection with the PI Acquisition. The decrease in accounts payable
during Fiscal Year 1998 was offset in part by the additional deferral of
approximately $10.1 million of accounts payable pursuant to deferred payment
terms obtained from certain of the Company's vendors. These deferred payments
are part of the prepetition claims and actual amounts to be paid and the timing
of such payments will be determined through Bankruptcy Court proceedings.
Investing activities utilized approximately $12.7 million of cash, principally
consisting of capital expenditures and business acquisitions. Financing
activities provided $1.8 million of cash primarily resulting from additional
revolving credit borrowings under the Company's bank credit agreement offset in
part by repayment of long-term debt.

      For Fiscal Year 1997, operating activities provided net cash of
approximately $14.3 million, due primarily to decreases in accounts receivable
and inventory principally resulting from the closure and consolidation of
certain of the Company's and PI's facilities. Investing activities utilized
$12.5 million of cash, principally consisting of capital expenditures,
investments in customer notes receivable and business acquisitions. Such
investments were offset in part by the proceeds from repayment of customer notes
receivable and the sale of assets, including the Company's interest in the
"Parts Plus" group of marks which had been acquired by the Company in the PI
Acquisition. See "Other Matters", below. Financing activities provided $3.6
million of cash, principally resulting from additional revolving credit
borrowings under the Company's bank credit agreement offset in part by repayment
of long-term debt.

      For Fiscal Year 1996, operating activities utilized net cash of
approximately $41.9 million, resulting primarily from increases in inventories
and accounts receivable in connection with the expansion of the Company's ISW
business. Investing activities utilized $97.7 million of cash, principally
consisting of the Company's investment in business acquisitions, including the
PI Acquisition. Financing activities provided $147.5 million of cash,
principally resulting from the issuance of the Company's 11.875% senior
subordinated notes due 2006 (the "Notes") to finance the PI Acquisition and a
net increase in borrowings under the Company's bank credit agreements to finance
its ISW expansion and business acquisitions other than the PI Acquisition.

      WORKING CAPITAL. At January 31, 1998, the Company had $87.0 million of
working capital deficit, $4.6 million in cash and cash equivalents, compared to
$293.6 million of working capital at January 25, 1997, including $13.4 million
of cash and cash equivalents. During Fiscal Year 1998, working capital decreased
$380.6 million primarily due to the reclassification of the Company's
outstanding debt under its bank credit agreement and Senior Subordinated Notes
from long-term to current liabilities as of year end. During Fiscal Year 1998,
the Company's 

                                       21
<PAGE>
management pursued a number of working capital management initiatives focused on
seeking substantial inventory reductions and improved liquidity. Such
initiatives included (a) the return of substantial amounts of excess and slow
moving inventory to the Company's suppliers, (b) the redistribution of excess
and slow moving inventory from the ISW division to the Company's distribution
centers and Big-A Company-owned stores, and (c) the sourcing of substantial
amounts of ISW inventory from the Company's distribution centers rather than
from third party suppliers. Such initiatives resulted in inventory reductions of
approximately $41.9 million between the end of the first and fourth quarter of
Fiscal Year 1998, primarily at the ISW division.

        DEBTOR IN POSSESSION FINANCING AND PREVIOUS BANK CREDIT AGREEMENT. On
February 2, 1998, the Bankruptcy Court gave approval on an interim basis for $45
million of a $100 million DIP financing facility ("DIP Financing") with a
syndicate of bank lenders led by The Chase Manhattan Bank ("Senior Lenders"). On
February 26, 1998, the Bankruptcy Court gave final approval to the facility. The
amount of new loans that may be outstanding at any time may not exceed a maximum
that varies from month to month, ranging from $40 million to $65 million
(exclusive of letters of credit).

       The DIP financing approved by the Bankruptcy Court is provided for in a
new Revolving Credit, Term Loan and Guarantee Agreement ("DIP Financing
Facility"). The DIP Financing Facility includes the new DIP financing referred
to above ("Tranche A") and approximately $228 million of borrowings that were
outstanding under the previous revolving credit facility and term loan
facilities ("Previous Bank Credit Agreement") which were refinanced in the
amount of $228 million ("Tranche B") and combined with the new DIP Financing
Facility into a single post-filing date facility. The $228 million is classified
as a current liability at year end. The Tranche A loans are available on a
revolving loan basis, and the Tranche A facility includes a $20 million
sub-facility for letters of credit, subject to certain restrictions. The DIP
Financing Facility has a superpriority administrative claim as well as first
priority security interest in and lien upon all of the Company's assets. The
Tranche A and B borrowings bear interest at the Company's option of either the
bank agent's stated base rate plus a margin of 1.5% or at LIBOR plus a margin of
2.5% for Tranche A borrowings or 2.75% for Tranche B borrowings. The DIP
Financing Facility has a final maturity date of January 31, 1999 and includes
various covenants and restrictions on the Company and its business. While the
Company has been in compliance with its covenants through March 1998, it is
likely that continuation of unfavorable operating conditions may require the
Company to seek modification of its current bank covenants during the second or
third quarter of the current fiscal year. If the bank should not agree to any
such modifications, the Company would be in default under the DIP Financing
Facility. If such modifications were not made or if any such default were not
waived, the Company might have to pursue a sale or orderly liquidation of its
business.

       Under the Previous Bank Credit Agreement, as of December 8, 1997, the
Company obtained a waiver of its Consolidated Leverage Ratio, Fixed Charge
Coverage Ratio and Minimum Net Worth covenant requirements (the "Financial
Covenants"). Pursuant to such waiver, aggregate borrowings under the Previous
Bank Credit Agreement were limited to $204.7 million until February 10, 1998.
Effective as of December 8, 1997, lenders under the Previous Bank Credit
Agreement agreed, during the period from December 31, 1997 to the earliest of
(i) February 10, 1998, (ii) the date on which a default or event of default
under the Previous Bank Credit Agreement (other than as a result of the
Company's failure to comply with the Financial Covenants at January 31, 1998)
occurs and (iii) the effective date of a new financing, to allow the Company to
continue to borrow under the Previous Bank Credit Agreement (notwithstanding the
expiration after December 31, 1997 of the waiver of the Financial Covenants) and
to forebear from exercising any of their rights or remedies against the Company
under the Previous Bank Credit Agreement and related documents as a result of
the Company's failure to comply with the Financial Covenants at January 31,
1998. The $204.7 million borrowing limit under the previous revolving credit
facility was in effect during this period. If the Company had not obtained the
DIP Financing Facility or otherwise obtained an amendment to the Previous Bank
Credit Agreement to cure its failure to comply with the Financial Covenants
prior to February 10, 1998, at any time thereafter the lenders could have
accelerated the maturity of the outstanding loans under the Previous Bank Credit
Agreement. The entire amount outstanding under the Previous Bank Credit
Agreement has been classified as a current liability at January 31, 1998.

       As of January 31, 1998, the Company had aggregate borrowings under the
Previous Bank Credit Agreement of $227.6 million, consisting of $190.6 million
and $37.0 million in borrowings outstanding under the previous revolving credit
facility and previous term loan facility, respectively, and approximately $3.6
million in outstanding letters of credit under the Previous Bank Credit
Agreement. Borrowing availability under the Previous 

                                       22
<PAGE>
Bank Credit Agreement at January 31, 1998 after taking into account borrowing
base restrictions and outstanding letters of credit and the waiver described in
the above paragraph, was approximately $3.2 million; however, the Company had
cash on hand of approximately $4.6 million as of January 31, 1998. Borrowings
under the Previous Bank Credit Agreement bore interest at variable rates based
in part upon the Company attaining certain financial ratios. At January 31,
1998, such rates were at the maximum levels provided for under the interest rate
pricing structure, as a result of the Company's current financial ratios. The
weighted average interest rates borne by the loans under the Previous Bank
Credit Agreement were 8.55% and 7.23% , respectively, as of January 31, 1998 and
January 25, 1997. The obligations of APS, APS Holding Corporation's wholly owned
subsidiary, under the Previous Bank Credit Agreement are guaranteed by APS
Holding Corporation and each of APS's wholly owned subsidiaries, and are
collateralized by pledges of the capital stock of APS and such subsidiaries, by
security interests in substantially all of the Company's personal property and
by mortgages on certain of its owned real property.

      SENIOR SUBORDINATED NOTES. The PI Acquisition was financed through the
private placement of $100.0 million principal amount of the Company's senior
subordinated notes ("the Notes"). The net proceeds from the sale of the Notes
were used to pay a $79.7 million cash payment at closing for the PI Acquisition,
to pay related fees and expenses and to repay a portion of the borrowings under
a prior credit agreement. Prior to the Chapter 11 Proceedings, the Notes would
have matured on January 15, 2006 and bore interest at a rate of 11.875% per
annum. During the year ended January 25, 1997, the Company filed a registration
statement with the Securities and Exchange Commission (the "SEC"), pursuant to
which it made and completed an offer to exchange registered Notes for all of the
initially issued Notes. The Company did not make its scheduled interest payment
on January 15, 1998. The Chapter 11 Proceedings and missed interest payment
constituted events of default under the indenture relating to the Notes. As a
result of the Chapter 11 Proceedings, the Notes have been accelerated, but
payments are not currently being made. The entire amount outstanding under the
Notes has been classified as a current liability at January 31, 1998.

      CAPITAL EXPENDITURES AND ACQUISITIONS. Capital expenditures for Fiscal
Year 1998, excluding new business acquisitions, were approximately $9.9 million
compared to $10.8 million for Fiscal Year 1997. Capital expenditures for the
past two years have been higher than previous years due to management
information system enhancements. Capital expenditures for Fiscal Year 1999 are
limited to $7.8 million by the covenant requirements of the DIP Financing
Facility. The Company currently has no significant planned capital expenditures
except for continued management information system enhancements. The Company is
preparing a plan of action to modify its internally developed software over the
next two years to accommodate the "Year 2000" dating changes necessary to permit
correct recording of year dates for 2000 and later years. The Company expects to
incur approximately $7.0 million of costs to develop and implement such plan,
substantially all of which will be expensed in Fiscal Year 1999. The actual
amount of such costs could vary materially from such estimate. The Company
expects that such costs will be financed through cash flows from operations and
additional borrowings. If the Company or any of its significant suppliers or
customers does not successfully and timely complete such changes, the Company's
business could be materially affected. For Fiscal Year 1998, the Company's cash
expenditures for business acquisitions totaled $2.2 million. The Company does
not intend to make any significant acquisitions during Fiscal Year 1999.

      SOURCES OF LIQUIDITY. Since the completion of the Company's initial public
offering and debt refinancing in 1993, the Company has pursued more aggressive
acquisition and ISW expansion programs, resulting in increased funding
requirements. The principal sources of liquidity for the Company's operating
requirements and business expansion have been internally generated funds from
the operation of its traditional businesses, borrowings under the bank credit
agreements and the proceeds from the 1996 issuance of the Notes. The Company
expects that the principal sources of liquidity in the near future for its
future operating requirements will be cash flows from operations and borrowings
under the DIP Financing Facility. While the Company expects that such sources
will 

                                       23
<PAGE>
provide sufficient working capital to operate its business, there can be no
assurance that such sources will prove to be sufficient and, as discussed above,
the Company may be required to seek modification of certain of the covenants and
in the DIP Financing Facility in the near future.

BUSINESS INITIATIVES

BUSINESS STRATEGY

      As indicated above, the Company has pursued aggressive acquisition and ISW
expansion programs over the last four years, since its initial public offering
in 1993. Such programs and, particularly with regard to Fiscal Year 1997,
integrating PI into the Company's business consumed significant financial and
operating resources and demanded extensive managerial focus and attention.
During Fiscal Year 1998 the Company re-focused its efforts and resources from
such aggressive growth programs to improving both the execution of its business
strategy and its management information systems. In conjunction with such
efforts, the Company commenced implementation of a restructuring program focused
on the goals of reducing costs, improving cash flow and achieving profitability.
Through January 31, 1998 this program has included the consolidation of its ISW
and Big-A Company-owned store operations under one management group, other
operational changes in the ISW business, the closure of approximately 100 Big-A
Company-owned stores and ISW units, implementation of Company-wide cost control
and cost reduction programs (including field and corporate level staff
reductions) and implementation of new management information systems pursuant to
a multi-year plan developed with outside consultants. During the quarter ended
July 25, 1997, the Company recognized a charge of approximately $8.7 million for
restructuring costs associated with such program. Additionally, charges for
inventory write-offs and incremental bad debt expense of $1.3 million and $1.8
million, respectively, were recorded during such quarter to cost of goods sold
and selling, general and administrative expenses, respectively, in connection
with facility closures designated in such program.

      Looking forward, the Company is currently developing a multi-year plan to
be submitted to its bank group as part of its covenant compliance. As part of
such plan, the Company may close an undetermined number of Big-A Company-owned
stores and ISWs and will review its distribution network and overhead structure
and may also consider sales of certain assets or parts of its business. In this
context, Chapter 11 typically entails an evaluation of strategic alternatives to
a reorganization. It is possible, therfore, that the Company's restructuring may
involve a sale of all or substantially all of its assets in one or more
transactions. With regard to inventory, the Company will seek to reinforce a
structure under which both the Big-A Company-owned stores and the ISW stores
will source product primarily through the distribution centers.

BIG-A COMPANY-OWNED STORES

      Historically, operating results for the ISW division have been below those
of the Company's traditional businesses and the ISW division has generally
experienced operating losses. During Fiscal Year 1998, the Company shifted its
focus from aggressive growth of the ISW business to refining and improving both
the execution of this division's business strategy and its systems. To that end,
the Company significantly reconfigured its ISW business as part of the
restructuring program discussed above. During the quarter ended October 25,
1997, the Company consolidated the operations, management and sales forces of
the ISW and Company-owned store divisions. The Company has also begun to broaden
the product offerings at the ISW units while at the same time the Company is
steadily reducing average inventory in ISW locations. The Company has also
largely completed its program to supply such units from the Company's
distribution centers as it has traditionally done for its Big-A Company-owned
stores. Such consolidation of the Company-owned stores and ISW operations and
other operational changes in the ISW business are expected to reduce both
inventory and selling, general and administrative expenses. Management's
inventory reduction initiatives reduced the Company's inventory by approximately
$41.9 million between the end of the first and fourth quarter of Fiscal Year
1998, primarily at the ISW business.

                                       24
<PAGE>
      The Company's initiatives to improve its business systems and controls
include the development of a Centralized Management System (CMS) for the ISW
business, as well as for the Company's traditional businesses, with a particular
focus on inventory and expense controls and working capital management. The
Company began implementation of such system during the third quarter of Fiscal
Year 1998 and expects complete implementation in phases through the fourth
quarter of Fiscal Year 1999. In addition, the Company implemented a new Oracle
based accounts receivable system in the fourth quarter of Fiscal Year 1998 for
the ISW business. Such system will facilitate collection of accounts receivable
and improve working capital management in the ISW business. The Company expects
that such system will be installed for the Company's traditional businesses
during the fiscal years 1999 and 2000.

      The Company continually reviews the position of its Big-A Company-owned
stores and ISWs in the respective markets in which they operate. This review
process has led, and will continue to lead, to the rationalization of stores and
ISWs whose performance does not achieve targeted return on investment
objectives. At January 31, 1998, the number of Big-A Company-owned stores and
ISWs is 273 and 214, respectively.

      The ongoing benefits expected as a result of the Company's actions and
programs described above may, however, be impacted by other pressures or
constraints arising in the Chapter 11 Proceedings.

SEASONALITY; INFLATION

      Historically, the Company's net sales have been higher during April
through September of each year than during the other months of the year. In
addition, the demand for automotive products is somewhat affected by weather
conditions and, consequently, the Company's results of operations from period to
period may be affected by such conditions. Temperature extremes tend to enhance
sales by causing a higher incidence of parts failure and increasing sales of
seasonal products, while milder weather tends to depress sales. The Company's
management does not believe that its operations have been materially affected by
inflation. In general, the Company has been able to pass on to its customers any
increases in the cost of its inventory.

NEW ACCOUNTING STANDARDS

       The Company will adopt SFAS No. 130, "REPORTING COMPREHENSIVE INCOME",
during the first quarter of Fiscal Year 1999. SFAS No. 130 requires a statement
of comprehensive income to be included in the financial statements for fiscal
years beginning after December 15, 1997.

       The Company will adopt SFAS No. 131, "DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION", no later than the fourth quarter of Fiscal
Year 1999. SFAS No. 131 establishes standards for the manner in which public
business enterprises report selected information about operating segments.

       The Company will adopt the disclosure requirements of SFAS No. 132,
"EMPLOYER'S DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS", in
the fourth quarter of Fiscal Year 1999. SFAS No. 132 revises disclosure
requirements for pension and postretirement benefit plans as to standardize
certain disclosures and eliminate certain other disclosures no longer deemed
useful. SFAS No. 132 does not change the measurement or recognition criteria for
such plans.

FORWARD LOOKING INFORMATION

      The statements contained in this Annual Report on Form 10-K ("Annual
Report") that are not historical facts are forward-looking statements that
involve a number of risks and uncertainties. These forward-looking 

                                       25
<PAGE>
statements include, without limitation, the statements as to management's or the
Company's expectations or beliefs found under the captions "Results of
Operations," "Liquidity and Capital Resources" and "Business Initiatives" in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations". The actual results of the future events described in such
forward-looking statements in this Annual Report could differ materially from
those contemplated by such forward-looking statements, particularly as a result
of the Chapter 11 Proceedings. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future developments and
their potential effects upon the Company. There can be no assurance that future
developments will be in accordance with management's expectations or that the
effect of future developments on the Company will be those anticipated by
management. The following important factors, and those important factors
described elsewhere in this Annual Report (including, without limitation, those
discussed under the captions "Liquidity and Capital Resources--Sources of
Liquidity" and "Business Initiatives" in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations") or in other
Securities and Exchange Commission filings of the Company, as well as the
effects of the Chapter 11 Proceedings, could affect (and in some cases have
affected) the Company's actual results and could cause such results to differ
materially from estimates or expectations reflected in such forward-looking
statements made by, or on behalf of, the Company.

o   The Company is highly leveraged, with substantial existing indebtedness and,
    consequently, is subject to significant principal and interest payment
    obligations. The Company's ability to make scheduled payments of principal
    or interest on, or to refinance, its indebtedness will depend on its future
    operating performance and cash flow, which are subject to prevailing
    economic conditions, prevailing interest rate levels and financial,
    competitive, business and other factors beyond its control. The degree to
    which the Company is leveraged could have important consequences, including:
    (i) the Company's future ability to obtain additional financing for working
    capital or other purposes may be limited; (ii) a substantial portion of the
    Company's cash flow from operations will be dedicated to the payment of
    principal and interest on its indebtedness, thereby reducing funds available
    for operation; (iii) certain of the Company's borrowings are at variable
    rates of interest, which could cause the Company to be vulnerable to
    increases in interest rates; and, (iv) the Company may be more vulnerable to
    economic downturns and may be limited in its ability to respond to
    competitive pressures.

o   The Company filed for Chapter 11 reorganization on February 2, 1998. The 
    Company is uncertain, at this time, about the outcome of its reorganization
    and its impact on various parties.

o   The DIP Financing Facility contains numerous operating covenants that limit
    the discretion of the Company's management with respect to certain business
    matters. These covenants place significant restrictions on, among other
    things, the ability of the Company to incur additional indebtedness, to
    create liens or other encumbrances, to make certain dividends and other
    payments, to make certain investments, loans and guarantees, or to sell or
    otherwise dispose of assets or merge or consolidate with another entity. The
    DIP Financing Facility also contains covenant requirements which require the
    Company to meet certain financial ratios and tests. The Company is currently
    in compliance with these covenant requirements but may be required to seek
    modification of certin covenants. See "Debtor in Possession Financing and
    Previous Bank Credit Agreement," above.

o   Failure to comply with the Company's payment, covenant or other obligations
    under the DIP Financing Facility could result in a default thereunder that,
    if not cured or waived, could result in acceleration of the relevant
    indebtedness thereunder, subject to proceedings in the Bankruptcy Court.

o   The Company operates in a highly competitive environment. It competes
    directly and indirectly with numerous distributors, retailers and
    manufacturers of automotive aftermarket products, some of which distribute
    in channels that may be expanding in terms of market share relative to the
    channels in which the Company distributes its products. In addition, some of
    the Company's current and potential competitors are larger, may

                                       26
<PAGE>
    have greater financial resources and may be less leveraged than the Company.
    Furthermore, particularly in light of the trend in the automotive parts
    industry toward increasing consolidation at the warehouse and jobber levels,
    the Company's financial performance may be significantly affected by the
    Company's ability to compete successfully for associate jobber customers,
    and otherwise take advantage of consolidation opportunities and other
    industry trends. Competitors of the Company, in efforts to expand or enhance
    their business, may seek to take advantage of the Company's financial
    condition and difficulties arising as a result of the Chapter 11
    Proceedings.

o   The demand for automotive products is affected by a number of factors beyond
    the Company's control, including economic conditions, vehicle quality and
    maintenance, vehicle scrappage rates and weather conditions. Weather
    conditions cause seasonal variations in the Company's results of operations,
    and the occurrence of extreme weather or mild weather may result in
    significant fluctuations in such results. Temperature extremes tend to
    enhance sales by causing a higher incidence of parts failure and increasing
    sales of seasonal products, while milder weather tends to depress sales. In
    addition, in recent years there have been, and in the future there are
    likely to continue to be, significant improvements in the quality of new
    vehicles and vehicle parts and extensions of manufacturers' warranties that
    may reduce demand for the Company's products.

o   The Company is preparing a plan of action to modify its internally developed
    software over the next two years to accommodate the "Year 2000" dating
    changes necessary to permit correct recording of year dates for 2000 and
    later years. The Company expects to incur approximately $7.0 million of
    costs to develop and implement such plan, substantially all of which will be
    expensed in Fiscal Year 1999. The actual amount of such costs could vary
    materially from such estimate. The Company expects that such costs will be
    financed through cash flows from operations and additional borrowings. If
    the Company or any of its significant suppliers or customers does not
    successfully and timely complete such changes, the Company's business could
    be materially affected.

      While the Company periodically reassesses the material trends and
uncertainties affecting its operations and financial condition in connection
with its preparation of management's discussion and analysis of results of
operations and financial condition contained in its quarterly and annual
reports, the Company does not intend to review or revise any particular
forward-looking statement referenced in this report in light of future events.

OTHER MATTERS

      In February 1996, the Company sold its interest in the "Parts Plus" group
of marks, which had been acquired by the Company in the PI Acquisition, to
Association of Automotive Aftermarket Distributors ("AAAD") for cash
consideration of $3.5 million. PI had previously licensed the same marks to AAAD
for a small yearly license fee.

      On October 25, 1996, the Company completed the sale of seventeen Big-A
Company-owned stores and one ISW located in Mississippi and Florida to
associated jobbers for a gain of approximately $1.3 million.

      During Fiscal Year 1998, the Company made a number of small acquisitions
for a total of $2.2 million.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      Reference is made to the financial statements, the report thereon, the
notes thereto and supplementary data commencing at page F-1 of this Form 10-K,
which financial statements, reports, notes and data are incorporated herein by
reference.

                                       27
<PAGE>
ITEM 9.  CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

                                    None.

                                       28
<PAGE>
                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      For information regarding the directors and persons nominated to become
directors of the Company, reference is made to the information presented in the
Company's definitive Proxy Statement for its 1998 Annual Meeting of Stockholders
to be filed with the Commission pursuant to Regulation 14A under the Securities
and Exchange Act of 1934 (the "1998 Proxy Statement"). For information regarding
the executive officers of the Company, reference is made to the information set
forth under the caption "Executive Officers of the Registrant" included in Part
I of this Form 10-K. All of such information is incorporated herein by
reference.

ITEM 11.  EXECUTIVE COMPENSATION.

      For information concerning the compensation paid by the Company during
fiscal 1998 to its executive officers, reference is made to the information
presented in the 1998 Proxy Statement. Such information is incorporated herein
by reference.

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

          For information concerning the beneficial ownership of the common
stock of the Company by its directors and officers and by certain other
beneficial owners, reference is made to the information presented in the
Company's 1998 Proxy Statement. Such information is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          For information  regarding certain business relationship and related
transactions  involving the  Company's  officers and  directors,  reference is
made  to  the  information  presented  in  the  1998  Proxy  Statement.   Such
information is incorporated herein by reference.

                                       29
<PAGE>
                                    PART IV

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

(A) AND (D)   FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

      The financial statements and financial statement schedules listed on the
accompanying Index to Financial Statements (see page F-1) are filed as part of
this Form 10-K.

(B) REPORTS ON FORM 8-K.

      The Company filed an 8-K on February 2, 1998, reporting under Item 3 the
filing of the February 1998 Chapter 11 proceeding. The Company also filed an 8-K
on February 26, 1998, reporting under Item 5 the final approval of $100 million
debtor in possession financing.

(C)    EXHIBITS.

      See the Exhibit Index attached hereto.

                                       30
<PAGE>
                                                                   LOCATION OF
                                                                   EXHIBIT IN
EXHIBIT                                                            SEQUENTIAL
NUMBER                       DESCRIPTION OF DOCUMENTS             NUMBER SYSTEM
------                       ------------------------             -------------
2.1.1       Asset Purchase Agreement, between Sieg Company and
            A.P.S., Inc., dated August 27, 1994. (10)

2.1.2       Amendment One, dated September 26, 1994, to Asset
            Purchase Agreement, between Sieg Company and A.P.S.,
            Inc. (10)

2.2         Purchase Agreement between A.P.S., Inc. and GKN
            Parts, dated December 5, 1995 (the "Purchase
            Agreement"). (Certain portions of the Purchase
            Agreement have been omitted and filed separately with
            the Securities and Exchange Commission pursuant to
            Rule 24b-2 under the Securities Exchange Act of
            1934.) (15)

3.1         Second Restated Certificate of Incorporation of APS
            Holding dated September 20, 1993. (6)

3.2         Amended  By-Laws of APS  Holding  dated  November  22,
            1993. (7)

4.1.1       Form of Stock Certificate for Class A Common Stock,
            par value $.01 per share, of APS Holding. (1)

4.1.2       Form of Stock Certificate for Class B Common Stock,
            par value $.01 per share, of APS Holding. (1)

4.2         Second Restated Certificate of Incorporation of APS
            Holding, dated September 20, 1993. (6)

4.3         Amended By-Laws of APS Holding dated November 22,
            1993. (7)

4.4.1       Fund Stock Subscription Agreement, dated as of
            November 22, 1989, between The Clayton & Dubilier
            Private Equity Fund IV Limited Partnership ("Fund
            IV") and APS Holding. (1)

4.4.2       Agreement, dated as of May 11, 1992, between Fund IV
            and APS Holding. (4)

4.5         Common Stock Purchase Agreement, dated as of November
            22, 1989, between APS Holding and each of certain
            institutional investors. (1)

4.6.1       Management Stock Subscription Agreement, dated as of
            November 22, 1989, between APS Holding and Richard J.
            Spelleri. (1)

4.6.2       Stock Subscription Agreement, dated as of June 6,
            1990, between APS Holding and H. Jack Meany. (1)

                                       31
<PAGE>
4.6.3       Stock Subscription Agreement, dated as of June 1,
            1990, between APS Holding and John J. Nevin. (1)

4.6.4       Stock Subscription Agreement, dated as of May 31,
            1990, between APS Holding and Lawrence H. Hyde. (1)

4.6.5       Management Stock Subscription Agreements, between APS
            Holding and each of Messrs. Mike Allen, David C.
            Barbeau, Marc and. Beasley, Doug Buscher, Leland
            Charley, James E. Clarke, Earl Colvin, Ronald B.
            Diedring, Walt Doman, Robert Greathouse, Tom
            Hartenbower, Richard A. Henricks, Dick Kelly, E.
            Eugene Lauver, Bill Licklider, Montie C. Loney,
            Christopher McGinley, Jim McWilliams, Ray Mohler,
            William H. Moore, Ed Morris, John D. Pearce, George
            Poe, Michael L. Preston, Greg Rada, S. David Ramsey,
            Raymond J. Rarey, David Robison, Elmer H.C. Romeis,
            Claude T. Salmon, Jr., Ralph Souza, Rogers Stock, Tom
            Wacker, Randall B. Walker, Thomas H. Warner, Bob
            Werner, Paul Whelton, and Jim Woodward. (2)

4.7.1       Registration and Participation Agreement, dated as of
            November 22, 1989 (the "Registration and
            Participation Agreement"), among Fund IV, certain
            other APS Holding stockholders, and APS Holding. (1)

4.7.2       Letter Agreement, dated as of June 26, 1992, between
            APS Holding and Fund IV, amending the Registration
            and Participation Agreement. (1)

4.8         Capital Call Agreement, dated as of November 22,
            1989, among Fund IV, APS Holding, The Connecticut
            National Bank, First Trust National Association, and
            First Bank National Association. (1)

4.9.1       APS Holding's 1990 Employee Stock Option Plan and
            form of Management Stock Option Agreement. (1)

4.9.2       APS Holding's 1990 Employee Stock Option Plan as
            amended through Amendment No. 1. (1)

4.9.3       Management Stock Option Agreements, dated as of
            November 14, 1990, between APS Holding and each of
            the persons named on the schedule attached
            thereto.(2)

4.10.1      APS Holding's 1993 Employee Stock Option Plan as
            amended and restated, effective July 19, 1993. (5)

4.10.2      Management Stock Option Agreement, dated as of
            December 16, 1992, between APS Holding and Mark S.
            Hoffman. (5)

4.10.3      Management Stock Option Agreement, dated as of May
            17, 1993, between APS Holding and Douglas Beckstett.
            (5)

                                       32
<PAGE>
4.10.4      Stock  Option  Agreement,  dated  as of  December  16,
            1992, between APS Holding and Theodore Barry. (5)

4.10.5      Stock  Option  Agreement,  dated  as of May 17,  1993,
            between APS Holding and Theodore Barry. (5)

4.10.6      Management Stock Subscription  Agreement,  dated as of
            September  23,  1993,  between  APS  Holding and Vince
            Heiker. (7)

4.11        Management Stock Subscription  Agreement,  dated as of
            August 24,  1993,  between  APS  Holding  and  Douglas
            Beckstett. (5)

4.12        Management Stock Subscription Agreement, dated as of
            August 24, 1993, between APS Holding and Mark S.
            Hoffman. (5)

4.13        Management Stock Subscription Agreement, dated as of
            August 24, 1993, between APS Holding and Steven H.
            Sattinger. (5)

4.14        Stock Subscription Agreement, dated as of August 24,
            1993, between APS Holding and Wiley N. Caldwell. (5)

4.15        Indenture, dated as of January 25, 1996, among
            A.P.S., Inc., as Issuer, APS Holding Corporation and
            certain of its subsidiaries, as Guarantors, and The
            Bank of New York, as Trustee. (14)

4.16        Registration Agreement, dated January 19, 1996, among
            A.P.S., Inc., Salomon Brothers Inc and Chemical
            Securities Inc. (14)

4.17        Purchase Agreement, dated January 19, 1996, among
            A.P.S., Inc., APS Holding Corporation, Salomon
            Brothers Inc and Chemical Securities Inc. (14)

10.1.1      Amended and Restated Credit Agreement, dated as of
            January 25, 1996, among A.P.S., Inc., the several
            lenders from time to time parties thereto, and
            Chemical Bank, as agent. (14)

10.1.2      Amended and Restated Guarantee, dated as of January
            25, 1996, made by APS Holding Corporation in favor of
            Chemical Bank, as agent. (14)

10.1.3      Amended and Restated Subsidiaries' Guarantee, dated
            as of January 25, 1996, made by certain of the
            subsidiaries of A.P.S. , Inc. in favor of Chemical
            Bank, as agent. (14)

10.1.4      Supplement to the Amended and Restated Subsidiaries'
            Guarantee, dated as of May 15, 1996, made by each of
            the Subsidiaries of A.P.S., Inc. in favor of Chemical
            Bank, as agent. (19)

10.1.5      Amended and Restated Security Agreement, dated as of
            January 25, 1996, made by A.P.S., Inc. in favor of
            Chemical Bank, as agent. (14)

                                33
<PAGE>
10.1.6      Amended and Restated Trademark Security Agreement,
            dated as of January 25, 1996, made by A.P.S., Inc. in
            favor of Chemical Bank, as agent. (14)

10.1.7      Trademark Security Agreement, dated May 15, 1996,
            made by A.P.S. Management Services, Inc. in favor of
            Chemical Bank, as agent. (19)

10.1.8      Amended and Restated Security Agreement, dated as of
            January 25, 1996, made by certain of the subsidiaries
            of A.P.S., Inc. in favor of Chemical Bank, as agent.
            (14)

10.1.9      Amended and Restated Security and Note Pledge
            Agreement, dated as of January 25, 1996, made by
            Autoparts Finance Company, Inc. in favor of Chemical
            Bank, as agent. (14)

10.1.10     Amended and Restated Pledge Agreement, dated as of
            January 25, 1996, made by A.P.S., Inc. in favor of
            Chemical Bank, as agent. (14)

10.1.11     Amended and Restated Pledge Agreement, dated as of
            January 25, 1996, made by APS Holding Corporation in
            favor of Chemical Bank, as agent. (14)

10.1.12     Amended and Restated Lockbox Agreement, dated as of
            January 25, 1995, among Texas Commerce Bank National
            Association, Chemical Bank, as Agent, and Autoparts
            Finance Company, Inc. (14)

10.1.13     Amended and Restated Lockbox Agreement, dated as of
            January 25, 1995, among Texas Commerce Bank National
            Association, Chemical Bank, as Agent, and A.P.S.,
            Inc. (14)

10.1.14     Note Pledge Agreement, dated as of January 25, 1996,
            made by APS Holding in favor of Chemical Bank, as
            agent. (14)

10.1.15     Open-End Mortgage and Security Agreement, dated as of
            January 25, 1996, from A.P.S., Inc., as mortgagor, to
            Chemical Bank (as agent), as mortgagee. (14)

10.1.16     Second Amendment to Mortgage in respect of real
            property located in Indiana, dated as of January 25,
            1996, between A.P.S., Inc., as mortgagor, and
            Chemical Bank (as agent), as mortgagee. (14)

10.1.17     Second Amendment to Deed of Trust in respect of real
            property located in Missouri, dated as of January 25,
            1996, between A.P.S., Inc., as grantor, and Chemical
            Bank (as agent), as beneficiary. (14)

10.1.18     Second Amendment to Deed of Trust in respect of real
            property located in Virginia, dated as of January 25,
            1996, between American Parts System Inc., as grantor,
            and Chemical Bank (as agent), as beneficiary. (14)

                                34
<PAGE>
10.1.19     Second Amendment to Deed of Trust, Assignment of
            Rents and Leases, Security Agreement and Financing
            Statement in respect of real property located in New
            Mexico, dated as of January 25, 1996, between
            American Parts System, Inc., as trustor, and Chemical
            Bank (as agent), as beneficiary. (14)

10.1.20     Second Amendment to Deed of Trust in respect of real
            property located in Colorado, dated as of January 25,
            1996, between A.P.S., Inc., as grantor, and Chemical
            Bank (as agent), as beneficiary. (14)
            
10.1.21     First Amendment, dated as of April 23, 1996, to the
            amended and Restated Credit Agreement dated as of
            January 25, 1996, among A.P.S., Inc., the several
            lenders from time to time parties thereto, and
            Chemical Bank, as agent. (16)

10.1.22     Second Amendment, dated as of August 28, 1996, to the
            Amended and Restated Credit Agreement dated as of
            January 25, 1996, among A.P.S., Inc., the several
            lenders from time to time parties thereto, and The
            Chase Manhattan Bank (formerly Chemical Bank), as
            agent. (18)
            
10.1.23     Third Amendment, dated as of January 25, 1997, to the
            Amended and Restated Credit Agreement dated as of
            January 25, 1996, among A.P.S., Inc., the several
            lenders from time to time parties thereto, and The
            Chase Manhattan Bank (formerly Chemical Bank), as
            agent. (19)

10.1.24     Waiver, dated as of April 25, 1997, to the Amended
            and Restated Credit Agreement dated as of January 25,
            1996, among A.P.S., Inc., the several lenders from
            time to time parties thereto, and Chemical Bank, as
            agent. (20)

10.1.24     Fourth Amendment, dated as of July 15, 1997, to the
            Amended and Restated Credit Agreement dated as of
            January 25, 1996, among A.P.S., Inc., the several
            banks and other financial institutions from time to
            time parties thereto, and The Chase Manhattan Bank,
            as agent. (21)

10.1.25     Fifth Amendment and waiver, dated as of October 24,
            1997, to the Amended and Restated Credit Agreement
            dated as of January 25, 1996, (the "Credit
            dgreement") among A.P.S., Inc., the several banks and
            other financial institutions from time to time
            parties thereto and The Chase Manhattan Bank, as
            agent. (22)

10.1.26     Sixth Amendment, Waiver and Agreement, dated as of
            December 8, 1997, to the Credit Agreement. (22)

10.1.27     Security Agreement, dated as of December 8, 1997,
            made by APS Holding Corporation in favor of The Chase
            Manhattan Bank, as agent. (22)

10.1.28     Pledge Agreement, dated as of December 8, 1997, made
            by American Parts System, Inc. in favor of The Chase
            Manhattan Bank, as agent. (22)

10.1.29     Supplement, dated as of December 8, 1997, to the
            Trademark Security Agreement, dated as of May 15,
            1996, made by A.P.S. Management Services, Inc. in
            favor of The Chase Manhattan Bank, as agent. (22)

                                35
<PAGE>
10.1.30     Revolving Credit, Term Loan and Guarantee Agreement
            among A.P.S., Inc., a Debtor-in-Possession, as
            Borrower, APS Holding Corporation and the
            Subsidiaries of the Borrower named herein, as
            Guarantors and the lenders party hereto, and The
            Chase Manhattan Bank, as Agent, dated as of February
            2, 1998.

10.1.31     First Amendment, dated as of February 26, 1998 to the
            Revolving Credit, Term Loan and Guarantee Agreement,
            dated as of February 2, 1998.

10.2.1      Fund Stock Subscription Agreement, dated as of
            November 22, 1989, between Fund IV and APS Holding.
            (1)

10.2.2      Indemnification Agreement, dated as of November 22,
            1989, among APS Holding, APS Acquisition Corporation,
            A.P.S., Inc., Clayton & Dubilier, Inc. and Fund IV.
            (1)

10.2.3      Loanout Agreement, dated as of March 4, 1997, among
            APS Holding Corporation, A.P.S., Inc., and Clayton,
            Dubilier & Rice, Inc. (20)

10.2.3      Agreement, dated as of May 11, 1992, between Fund IV
            and APS Holding. (4)

10.3.1      Registration and Participation Agreement. (1)

10.3.2      Letter Agreement, dated as of June 26, 1992, amending
            the Registration and Participation Agreement (1).

10.4.1      Sales and Distribution Agreement, made as of October
            6, 1989, by and between Standard Motor Products
            Company, Inc. and APS for Tune-Up Products. (4)

10.4.2      Sales and Distribution Agreement, made as of October
            6, 1989, between Standard Motor and APS for
            Temperature Control Products. (1)

10.4.3      Amendment to the Sales and Distribution Agreements
            between A.P.S., Inc. and Standard Motor Products
            Company, Inc., for Tune-Up Products and Temperature
            Control Products, dated October 26, 1989. (1)

10.4.4      Sales and Distribution Agreement, dated as of April
            22, 1993, between APS and Standard Motor and APS, for
            Big and Service Line and Specialty Tool Line
            Products. (1)

10.4.5      Letter agreement dated March 20, 1997 between
            Standard Motor Products, Inc. and A.P.S., Inc. (the
            "Extension Agreement") amending the Sales and
            Distribution agreement, made as of October 6, 1989,
            by and between Standard Motor Products Company, Inc.
            and A.P.S., Inc., for Tune-up Products, as amended,
            and the Sales Distribution Agreement, made as of
            October 6, 1989, between Standard Motor Products
            COompany, Inc. and A.P.S., Inc. for Temperature
            Control Products, as amended. (Certain portions of
            the Extension Agreement have been omitted and filed
            separately with the Securities and Exchange
            Commission pursuant to Rule 24b-2 under the
            Securities Exchange Act of 1934. (20)

                                     36
<PAGE>
10.5.1      Agreement, executed April 14, 1993, between Big-A
            Auto Parts, Inc., and Teamsters Local Union No. 429
            of Reading, Pennsylvania. (5)

10.5.2      Agreement, executed on March 17, 1993, between APS
            and Automotive Petroleum and Allied Industries
            Employees Union, Local 618 of St. Louis, Missouri.
            (5)

10.5.3      Agreement, Executed on March 6, 1992, between APS and
            Truck Drivers, Chauffeurs and Helpers Local Union No.
            384 of Pennsylvania. (5)

10.5.4      Agreement, entered into and effective as of July 1,
            1993, between APS and Teamsters Local Union No. 284
            of the International Brotherhood of Teamsters. (5)

10.6.1      APS Holding's 1990 Employee Stock Option Plan and
            form of Management Stock Option Agreement. (1)

10.6.2      APS Holding's 1990 Employee Stock Option Plan as
            amended through Amendment No. 1. (1)

10.6.3      Stock Subscription Agreements, between APS Holding
            and each of the persons named on the schedule
            attached thereto. (2)

10.7.1      APS Holding's 1993 Employee Stock Option Plan. (5)

10.7.2      Management Stock Option Agreement, dated as of
            December 16, 1992, between APS Holding and Mark S.
            Hoffman. (5)

10.7.3      Management Stock Option Agreements, dated as of May
            17, 1993, between APS Holding and Douglas Beckstett.
            (5)

10.7.4      Stock Option Agreement, dated as of December 16,
            1992, between APS Holding and Theodore Barry. (5)

10.7.5      Stock Option Agreement, dated as of May 17, 1993,
            between APS Holding and Theodore Barry. (5)

10.7.6      Stock Option Agreement, dated as of September 23,
            1993, between APS Holding and Vince Heiker. (7)

10.7.7      Stock Option Agreement, dated as of September 23,
            1993, between APS Holding and Paul G. Hargett. (8)

                                     37
<PAGE>
10.8.1      Management Stock Subscription Agreement, dated as of
            August 24, 1993, between APS Holding and Kenneth
            Caracci. (5)

10.8.2      Management Stock Subscription Agreement, dated as of
            August 24, 1993, between APS Holding and Douglas
            Beckstett. (5)

10.8.3      Management Stock Subscription Agreement, dated as of
            August 24, 1993, between APS Holding and Mark S.
            Hoffman. (5)

10.8.4      Stock Subscription Agreement, dated as of August 24,
            1993, between APS Holding and Wiley N. Caldwell. (5)

10.9        A.P.S., Inc., Executive 401(k) Deferral Plan. (17)

10.10.1     Confirmation for U.S. Dollar Rate Swap Transaction,
            dated June 6, 1995, among Nations Bank of Texas, N.A.
            and A.P.S., Inc. (12)

10.10.2     Confirmation of Conditions of Swap Transaction, dated
            June 6, 1995, among Chemical Bank and A.P.S. (12)

10.10.3     Confirmation for U.S. Dollar Rate Swap Transaction,
            dated July 7, 1995, among Bank of America National
            Trust and Savings Association and A.P.S., Inc. (13)

10.11       Purchase Agreement between A.P.S., Inc. and GKN Parts
            Industries Corporation, dated December 5, 1995 (See
            item 2.2). (15)

10.12       Agreement of Sale By and Between The Parts Source,
            Inc. and A.P.S., Inc., dated as of October 22, 1996.
            (18)

10.13       Agreement of Sale By and Between Rankin Automotive
            Group, Inc., and Parts, Inc., dated as of September
            12, 1996. (18)

11.1        Statement re Computation of Income (Loss) per Share

12          Statement re Computation of Earnings to Fixed Charges

21          List of Subsidiaries of APS Holding

23.1        Consent of Independent Accountants

99.1        Press release issued by the Company on February 2,
            1998. (23)

99.2        Press Release issued by the Company on February 3,
            1998. (23)

99.3        Interim Order (I) authorizing secured postpetition
            financing on a superpriority basis pursuant to 11
            U.S.C. SS 364, (II) authorizing use of cash
            collateral pursuant to 11 U.S.C. SS 363, (III)
            granting adequate protection pursuant to 11 U.S.C. SS
            363 and 364, and (IV) scheduling a final hearing
            pursuant to bankruptcy rule 4001(c). (23)

                                     38
<PAGE>
99.4        Final Order authorizing secured postpetition
            financing on a superpriority basis pursuant to 11
            U.S.C. SS 364. (24)

99.5        Press Release issued by the Company on February 27,
            1998. (24)
------------
(1) Incorporated by reference to the Exhibits filed with APS Holding's
    Registration Statement on Form S-1 (Registration No. 33-36102).

(2) Incorporated by reference to the Exhibits filed with APS Holding's Annual
    Report on Form 10-K for the year ended January 26, 1991.

(3) Not used.

(4) Incorporated by reference to the Exhibits filed with APS Holding's Annual
    Report on Form 10-K for year ended January 25, 1992.

(5) Incorporated by reference to the Exhibits filed with APS Holding's
    Registration Statement on Form S-1 (Registration No. 33-66412).

(6) Incorporated by reference to the Exhibits filed with APS Holding's Form 10-Q
    for the Quarter ended October 25, 1993.

(7) Incorporated by reference to the Exhibits filed with APS Holding's Annual
    Report on Form 10-K for year ended January 29, 1994.

(8) Incorporated by reference to the Exhibits filed with APS Holding's Form 10-Q
    for the Quarter ended April 25, 1994.

(9) Not used.

(10) Incorporated by reference to the Exhibits filed with APS Holding's Form
     8-K, as amended, dated September 26, 1994.

(11) Not used.

(12) Incorporated by reference to the Exhibits filed with APS Holding's Form
     10-Q for the Quarter ended April 25, 1995.

(13) Incorporated by reference to the Exhibits filed with APS Holding's Form
     10-Q for the Quarter ended July 25, 1995.

(14) Incorporated by reference to the Exhibits filed with APS Holding's Form 8-K
     dated January 25,1996.

(15) Incorporated by reference to the Exhibits filed with APS Holding's Form
     8-K/A dated January 25, 1996.

(16) Incorporated by reference to the Exhibits filed with APS Holding's Form
     10-Q for the Quarter ended April 25, 1996.

                                       39
<PAGE>
(17) Incorporated by reference to the Exhibits filed with APS Holding
     Corporation's Registration Statement on Form S-8, Registration No.
     333-10217.

(18) Incorporated by reference to the Exhibits filed with APS Holding's Form
     10-Q for the Quarter ended October 25, 1996.

(19) Incorporated by reference to the Exhibits filed with APS Holding's Annual
     Report on Form10-K for the year ended January 25, 1997.

(20) Incorporated by reference to the Exhibits filed with APS Holding's Form
     10-Q for the Quarter ended April 25, 1997.

(21) Incorporated by reference to the Exhibits filed with APS Holding's Form
     10-Q for the Quarter ended July 25, 1997.

(22) Incorporated by reference to the Exhibits filed with APS Holding's Form
     10-Q for the Quarter ended October 25, 1997.

(23) Incorporated by reference to the Exhibits filed with APS Holding's Form
     8-K, dated February 2, 1998.

(24) Incorporated by reference to the Exhibits filed with APS Holding's Form
     8-K, dated February 26, 1998.

                                       40
<PAGE>
                                  SIGNATURES

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

                             APS HOLDING CORPORATION



      Date:  April 30, 1998               BY:/s/HUBBARD C. HOWE
                                          Hubbard C. Howe, Chairman of the Board


      Date:   April 29, 1998              BY:/s/BETTINA M. WHYTE
                                          Bettina M. Whyte, President and
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities on the dates indicated.

               SIGNATURE                         TITLE             DATE

/s/         HUBBARD C. HOWE             Chairman of the Board    April  30, 1998
            Hubbard C. Howe

/s/         BETTINA M. WHYTE                 President and       April  29, 1998
             Bettina Whyte              Chief Executive Officer

/s/         JOHN L. HENDRIX              Senior Vice President   April  29, 1998
            John L. Hendrix           and Chief Financial Officer

/s/        WILEY N. CALDWELL                  Director           April  28, 1998
           Wiley N. Caldwell

/s/        MICHAEL J. DUBILIER                Director           April  29, 1998
           Michael J. Dubilier

/s/       JOSEPH P. FLANNERY                  Director           April  29, 1998
          Joseph P. Flannery

/s/        DONALD J. GOGEL                    Director           April  30, 1998
           Donald J. Gogel

/s/         JERRY K. MYERS                    Director           April  29, 1998
            Jerry K. Myers

/s/          H. JACK MEANY                    Director           April  27, 1998
             H. Jack Meany
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS
                   APS HOLDING CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
<S>                                                                                 <C>
Report of Independent Accountants .............................................   F-2

Consolidated Balance Sheets at January 31, 1998 and January 25, 1997 ..........   F-3

Consolidated Statements of Operations for the years ended
   January 31, 1998, January 25, 1997 and January 27, 1996 ....................   F-4

Consolidated Statements of Changes in Stockholders' Equity for the years ended
   January 31, 1998, January 25, 1997 and January 27, 1996 ....................   F-5

Consolidated Statements of Cash Flows for the years ended January 31, 1998,
 January 25, 1997 and January 27, 1996 ........................................   F-6

Notes to Consolidated Financial Statements ....................................   F-7

Schedule I - Condensed Financial Information of APS Holding Corporation as of
   January 31, 1998 and January 25, 1997 and for the years ended January 31,
   1998, January 25, 1997 and January 27, 1996 ................................   F-24

Schedule II - Valuation and Qualifying Accounts for the years ended January 31,
   1998, January 25, 1997 and January 27, 1996 ................................   F-25
</TABLE>
                                     F-1
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
APS Holding Corporation:

   We have audited the consolidated financial statements and financial statement
schedules of APS Holding Corporation and Subsidiaries (debtor in possession,
effective February 2, 1998) listed on the accompanying index on Page F-1 of this
Form 10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

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

   In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of APS Holding
Corporation and Subsidiaries as of January 31, 1998 and January 25, 1997, and
the consolidated results of their operations and their cash flows for the years
ended January 31, 1998, January 25, 1997 and January 27, 1996 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.

   The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, APS Holding Corporation and its direct and
indirect subsidiaries filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code on February 2, 1998. Although the Company is
currently operating its business as a debtor in possession under the
jurisdiction of the Bankruptcy Court, the continuation of the Company's business
as a going concern is contingent upon, among other things, the ability to
formulate a plan of reorganization which will gain approval of the creditors and
confirmation by the Bankruptcy Court, and the Company's ability to generate
sufficient cash from operations or other sources to meet ongoing obligations
over a sustained period. These matters raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that may be required in connection with
restructuring the Company as it reorganizes under Chapter 11 of the United
States Bankruptcy Code.

   As discussed in Note 2 to the consolidated financial statements, during the
year ended January 27, 1996, the Company changed its methods of accounting for
impairment of long-lived assets and impairment of notes receivable.

   The selected quarterly financial data in Note 12 contains information that we
did not audit, and, accordingly, we do not express an opinion on that data. For
reasons described in Note 12, we were unable to review the quarterly data for
the year ended January 25, 1997 in accordance with standards established by the
American Institute of Certified Public Accountants.


COOPERS & LYBRAND L.L.P.

Houston, Texas
April 28, 1998

                                      F-2
<PAGE>

                            APS HOLDING CORPORATION

                          CONSOLIDATED BALANCE SHEETS

                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                                       JANUARY 31,  JANUARY 25,
                         ASSETS                           1998         1997
                                                        ---------    ---------
Current assets:
   Cash and cash equivalents ........................   $   4,574    $  13,370
   Accounts and notes  receivable, less allowance of
     $18,155 and $11,164 ............................      99,223      103,168
   Inventories ......................................     253,394      294,816
   Deferred tax asset ...............................        --         19,789
   Prepaid expenses and other current assets ........      20,071       35,543
                                                        ---------    ---------
      Total current assets ..........................     377,262      466,686

Property and equipment, net .........................      41,054       44,483
Notes receivable, less current portion ..............      21,497       21,615
Intangible assets, net ..............................      32,499       47,073
Investment in available-for-sale securities .........         584        3,977
Deferred costs and other assets .....................      14,015       14,371
                                                        ---------    ---------
                                                        $ 486,911    $ 598,205
                                                        =========    =========
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Book overdrafts ..................................   $    --      $   6,306
   Current maturities of long-term debt .............     328,034       15,471
   Accounts payable .................................      87,964      106,927
   Accrued liabilities ..............................      48,255       44,359
                                                        ---------    ---------
      Total current liabilities .....................     464,253      173,063

Long-term debt, less current maturities .............       1,207      305,941
Deferred tax liability ..............................        --            561
Deferred income and other liabilities ...............       2,837        4,071
                                                        ---------    ---------
      Total liabilities .............................     468,297      483,636
                                                        ---------    ---------
Commitments and contingencies (Note 6) ..............        --           --

8% cumulative redeemable preferred stock,
 liquidation preference $2.00 per share,
 authorized 10,000,000 shares; no shares issued .....        --           --

Stockholders' equity:
   Class A common stock,  par value $.01,  authorized
      20,000,000 shares; issued 13,795,627 shares and
      13,769,868 shares .............................         138          137
   Class B common stock,  par value $.01,  authorized
      20,000,000 shares; no shares issued ...........        --           --
   Additional paid-in capital .......................     155,601      155,363
   Accumulated deficit ..............................    (137,005)     (41,712)
   Treasury stock, 5,517 shares at cost .............        (120)        (120)

   Unrealized gain on available-for-sale securities .        --            901
                                                        ---------    ---------
      Total stockholders' equity ....................      18,614      114,569
                                                        ---------    ---------
                                                        $ 486,911    $ 598,205
                                                        =========    =========

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

                                      F-3
<PAGE>
                            APS HOLDING CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                         YEAR ENDED    YEAR ENDED   YEAR ENDED
                                         JANUARY 31,   JANUARY 25,  JANUARY 27,
                                             1998         1997         1996
                                          ---------    ---------    ---------
Net sales .............................   $ 812,942    $ 858,739    $ 603,737
Cost of goods sold ....................     553,596      583,146      397,164
                                          ---------    ---------    ---------
     Gross profit .....................     259,346      275,593      206,573

Selling,  general and administrative
 expenses .............................     276,943      271,754      171,210
Asset  impairment and  restructuring
 charge ...............................      28,969         --         11,224
                                          ---------    ---------    ---------
     Operating income (loss) ..........     (46,566)       3,839       24,139

Interest income .......................       5,300        5,609        5,265
Other income ..........................         200        1,765        1,535
                                          ---------    ---------    ---------
     Income (loss) before  writedown
     on available-for-sale securities,
     taxes interest expense, income
     and extraordinary item ...........     (41,066)      11,213       30,939

Writedown on available-for-sale
 securities ...........................       1,916         --           --

Interest expense ......................      32,590       27,296       16,256
                                          ---------    ---------    ---------
     Income (loss) before income
     taxes and extraordinary item .....     (75,572)     (16,083)      14,683

Provision (benefit) for income taxes ..      19,721       (5,247)       5,447
                                          ---------    ---------    ---------
     Income (loss) before
      extraordinary item ..............     (95,293)     (10,836)       9,236

Extraordinary item  - charges
 resulting from extinguishment of debt,
 net of income taxes (Note 5) .........        --           --         (2,468)
                                          ---------    ---------    ---------
Net income (loss) .....................   $ (95,293)   $ (10,836)   $   6,768
                                          =========    =========    =========
Income (loss) per share:

Basic:
Income (loss) before extraordinary
 item .................................   $   (6.91)   $   (0.79)   $    0.67

Extraordinary item ....................        --           --          (0.18)
                                          ---------    ---------    ---------
Net income (loss) .....................   $   (6.91)   $   (0.79)   $    0.49
                                          =========    =========    =========
Diluted:

Income (loss) before  extraordinary
  item ................................   $   (6.91)   $   (0.79)   $    0.66

Extraordinary item ....................        --           --          (0.18)
                                          ---------    ---------    ---------
Net income (loss) .....................   $   (6.91)   $   (0.79)   $    0.48
                                          =========    =========    =========
Basic weighted average shares
  outstanding .........................      13,782       13,741       13,725
Dilutive impact of stock options ......        --           --            176
                                          ---------    ---------    ---------
Dilutive weighted  average  shares
  outstanding .........................      13,782       13,741       13,901
                                          =========    =========    =========

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

                                      F-4
<PAGE>
                             APS HOLDING CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                      (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                       CLASS A     ADDITIONAL                                      TOTAL
                                                    COMMON STOCK    PAID-IN   ACCUMULATED TREASURY  UNREALIZED STOCKHOLDERS'
                                                   SHARES   AMOUNT  CAPITAL     DEFICIT    STOCKS    GAIN/LOSS    EQUITY
                                                   -------   ----   --------   ---------    -----      -----    ---------
<S>                <C> <C>                         <C>       <C>    <C>        <C>          <C>        <C>      <C>      
Balance at January 28, 1995 ....................    13,722   $137   $154,845   $ (37,644)   $(120)     $--      $ 117,218
                                                                                                     
Issuance of common stock .......................         6    --          44        --       --         --             44
                                                                                                     
Net income for the year ........................      --      --        --         6,768     --         --          6,768
                                                   -------   ----   --------   ---------    -----      -----    ---------
Balance at January 27, 1996 ....................    13,728    137    154,889     (30,876)    (120)      --        124,030
                                                                                                     
Issuance of common stock .......................        36    --         174        --       --         --            174
                                                                                                     
Tax benefit associated with stock options ......      --      --         300        --       --         --            300
                                                                                                     
Unrealized gain on available-for-sale securities      --      --        --          --       --          901          901
                                                                                                     
Net loss for the year ..........................      --      --        --       (10,836)    --         --        (10,836)
                                                   -------   ----   --------   ---------    -----      -----    ---------
                                                                                                     
Balance at January 25, 1997 ....................    13,764   $137   $155,363   $ (41,712)   $(120)     $ 901    $ 114,569
                                                                                                     
Exercise of stock options ......................        26      1        238        --       --         --            239
                                                                                                     
Writedown on available-for-sale                                                                      
  securities ...................................      --      --        --          --       --         (901)        (901)
                                                                                                     
Net loss for the year ..........................      --      --        --       (95,293)    --         --        (95,293)
                                                   -------   ----   --------   ---------    -----      -----    ---------
Balance at January 31, 1998 ....................    13,790   $138   $155,601   $(137,005)   $(120)     $--      $  18,614
                                                   =======   ====   ========   =========    =====      =====    =========
</TABLE>
     The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-5
<PAGE>
                             APS HOLDING CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                  YEAR ENDED  YEAR ENDED   YEAR ENDED
                                                  JANUARY 31, JANUARY 25,  JANUARY 27,
                                                      1998        1997         1996
                                                   --------    --------    ---------
<S>                                                <C>         <C>         <C>      
Cash flows from operating activities:
    Net income (loss) ..........................   $(95,293)   $(10,836)   $   6,768
    Adjustments to reconcile net income
     (loss) to net cash provided
      by (used in) operating activities:
     Extraordinary item ........................       --          --          2,468
     Asset impairment and restructuring charge .     28,969        --         11,224
     Inventory writedown .......................      1,268        --           --
     Depreciation and amortization .............     13,123      12,094        7,794
     Amortization  of debt discount and debt
      issue costs ..............................      1,182         784          955
     Gain on sale of stores ....................       --        (1,343)        --
     Provision for bad debts ...................     12,809       9,472        3,786
     Income from supply agreement ..............       (200)       (423)      (1,535)
     Deferred income taxes .....................     19,228      (4,955)       2,503
     Tax benefit associated with stock options .       --           300         --
     Writedown on available-for-sale investments      1,916        --           --
     Change in operating assets and liabilities:
        Accounts receivable ....................     (7,872)      8,036      (22,697)
        Inventories ............................     45,044       7,098      (42,283)
        Prepaid expenses and other current
          assets ...............................     12,068      (4,652)      (6,343)
        Accounts payable .......................    (18,963)      3,713          449
        Accrued liabilities ....................     (5,327)        152       (2,368)

        Other assets and liabilities ...........     (5,795)     (5,117)      (2,615)
                                                   --------    --------    ---------
        Net cash provided by (used  in)
          operating activities .................      2,157      14,323      (41,894)
                                                   --------    --------    ---------
Cash flows from investing activities:
    Investment in notes receivable .............    (10,956)    (11,572)      (9,314)
    Proceeds from repayment of notes
      receivable ...............................     10,361      15,554        7,841
    Investment in available-for-sale
      securities ...............................       --        (2,500)        --
    Business acquisitions, net of cash acquired      (2,200)     (7,928)     (87,834)
    Proceeds from disposition of assets ........       --         4,843         --

    Capital expenditures .......................     (9,920)    (10,849)      (8,422)
                                                   --------    --------    ---------
        Net cash used in investing activities ..    (12,715)    (12,452)     (97,729)
                                                   --------    --------    ---------

Cash flows from financing activities:
    Change in book overdrafts ..................     (6,306)     (2,008)       8,314
    Proceeds from issuance of common stock .....        239         174           44
    Proceeds from term loans ...................       --          --         65,000
    Net borrowings under revolving credit
      facility .................................     23,300      18,900      148,400
    Proceeds from senior subordinated notes ....       --          --        100,000
    Retirement of long-term debt ...............    (15,471)    (13,453)    (167,968)
    Debt issuance costs ........................       --          --         (6,296)
                                                   --------    --------    ---------
        Net cash provided by financing
          activities ...........................      1,762       3,613      147,494
                                                   --------    --------    ---------

Net increase in cash and cash equivalents ......     (8,796)      5,484        7,871
Cash and cash  equivalents  at  beginning of
period .........................................     13,370       7,886           15
                                                   --------    --------    ---------

Cash and cash equivalents at end of period.....    $  4,574    $ 13,370    $   7,886
                                                   ========    ========    =========

Supplemental disclosures:
     Cash paid for interest...................     $ 25,304    $ 25,070    $  17,060
                                                   ========    ========    =========

     Cash paid  (refunded) for income taxes ....   $ (4,835)   $  2,289    $   5,223
                                                   ========    ========    =========
</TABLE>
     The accompanying notes are an integral part of the consolidated financial
statements.

                                      F-6
<PAGE>
                          APS HOLDING CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  PETITION FOR REORGANIZATION UNDER CHAPTER 11:

      On February 2, 1998, APS Holding Corporation ("APS Holding") and its
direct and indirect subsidiaries (collectively referred to as "the Company")
filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code
("Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware ("Bankruptcy Court"). Since February 2, 1998, the Company has been
operating as a debtor in possession ("DIP").

      As a debtor in possession, the Company is authorized to operate its
business, but may not engage in transactions outside of the normal course of
business without approval, after notice and hearing, of the Bankruptcy Court. A
creditors' committee was formed on February 13, 1998, which has the right to
review and object to business transactions outside the ordinary course and
participate in any plan or plans of reorganization.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Accordingly, the consolidated
financial statements do not purport to show (a) the realizable value of assets
on a liquidation basis or their availability to satisfy liabilities; (b)
ultimate pre-petition liability amounts that may be allowed for claims or
contingencies or the status and priority thereof; (c) the effect of any changes
that may be made to the capitalization of the Company; or (d) the effect of any
changes that may be made in the Company's business operations. The outcome of
these matters is not presently determinable. The continued viability of the
Company under Chapter 11 and subsequent to Chapter 11 is dependent upon, among
other factors, confirmation of a plan of reorganization and the ability to
generate sufficient cash from operations and financing sources to meet
obligations.

      As of February 2, 1998, actions to collect prepetition indebtedness were
stayed and other contractual obligations could not be enforced against the
Company. Certain prepetition liabilities are subject to approval by the
Bankruptcy Court for payment in the ordinary course of business.

      The Bankruptcy Code allows the debtor to either assume or reject certain
executory contracts, subject to Bankruptcy Court approval. Parties to contracts,
which are rejected, are entitled to file claims for losses or damages sustained
as a result of the rejection.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      GENERAL - The Company is a leading warehouse distributor of automotive
replacement parts in the United States, supplying over 1,650 parts stores owned
by independent operators, 273 company-owned stores and 214 Installers' Service
Warehouses ("ISW") from a network of 27 distribution centers at January 31,
1998("Fiscal Year 1998").

      PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of APS Holding and its wholly-owned and majority-owned
subsidiaries except for those where control is expected to be temporary. All
significant intercompany balances have been eliminated.

      FISCAL YEAR - The Company has adopted a fiscal year which ends on the last
Saturday in January.

      CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.

      CUSTOMER NOTES RECEIVABLE -The Company adopted Statement of Financial
Accounting Standards No.'s 114 and 118, "ACCOUNTING BY CREDITORS FOR IMPAIRMENT
OF A LOAN" and "ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN INCOME
RECOGNITION AND DISCLOSURES" (hereinafter collectively referred to as "SFAS No.
114") in the first quarter of the fiscal year ended January 27, 1996 ("Fiscal
Year 1996"). Under SFAS No. 114, certain impaired loans are required to be
measured based either on the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's observable market
price or the fair value of the collateral if the loan is collateral dependent.
Because the Company's customer notes receivable are generally collateral
dependent, the Company

                                      F-7
<PAGE>
generally assesses the value of such impaired notes receivable based upon the
fair value of each note's underlying collateral. As a result, the adoption of
SFAS No. 114 did not result in any adjustment to the Company's financial
statements.

      The adequacy of the allowance for losses on customer notes receivable is
periodically evaluated in order to maintain the allowance at a level that is
sufficient to absorb probable credit losses. Management's evaluation of the
adequacy of the allowance includes a review of each note's credit history, the
estimated value of collateral and other circumstances that may affect the
customer's ability to repay principal and interest. A customer's note receivable
is considered impaired when it is probable that the Company will be unable to
collect all amounts due according to the scheduled payments and other
contractual terms of the note. Impairment losses are included in the provision
for bad debts.

      Interest payments on impaired customer notes receivable are typically
applied to principal unless collectibility of the principal amount is fully
assured, in which case interest income is recognized on the cash basis.

      Customer notes receivable are generally classified as nonaccrual if they
are past due for 90 days or more, unless such notes are well-collateralized
and/or in the process of collection. Loans may be returned to accrual status
when all principal and interest amounts contractually due are reasonably assured
of repayment within an acceptable period of time, and there is a sustained
period of repayment performance for a minimum of three months.

The following table summarizes impaired loan information (in thousands):

                                              JANUARY 31, 1998  JANUARY 25, 1997
                                                    ------            ------
Impaired customer notes receivable                                
  with no loss reserves ...................         $1,586            $6,029
Impaired customer  notes receivable                               
  with loss reserves ......................              6              --
                                                    ------            ------
Total impaired customer notes                                     
receivable ................................         $1,592            $6,029
                                                    ======            ======
                                                               
                                                YEAR ENDED         YEAR ENDED
                                             JANUARY 31, 1998   JANUARY 25, 1997
                                             ----------------   ----------------
Average investment in impaired
  customer notes receivable...................      $1,419               $5,975
Interest income recognized on
  impaired loans..............................         148                  523
Cash basis interest income  recognized
  on impaired loans...........................          89                  184

An analysis of the allowance for credit losses follows (in thousands):

                                           YEAR ENDED   YEAR ENDED   YEAR ENDED
                                           JANUARY 31,  JANUARY 25,  JANUARY 27,
                                              1998         1997         1996
                                              ----         ----         ----
Balance at beginning of period                $375         $350         $500
Provisions charged to operating
 expense..............................         602           25          350
Loans charged off, net of
 recoveries...........................           -            -         (500)
                                              ----         ----         ----
Balance at end of period..............        $977         $375         $350
                                              ====         ====         ====


       INVENTORIES - Inventories, which consist of finished goods, are carried
at the lower of cost (FIFO) or market. Reserves are maintained for anticipated
customer returns and allowances.

       The cost of inventory at Company-owned stores includes overhead costs
incurred by the Company's distribution centers to prepare and ship inventory to
such stores. During the year ended January 25, 1997, the Company refined its
estimate of the rate used to capitalize overhead costs in store inventory. Such
change in 

                                      F-8
<PAGE>
estimate resulted in an increase in capitalized overhead in Company-owned store
inventory of approximately $1.7 million at January 25, 1997.

       VENDOR INCENTIVES - The Company receives from certain of its suppliers
volume rebates in connection with its inventory purchases as well as discounts
relating to the initial inventory purchased for a new ISW unit. These rebates
and discounts are treated as a component of inventory cost and are recorded to
cost of goods sold over an aggregate inventory turn.

       In addition, the Company receives from certain of its suppliers discounts
and allowances designated for advertising, promotional and discounting
activities as well as one-time changeover incentives for changing suppliers on
certain product categories. Such discounts and allowances are recorded to cost
of goods sold when earned. Product changeover incentives are recorded to
selling, general and administrative expenses to offset direct and indirect costs
incurred to carry out the product changeover. Selling, general and
administrative expenses for the year ended January 25, 1997 have been reduced by
the recognition of one-time supplier changeover and acquisition incentives in
the amount of approximately $12.1 million. Such incentives were provided in
connection with the acquisition and integration of Parts, Inc. into the Company.

       PROPERTY AND EQUIPMENT - Property and equipment are stated at cost or, in
the case of real property under capital leases, at cost or the present value of
future minimum lease payments. Expenditures for major renewals and betterments,
which extend the original estimated economic useful lives of the applicable
assets, are capitalized. Expenditures for normal repairs and maintenance are
charged to expense as incurred. The cost and accumulated depreciation of assets
sold or otherwise disposed of are removed from the accounts and any gain or loss
thereon is reflected in operations currently.

       Upon the decision to close facilities, the Company records a provision to
writedown the fixed assets at such facilities to be closed to their net
realizable value. Furthermore, a provision is established at that time to
reserve for estimated future lease costs and related obligations.

       Depreciation and amortization, including amortization of real property
leased under capital leases, are computed on a straight-line basis over the
estimated useful lives of the assets or the remaining terms of the leases.
Depreciation and amortization expense for property and equipment totaled $7.0
million, $6.4 million and $4.6 million for fiscal years ended January 31, 1998,
January 25, 1997 and January 27, 1996, respectively. A summary of the cost of
property and equipment and the estimated useful lives for financial reporting
purposes is as follows (in thousands):

                                    JANUARY 31,  JANUARY 25,    ESTIMATED
                                       1998         1997           LIVES
                                    -----------  -----------    ---------
         Land.......................$    4,174   $    4,034
         Buildings and improvements.    12,755       12,603         30 years
         Furniture and fixtures.....    16,454       16,003         10 years
         Leasehold improvements.....     7,974        7,964       2-25 years
         Machinery and equipment....    27,350       24,013       3-15 years
         Real property under capital 
          lease.....................    1,043         1,044       2-10 years
         Construction in progress...    7,005         2,771
                                    ---------     ---------
                                       76,755        68,432
         Accumulated depreciation and
           amortization:
             Property and equipment.  (34,724)      (23,086)
             Capital leases.........     (977)         (863)
                                    ----------   ----------
                                      $ 41,054     $ 44,483
                                    ==========   ==========

                                      F-9
<PAGE>
INTANGIBLE ASSETS - Intangible assets consisted of the following (in thousands):

                                    JANUARY 31,  JANUARY 25,       ESTIMATED
                                       1998         1997             LIVES
                                    -----------  -----------       ---------
         Excess of purchase price
           over fair value
           of net assets acquired... $  37,664     $ 34,192        5-40 years
         Associate jobber network...    18,600       18,600          30 years
         Leasehold equity...........     4,106        4,106        2-23 years
         Other intangible assets....       113          113           9 years
                                    ----------   ----------
                                        60,483       57,011
         Accumulated amortization...   (27,984)      (9,938)
                                    ----------   -----------

                                     $  32,499   $   47,073
                                     =========   ==========

Intangible assets are amortized on a straight-line basis over the estimated
life. Amortization expense for intangible assets totaled $2.6 million, $2.7
million and $2.2 million for fiscal years ended January 31, 1998, January 25,
1997 and January 27, 1996, respectively.

      Prior to the fourth quarter of Fiscal Year 1996, intangible assets were
assessed for impairment based on estimated undiscounted future operating income.
In the fourth quarter of Fiscal Year 1996, the Company adopted Statement of
Financial Accounting Standards No. 121, entitled "ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF" ("SFAS No.
121"), which requires evaluation of impairment based on undiscounted future cash
flows. If such cash flows are not expected to recover the unamortized cost, the
intangible assets are written down to fair value. The Company charged off $1.6
million of excess of purchase price over fair value of net assets acquired and
$0.6 million of property and equipment upon the adoption of SFAS No. 121 in
Fiscal Year 1996.

      In the fourth quarter of Fiscal Year 1998, the Company recorded non-cash
charges of approximately $15.8 million and $4.5 million for writedowns of
intangible assets and property and equipment. The intangible assets writedown
consisted of approximately $14.5 million related to excess of purchase price
over fair value of net assets acquired and $1.3 million related to the associate
jobber network. The intangible assets and property and equipment writedowns were
based on estimated future cash flows, which were impacted by management's review
of certain Company-owned stores, ISWs and distribution centers that potentially
could be closed. The writedowns are included in "Asset impairment and
restructuring charge" in the accompanying consolidated statement of operations.

      INVESTMENT IN AVAILABLE-FOR-SALE SECURITIES - Securities to be held for
indefinite periods of time, including securities that may be sold in response to
changes in interest rates or other similar factors, are classified as
available-for-sale and are carried at fair value. Fair values of securities are
estimated based on available market quotations. Unrealized holding gains and
losses, net of taxes, on available-for-sale securities are reported as a
separate component of stockholders' equity until realized. Realized gains and
losses upon the sale of available-for-sale securities are determined using the
specific identification method.

      The Company reviews its financial position, liquidity and future plans in
evaluating the criteria for classifying investment securities. Securities are
classified among categories at the time the securities are purchased. Declines
in the fair value of individual available-for-sale securities below their cost
that are other than temporary, result in a writedown of the individual
securities to their fair value. During the quarter ended January 31, 1998, the
Company recorded a $1.9 million realized loss on the writedown of its investment
in one of its jobbers.

      CAPITALIZED SOFTWARE DEVELOPMENT COSTS - The Company capitalizes costs to
develop software for internal use once conceptual formulation, design and
testing on each software project have been successfully completed. Such costs
capitalized generally include professional services rendered by third parties,
direct internal payroll and payroll-related costs for time spent directly on the
project, and interest costs incurred while developing internal-use software.
Upon completion of each software project, the Company plans to amortize each
project's capitalized cost over a period of up to five years.

                                      F-10
<PAGE>
      DEBT ISSUE COSTS - Debt issue costs relating to the Company's long-term
debt are included in deferred costs and other assets and are amortized to
interest expense over the scheduled maturity of the debt utilizing the interest
method. Unamortized debt issue costs relating to long-term debt retired prior to
its scheduled maturity are charged off as an extraordinary item.

      BOOK OVERDRAFTS - Certain of the Company's cash balances reflect credit
balances to the extent that checks written have not yet been presented to banks
for payment. Such balances are classified as "Book overdrafts" in the Company's
consolidated balance sheet.

      INCOME TAXES - The Company utilizes the liability method of accounting for
income taxes. Deferred income taxes are recognized for the tax consequences in
future years of differences in the tax basis of assets and liabilities and their
financial reporting amounts based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. A valuation allowance is established when necessary to reduce
deferred income tax assets to an amount that is more likely than not expected to
be realized.

      REVENUE RECOGNITION - The Company records sales when its products are
shipped. A reserve is maintained for anticipated returns and allowances, based
primarily on historical experience and current estimates.

      ADVERTISING COSTS - Advertising costs are expensed in the period the
advertising occurs. Advertising expense for fiscal years ended January 31, 1998,
January 25, 1997 and January 27, 1996 totaled approximately $6.4 million, $6.6
million, and $4.5 million, respectively.

      EARNINGS (LOSS) PER COMMON SHARE - In the fourth quarter of Fiscal Year
1998, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "EARNINGS PER SHARE," as required, and restated the
previously reported earnings per share amounts in conformity with SFAS No. 128.
The new standard specifies the computation, presentation, and disclosure
requirements for earnings per share.

      MANAGEMENT'S ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from these estimates.

      NON-CASH INVESTING ACTIVITIES - During the quarter ended October 25, 1997,
the Company exercised its rights as a secured creditor with respect to the
assets of one of its customers, resulting in the non-cash acquisition of assets
valued at approximately $3.5 million.

       NEW ACCOUNTING STANDARDS - The Company will adopt SFAS No. 130,
"REPORTING COMPREHENSIVE INCOME," during the first quarter of the year ended
January 30, 1996 ("Fiscal Year 1999"). SFAS No. 130 requires a statement of
comprehensive income to be included in the financial statements for fiscal years
beginning after December 15, 1997.

       The Company will adopt SFAS No. 131, "DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION," no later than the fourth quarter of the
year ended January 30, 1999 "Fiscal Year 1999." SFAS No. 131 establishes
standards for the manner in which public business enterprises report selected
information about operating segments.

       The Company will adopt the disclosure requirements of SFAS No. 132,
"EMPLOYER'S DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS", in
the fourth quarter of Fiscal Year 1999. SFAS No. 132 revises disclosure
requirements for pension and postretirement benefit plans as to standardize
certain disclosures and eliminate certain other disclosures no longer deemed
useful. SFAS No. 132 does not change the measurement or recognition criteria for
such plans.

3.  ASSET IMPAIRMENT AND RESTRUCTURING CHARGES:

                                      F-11
<PAGE>
       During the quarter ended July 25, 1997, the Company commenced
implementation of a comprehensive program for reducing costs and achieving
profitability. As part of such program, and in order to position the Company to
achieve improved operating performance, the Company has been consolidating
redundant administrative functions and has closed certain under-performing
facilities. The program included the planned closure of 50 ISWs and 15
Company-owned stores. At January 31, 1998, the program has resulted in the
closure of 50 ISWs and 11 Company-owned stores. Aggregate revenue from such
facilities was approximately $14.9 million during the year ended January 31,
1998, compared to approximately $23.8 million in the prior Fiscal Year.
Aggregate losses before income taxes and after overhead allocations from such
facilities were approximately $2.6 million for the year ended January 31, 1998,
compared to approximately $1.6 million in the prior fiscal year. As a result of
such program, during the quarter ended July 25, 1997, the Company recorded a
restructuring charge of approximately $8.7 million. Such charge consisted of
approximately $2.2 million for estimated costs to close facilities,
approximately $1.4 million of employee severance benefits related to personnel
reductions of approximately 570 employees (including field and corporate level
staff reductions), approximately $3.2 million for future lease and related
obligations and approximately $1.9 million of asset impairments. In addition, in
connection with such restructuring program, approximately $1.3 million was
charged to cost of goods sold during the quarter ended July 25, 1997 for
inventory write-offs expected in connection with facility closures, and
approximately $1.8 million was charged to selling, general and administrative
expenses for incremental bad debt expected in connection with such closures.
During the year ended January 31, 1998, approximately $4.1 million of costs were
charged to the liabilities and reserves established at July 25, 1997 for such
restructuring and related charges (including approximately $1.1 million of
employee severance). Approximately $2.7 million of such charges were recorded as
liabilities at January 31, 1998.

       On January 25, 1996, the Company acquired all of the outstanding stock of
Parts, Inc. ("PI") from GKN Parts Industries Corporation ("GKN") for a purchase
price, as adjusted, of $74.9 million (the "PI Acquisition"). The PI acquisition
was accounted for as a purchase and, accordingly, the purchase price was
allocated to PI's assets and liabilities based on the estimated fair value as of
the date of acquisition. Such liabilities included $9.2 million of costs to exit
PI facilities. The excess purchase price over the estimated fair value of
identifiable net assets acquired was approximately $18.2 million and is being
amortized using the straight-line method over 30 years. PI's results of
operations for the two days between the consummation of the PI Acquisition and
the Company's fiscal year end were immaterial to the Company's results of
operations for the fiscal year ended January 27, 1996.

       The Company's financial statements at January 31, 1998 also include
liabilities and reserves in the aggregate amount of $3.0 million for costs
related to the closure and consolidation of certain facilities and
administrative functions pursuant to programs of rationalization implemented by
the Company during the fiscal year ended January 27, 1996 in connection with the
PI Acquisition. The Company attained a majority of the program's objectives
during the year ended January 25, 1997 and expects final completion of such
programs during the fiscal year ending January 30, 1999. During the year ended
January 31, 1998, the Company charged approximately $2.6 million against such
liability and reserves, including approximately $0.2 million of employee
termination costs.

4.  ACCRUED LIABILITIES:

      Accrued liabilities consisted of the following (in thousands):

                                             JANUARY 31, 1998  JANUARY 25, 1997

         Payroll, benefits and related items     $   8,088           $ 12,087
         Facility closure reserves .........         6,265              7,970
         Insurance reserves.................         2,973              4,763
         Interest...........................         7,852              1,748
         Customer return reserves...........         4,042              3,413
         Customer rebates and discount .....         2,788              3,823
         Advertising and sales promotion....         3,318              1,418
         Other..............................        12,930              9,137
                                                 ---------          ---------
                                                  $ 48,255           $ 44,359
                                                  ========           ========

                                      F-12
<PAGE>
5.  DEBT:

COMPONENTS OF LONG-TERM DEBT

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

                                                         JANUARY      JANUARY  
                                                         31, 1998     25, 1997
                                                         ---------    ---------
New Credit Agreement:
Term Loans, payable in installments through 1999 .....   $  37,000    $  52,000
Revolving Credit Facility, payable in 2000 ...........     190,600      167,300
11.875% Senior Subordinated Notes due 2006 ...........     100,000      100,000
Note payable in installments through 2013 at 7.5% ....         959          992
Other ................................................         682        1,120
                                                         ---------    ---------
                                                           329,241      321,412
Less current maturities ..............................    (328,034)     (15,471)
                                                         ---------    ---------
                                                         $   1,207    $ 305,941
                                                         =========    =========

DEBTOR IN POSSESSION FINANCING AND SENIOR BANK CREDIT AGREEMENT. 

     On February 2, 1998, the Bankruptcy Court gave approval on an interim basis
for $45 million of a $100 million DIP financing facility ("DIP Financing") with
a syndicate of bank lenders led by The Chase Manhattan Bank ("Senior Lenders").
On February 26, 1998, the Bankruptcy Court gave final approval to the facility.
The amount of new loans that may be outstanding at any time may not exceed a
maximum that varies from month to month ranging from $40 million to $65 million
(exclusive letters of credit).

     The DIP financing approved by the Bankruptcy Court is provided for in a new
Revolving Credit, Term Loan, Guarantee Agreement ("DIP Financing Facility"). The
DIP Financing Facility includes the new DIP financing referred to above
("Tranche A") and approximately $228 million of borrowings that were outstanding
under the previous revolving credit facility and term loan facilities ("Previous
Bank Credit Agreement"), which were refinanced in the amount of $228 million
("Tranche B") and combined with the new DIP Financing Facility into a single
post-filing date facility. The $228 million is classified as a current liability
at year end. The Tranche A loans are available on a revolving loan basis, and
the Tranche A facility includes a $20 million sub-facility for letters of
credit, subject to certain restrictions. The DIP Financing Facility has a
superpriority administrative claim as well as a first priority security interest
in and lien upon all of the Company's assets. The Tranche A and B borrowings
bear interest at the Company's option of either the bank agent's stated base
rate plus a margin of 1.5% or at LIBOR plus a margin of 2.5% for Tranche A
borrowings or 2.75% for Tranche B borrowings. The DIP Financing Facility has a
final maturity date of January 31, 1999 and includes various covenants and
restrictions on the Company and its business. While the Company has been in
compliance with its covenants through March 1998, it is likely that continuation
of unfavorable operational conditions may require the Company to seek
modification of its current bank covenants during the second or third quarter of
the current fiscal year. If the bank should not agree to any such modifications
the Company would be in default under the DIP Financing Facility. If such
modifications were not made or if any such default were not waived, the Company
might have to pursue a sale or orderly liquidation of its business.

       Under the Previous Bank Credit Agreement, as of December 8, 1997, the
Company obtained a waiver of its Consolidated Leverage Ratio, Fixed Charge
Coverage Ratio and Minimum Net Worth covenant requirements (the "Financial
Covenants"). Pursuant to such waiver, aggregate borrowings under the Previous
Bank Credit Agreement were limited to $204.7 million until February 10, 1998.
Effective as of December 8, 1997, lenders under the Previous Bank Credit
Agreement agreed, during the period from December 31, 1997 to the earliest of
(i) February 10, 1998, (ii) the date on which a default or event of default
under the Previous Bank Credit Agreement (other than as a result of the
Company's failure to comply with the Financial Covenants at January 31, 1998)
occurs and (iii) the effective date of a new financing, to allow the Company to
continue to borrow under the Previous Bank Credit Agreement (notwithstanding the
expiration after December 31, 1997 of the waiver of the Financial Covenants) and
to forebear from exercising any of their rights or remedies against the Company
under the Previous Bank Credit Agreement and related documents as a result of
the Company's failure to comply with the Financial Covenants at January 31,
1998. The $204.7 million borrowing limit under the previous revolving credit
facility was in effect during this period. If the Company had not obtained the
DIP Financing Facility or otherwise obtained an amendment to the Previous Bank
Credit Agreement to cure its failure to comply with the Financial Covenants
prior to February 10,

                                      F-13
<PAGE>
1998, at any time thereafter the lenders could have accelerated the maturity of
the outstanding loans under the Previous Bank Credit Agreement. The entire
amount outstanding under the Previous Bank Credit Agreement has been classified
as a current liability at January 31, 1998.

       As of January 31, 1998, the Company had aggregate borrowings under the
Previous Bank Credit Agreement of $227.6 million, consisting of $190.6 million
and $37.0 million in borrowings outstanding under the previous revolving credit
facility and previous term loan facility, respectively, and approximately $3.6
million in outstanding letters of credit under the Previous Bank Credit
Agreement. Borrowing availability under the Previous Bank Credit Agreement at
January 31, 1998 after taking into account borrowing base restrictions and
outstanding letters of credit and the waiver described in the above paragraph,
was approximately $3.2 million; however, the Company had cash on hand of
approximately $4.6 million as of January 31, 1998. Borrowings under the Previous
Bank Credit Agreement bore interest at variable rates based in part upon the
Company attaining certain financial ratios. At January 31, 1998, such were rates
at the maximum levels provided for under the interest rate pricing structure, as
a result of the Company's current financial ratios. The weighted average
interest rates borne by the loans under the Previous Bank Credit Agreement were
8.55% and 7.23% , respectively, as of January 31, 1998 and January 25, 1997. The
obligations of A.P.S., Inc., APS Holding Corporation's wholly owned subsidiary,
under the Previous Bank Credit Agreement are guaranteed by APS Holding
Corporation and each of A.P.S., Inc.'s wholly owned subsidiaries, and are
collateralized by pledges of the capital stock of A.P.S., Inc. and such
subsidiaries, by security interests in substantially all of the Company's
personal property and by mortgages on certain of its owned real property.

       During the year ended January 27, 1996, the Company recorded an
extraordinary charge of $2.5 million, consisting of the write-off of unamortized
debt issue costs of $3.9 million, net of an income tax benefit of $1.4 million.

SENIOR SUBORDINATED NOTES

       The PI Acquisition was financed through the private placement of $100.0
million principal amount of the Company's senior subordinated notes (the
"Notes"). The net proceeds from the sale of the Notes were used to pay the
approximately $79.7 million cash payment at closing for the PI Acquisition, to
pay related fees and expenses and to repay a portion of the borrowings under a
prior credit agreement. Prior to the Chapter 11 Proceedings the Notes would have
matured on January 15, 2006 and bore interest at a rate of 11.875%, payable
semiannually on January 15 and July 15 of each year. During the year ended
January 25, 1997, the Company filed a registration statement with the Securities
and Exchange Commission (the "SEC"), pursuant to which it made and completed an
offer to exchange registered Notes for all of the initially issued Notes. The
Company did not make its scheduled interest payment on the Notes on January 15
,1998. The Chapter 11 Proceedings and missed interest payment constituted an
event of default under the indenture relating to the Notes. As a result of the
Chapter 11 Proceedings, the Notes have been accelerated, but payments are not
currently being made. The entire amount outstanding under the Notes at January
31, 1998 has been classified as a current liability.

GUARANTEE OF LONG-TERM DEBT

       APS Holding and all of the current wholly-owned subsidiaries of A.P.S.,
Inc. (the "Subsidiaries") have jointly and severally guaranteed the payment of
A.P.S., Inc.'s obligations under the Notes and the New Credit Facility. Separate
financial statements of A.P.S., Inc. and the Subsidiaries are not presented
herein because the Subsidiaries have jointly and severally guaranteed payment of
A.P.S., Inc.'s obligations under the Notes and because the aggregate assets,
liabilities, net loss and equity of A.P.S., Inc. and the Subsidiaries are
substantially equivalent to the assets, liabilities, net loss and equity of APS
Holding on a consolidated basis.

                                      F-14
<PAGE>
LONG-TERM DEBT MATURITIES

       The aggregate maturities of long-term debt for the fiscal years
subsequent to the fiscal year ended January 31, 1998 are as follows (in
thousands):

                  1999........................ $   328,034
                  2000........................         322
                  2001........................          41
                  2002........................          45
                  2003........................          48
                  Thereafter..................         751
                                               -----------
                                               $   329,241
                                               ===========

6.  COMMITMENTS AND CONTINGENCIES:

LITIGATION

      The Company is involved in various claims and disputes arising in the
normal course of business, including the matter of BARRY S. LAMM AND LAMM AUTO
STORES, INC. V. PARTS, INC., PARTS PLUS, ET AL, which was filed in The Circuit
Court of Mobile County, Alabama on June 21, 1996. The plaintiff in such case
seeks both compensatory and punitive damages in making a number of claims,
including both willful and reckless misrepresentation, suppression of material
fact, promissory fraud (all in violation of the Code of Alabama), and
conspiracy, breach of contract and intentional interference with contractual or
business relationships, all in connection with the operation of an automotive
parts business by the plaintiff while a customer of Parts, Inc. The Company
entered into an agreement with the plaintiff's counsel to settle this action for
a payment of $2.35 million. As a result of the Company's bankruptcy proceeding,
no payment was paid and this action, as to the Company, is now stayed. The
Company believes that the costs of defending such action as well as the
settlement, are the subject of a contractual indemnification by GKN Parts. The
Company has made a claim for indemnity to GKN Parts, which has been denied.

ENVIRONMENTAL

      The Company has been notified that it is considered a potentially
responsible party in connection with federal or state environmental clean-up
investigations at a landfill location, which is a "Superfund" site identified on
the National Priorities List of the Environmental Protection Agency in
connection with the Comprehensive Environmental Response, Compensation and
Liability Act of 1980. The Company has not incurred, and does not expect to
incur, any material liability, either individually or in the aggregate, in
connection with this site, although no assurance can be given in this regard.

      In addition, the Company is aware of investigations of two other
locations, including one site formerly operated by a former A.P.S., Inc.
subsidiary. In part because these investigations are in the preliminary stages,
the Company cannot currently estimate what liabilities, if any, it may have with
respect to these matters. The Company believes that, pursuant to an agreement
with Wickes Companies, Inc. ("Wickes") (the predecessor parent company of
A.P.S., Inc., now an indirect wholly owned subsidiary of Collins & Aikman
Corporation), Wickes will be required to indemnify the Company against any
liabilities associated with such former A.P.S., Inc. subsidiary's operations.
Since the divestiture from Wickes, the Company has not incurred any material
liabilities in connection with any matter for which Wickes has indemnified the
Company, nor has the Company experienced any difficulties in obtaining
appropriate indemnification for such matters as have arisen. The Company
believes, however, that Wickes may be a highly leveraged entity, and there can
be no assurance that the Company will not experience any such difficulties in
the future.

                                      F-15
<PAGE>
LEASES

      The Company has entered into operating and capital leases for land,
buildings and equipment. Certain land and building leases provide that the
Company pay taxes, maintenance, insurance and other occupancy expenses
applicable to the leased premises. Additionally, certain vehicle and equipment
leases provide for short lease terms with month to month renewal options and
guaranteed residual clauses. Generally, the leases provide for renewal for
various periods at stipulated rates. Rental expense for fiscal years ended
January 31, 1998, January 25, 1997 and January 27, 1996 was approximately $26.8
million, $28.8 million and $17.2 million, respectively.

      Future minimum lease payments under capital leases and noncancellable
operating leases (net of sublease rental income of $1.5 million) as of January
31, 1998 are as follows (in thousands):

                                          CAPITAL    OPERATING
          FISCAL YEAR                     LEASES       LEASES
                                         --------     -------
             1999........................   $163      $17,631
             2000........................     51       13,562
             2001........................      -        9,422
             2002........................      -        5,203
             2003........................      -        3,349
             Thereafter..................      -        3,063
                                         --------     -------
             Total minimum obligations...    214      $52,230
                                                      =======
             Less estimated interest.....   (14)  
                                         -------

             Present value of net minimum
              obligations................    200
             Less current portion........    151
                                         -------
             Long-term obligations
              under capital leases          $ 49
                                         =======

The Bankruptcy Code allows the debtor to either assume or reject certain
executory contracts, subject to Bankruptcy Court approval. Parties to contracts
which are rejected are entitled to file claims for losses or damages sustained
as a result of the rejection.

CONCENTRATION OF CREDIT RISK

      The Company is engaged in the distribution of automotive replacement parts
and accessories. Approximately 53% of the Company's sales for the Fiscal Year
1998 were derived from independently owned jobbers that participate in the "Big
A Program." The remaining 47% of sales are derived from company-owned stores and
ISWs that sell automotive replacement parts and accessories to service stations,
repair shops, garages, dealers, farmers, fleet operators, retail consumers and
other customers. Allowances are maintained for potential credit losses on
customer accounts which generally do not require collateral. No single customer
accounted for more than 3% of the Company's total sales in the fiscal years
ended January 31, 1998, January 25, 1997 or January 27, 1996.

      Most major categories of automotive replacement parts have more than one
competitive supplier. However, the Company typically sources each of its Big A
program product lines from one supplier. Management believes that alternative
sources are available for each of the Company's Big A program product lines.

      The Company invests its excess cash in unsecured commercial paper issued
by a major bank. The Company had no such cash investments at January 31, 1998
and $138,000 at January 25, 1997.

     Notes receivable are comprised of finance arrangements whereby the Company
offers financial assistance to its associated jobbers for inventory purchases
and, to a lesser extent, for general working capital needs. Such notes
receivable are generally collateralized by the business assets including
inventories and guarantees from the 

                                      F-16
<PAGE>
principals of the borrowers. Such notes generally have a seven-year maturity and
have interest rates at two to three percent above a floating prime rate (8.5% at
January 31, 1998 and January 25, 1997). As of January 31, 1998, the average
loan principal balance was approximately $165,000 and the largest loans in the
portfolio were to three associated jobbers who had, in the aggregate,
outstanding principal balances of $2.5 million, $.8 million and $0.7 million,
respectively.

OTHER CONTINGENCIES

      Certain of the Company's customers finance a portion of their inventories
through financial institutions. Under the terms of the arrangements with these
financial institutions, the Company may be required, in limited circumstances,
to repurchase inventory collateralizing the borrowings. Based on previous
history, occasions on which the Company has been called upon to repurchase such
inventory have been infrequent, and, on such occasions, the Company has
successfully resold the inventory that it repurchased. The Company believes any
future performance required under these repurchase agreements will not have a
material adverse affect on its financial condition.

7.  INCOME TAXES:

       The components of deferred tax assets and liabilities are as follows (in
thousands):

                                                      JANUARY      JANUARY 
                                                      31, 1998     25, 1997
                                                        ------      -------
         Deferred tax assets:
            Allowance for bad debts.................. $  4,673    $   3,518
            Inventories..............................    7,623        6,953
            Intangible assets........................    6,590        1,444
            Accrued expenses.........................    6,206        5,272
            Deferred income..........................      362          432
            Other liabilities........................      452          797
            Net operating loss carryforwards.........   20,726        4,824
                                                        ------      -------
                                                        46,632       23,240
            Less: Valuation Allowance................  (44,980)          -
                                                        ------      -------
                                                         1,652       23,240
          Deferred tax liabilities:
            Property and equipment...................      249        1,728
            Prepaid pension cost.....................    1,033        1,008
            Unrealized gain on securities available
             for sale................................       -           576
            Deferred costs...........................      358          700
            Investment in joint ventures ............       12           -
                                                        ------      -------
                                                         1,652        4,012
                                                        ------      -------
            Net deferred tax asset...................   $   -       $19,228
                                                        =======     =======

       Realization of deferred tax assets, including those associated with net
operating loss carryforwards, is dependent upon generating sufficient taxable
income. In the fourth quarter of Fiscal Year 1998, the Company recorded a
valuation allowance of $45.0 million to writedown deferred tax assets to zero,
due to the level of uncertainty surrounding the Company's ability to generate
sufficient future taxable income.

                                      F-17
<PAGE>
The components of income tax expense (benefit) for fiscal years ended January
31, 1998, January 25, 1997 and January 27, 1996 are as follows (in thousands):

                                     YEAR ENDED      YEAR ENDED    YEAR ENDED
                                     JANUARY 31,     JANUARY 25,   JANUARY 27,
                                        1998            1997          1996
                                      -------       ---------         ------
Current federal income tax
  provision (benefit)............    $    353        $   (525)       $ 1,283
Current state income tax
  provision .....................         140             233            206
Deferred income tax provision....      19,228          (4,955)         2,503
                                      -------       ---------         ------
                                       19,721          (5,247)         3,992
Tax benefit applicable to
  extraordinary item.............           -               -          1,455
                                      -------       ---------         ------
                                      $19,721        $ (5,247)       $ 5,447
                                      =======       =========         ======

      A reconciliation of the Company's income tax expense (benefit) and the
amount computed by applying the statutory federal income tax rate to income
(loss) before income taxes and extraordinary item for the years ended January
31, 1998, January 25,1997 and January 27, 1996 is as follows:

                                         YEAR ENDED    YEAR ENDED    YEAR ENDED
                                         JANUARY 31,    JANUARY 25,  JANUARY 27,
                                            1998          1997          1996
                                          ---------     ---------     ---------
Statutory tax
  rate ................................     (35.0)%       (35.0)%        35.0%
State income taxes, net of
  federal benefit .....................        .2           1.4           1.2
Other items ...........................       1.4           1.0           0.9
Change in  valuation allowance ........      59.4          --            --
                                         ---------     ---------     ---------
                                             26.0%        (32.6)%        37.1%
                                         ---------     ---------     ---------

       As of January 31, 1998, the Company had an estimated net operating loss
carryforward for income tax reporting purposes of approximately $59 million
which will expire in fiscal year 2013.

8.  STOCK OPTION PLANS:

       In March 1990, APS Holding's board of directors approved the APS Holding
Corporation 1990 Employee Stock Option Plan (the "1990 Stock Option Plan"). The
1990 Stock Option Plan, as amended, reserved up to 126,316 shares of Class A
Common Stock and is available to certain officers and key employees of the
Company. Unless otherwise specified, options granted under the 1990 Stock Option
Plan are exercisable for up to ten years at an exercise price of $7.125 per
share. Stock option activity under the 1990 Stock Option Plan was as follows:
<TABLE>
<CAPTION>
                                             YEAR ENDED                      YEAR ENDED                       YEAR ENDED
                                         JANUARY 31, 1998                 JANUARY 25, 1997                  JANUARY 27, 1996
                                  -------------------------------  -------------------------------  -------------------------------
                                                      WEIGHTED                         WEIGHTED                       WEIGHTED
                                                      AVERAGE                           AVERAGE                        AVERAGE
                                      SHARES          EXERCISE          SHARES          EXERCISE         SHARES        EXERCISE
                                    OUTSTANDING        PRICE         OUTSTANDING         PRICE        OUTSTANDING       PRICE
                                   -------------    -------------   -------------    -------------   -------------   -------------
<S>                                <C>                       <C>           <C>       <C>             <C>    <C>   
Options outstanding,
  beginning of year ............          58,566    $        7.13          67,634    $        7.13          71,866   $        7.13
Granted ........................            --                               --               --              --              --
Exercised ......................         (14,035)            7.13          (8,850)            7.13          (4,232)           7.13
Terminated .....................            --               --              (218)            --              --              7.13
                                   -------------    -------------   -------------    -------------   -------------   -------------
Options outstanding, end of year          44,531    $        7.13          58,566    $        7.13          67,634   $        7.13
                                   =============    =============   =============    =============   =============   =============
Available for grant at end
  of year ......................          37,826             --            37,826             --            37,826            --
                                   =============    =============   =============    =============   =============   =============
Exercisable at end of year .....          44,531    $        7.13          58,566    $        7.13          67,634          $ 7.13
                                   =============    =============   =============    =============   =============   =============
</TABLE>
                                      F-18
<PAGE>
      In March 1993, APS Holding's board of directors adopted, and APS Holding's
stockholders subsequently approved, the APS Holding Corporation 1993 Stock
Option Plan (the "1993 Stock Option Plan"). The 1993 Stock Option Plan, as
amended, reserved up to 700,000 shares of Class A Common Stock and is available
to key employees (including officers and directors who are also key employees)
of the Company. Options may be granted in the form of either incentive options
within the meaning of Section 422(b) of the Internal Revenue Code of 1986
("Incentive Stock Options") or options which do not constitute Incentive Stock
Options. The exercise price of Incentive Stock Options may not be less than the
fair market value of Class A Common Stock on the date of grant. The exercise
price of options which do not constitute Incentive Stock Options may not be less
than 50% of the fair market value of Class A Common Stock on the date of grant.
Unless otherwise specified, options granted under the 1993 Stock Option Plan
become exercisable in 20% increments on each of the first five anniversaries of
the date of grant. Each option shall terminate and shall not be exercisable on
or after the tenth anniversary of its date of grant. All options granted through
January 31, 1998 vest in increments of one-third or one-fifth per year. For
options issued during the year ended January 29, 1994, deferred compensation,
representing the difference between the option price and estimated fair market
value of the stock at the date of grant, was approximately $97,000 and was
charged to operations over the three year vesting period of such options. 
There was no compensation expense for the year ended January 31, 1998 and
approximately $9,000 and $32,000, respectively for the years ended January 25,
1997 and January 27, 1996. Stock option activity under the 1993 Stock Option
Plan was as follows:
<TABLE>
<CAPTION>
                                                YEAR ENDED                        YEAR ENDED                  YEAR ENDED
                                             JANUARY 31, 1998                  JANUARY 25, 1997            JANUARY 27, 1996
                                         ---------------------------   ----------------------------   -----------------------------
                                                           WEIGHTED                       WEIGHTED                        WEIGHTED
                                                           AVERAGE                        AVERAGE                          AVERAGE
                                            SHARES         EXERCISE        SHARES         EXERCISE        SHARES          EXERCISE
                                          OUTSTANDING        PRICE       OUTSTANDING       PRICE       OUTSTANDING         PRICE
                                         ------------    ------------   ------------    ------------   ------------    ------------
<S>                                           <C>        <C>                 <C>        <C>                 <C>        <C>         
Options outstanding, beginning of year        432,607    $      16.44        350,490    $      16.63        258,040    $      12.02
Granted ..............................        212,886            9.96        178,459           16.97         93,550           29.50
Exercised ............................       (117,017)           3.56        (29,474)           5.26           --              --
Terminated ...........................       (168,621)          17.17        (66,868)          23.81         (1,100)          29.50
                                         ------------    ------------   ------------    ------------   ------------    ------------
Options  outstanding, end of year ....        359,855    $      16.45        432,607    $      16.44        350,490    $      16.63
                                         ============    ============   ============    ============   ============    ============
Available for grant at end of year ...        192,627            --          237,559            --           42,492            --
                                         ============    ============   ============    ============   ============    ============
Exercisable at end of year ...........         78,800    $      22.38        171,971    $       9.86        159,645    $       7.17
                                         ============    ============   ============    ============   ============    ============
Weighted-average fair value of options
 granted during the year .............   $       5.24            --     $       7.15            --     $      13.49            --
                                         ============    ============   ============    ============   ============    ============
</TABLE>
     In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, entitled "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS No. 123") which
is effective for the Company's fiscal year ending January 25, 1997. SFAS No. 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans. It defines a fair value based method of accounting
for an employee stock option or similar equity instrument and encourages all
entities to adopt that method of accounting for all of their employee stock
compensation plans and include the cost in the income statement as compensation
expense. However, it also allows an entity to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, entitled "ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES" ("APB Opinion No. 25"). The Company accounts for
compensation cost for stock option plans in accordance with APB Opinion No. 25.

      The fair value of each stock option granted is estimated on the grant date
using the Black-Scholes option-pricing model with the following weighted-average
assumptions for grants for the years ended January 31, 1998 and 

                                      F-19
<PAGE>
January 25, 1997, respectively: dividend yield of 0.00% for both years;
risk-free interest rates 6.42% and 6.16%, respectively, the expected lives of
the options are 5 years for both years; and volatility of 43.32% and 32.95%,
respectively.

The following table summarizes information about stock options outstanding at
January 31, 1998:
<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE                             
                                ------------------------------------            -----------------------                           
                      Number     Weighted Average                            Number                                      
  Range of          Outstanding      Remaining       Weighted Average     Exercisable  Weighted Average         
EXERCISE PRICE       AT 1/31/98  CONTRIBUTION LIFE    EXERCISE PRICES    AT 1/31/98    EXERCISE PRICE 
----------------    ------------ -----------------  ----------------    -------------- ----------------
<S>                   <C>              <C>               <C>               <C>           <C>   
$3.56 to $15.25          217,924             5.06             $10.05            13,771           $15.33
$15.50 to $29.50         142,958             7.54              26.21            65,029            23.87
----------------    ------------ -----------------  ----------------    -------------- ----------------
$3.56 to $29.50          360,882              6.05            $16.45            78,800           $22.38
================    ============ =================  ================    ============== ================
</TABLE>

       Had the compensation cost for the Company's stock-based compensation plan
been determined consistent with SFAS No. 123, the Company's net loss and net
loss per common share for the fiscal years ended January 31, 1998 and January
25, 1997 would approximate the following pro forma amounts:
<TABLE>
<CAPTION>
                                                        YEAR ENDED       YEAR ENDED
                                                      JANUARY 31, 1998 JANUARY 25, 1997
                                                      ---------------- ----------------
                                                               (In thousands,
                                                           except per share data)
<S>                                                      <C>          <C>       
       Net loss - as reported............                $(95,293)    $ (10,836)
       Net loss - pro forma..............                 (95,662)      (11,232)

       Basic and diluted loss per share - as reported      $(6.91)      $ (0.79)
       Basic and diluted loss per share - pro forma         (6.94)        (0.82)
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards issued prior
to fiscal year ended January 27, 1996. Accordingly, as most of the options vest
over either a three or five year period, the full impact of the pro forma
disclosure will not be reflected until fiscal years ending January 31, 1998 and
January 29, 2000, respectively.

9.  RETIREMENT PLANS:

      The Company has two defined benefit plans, the A.P.S., Inc. Employees'
Retirement Plan (the "APS Plan") and the A.P.S., Inc. Master Hourly Plan,
formerly "The Mid-Con Corporation Retirement Income Plan" (the "Master Hourly
Plan") (collectively referred to as the "Plans"). These defined benefit pension
plans cover substantially all full-time employees who have completed one year of
service and reached the age of 21. Generally, benefits are based on years of
service and the employees' average final compensation integrated with Social
Security Benefits as defined in the Plans' agreements. The Company's funding
policy is to contribute to the Plans such amounts as are actuarially required to
fund the benefits of the Plans. In September 1992, A.P.S., Inc.'s Board of
Directors authorized a freeze of pension benefits offered under the APS Plan and
participants in the APS Plan became fully vested.

The components of pension income are as follows (in thousands):

                               YEAR ENDED        YEAR ENDED        YEAR ENDED
                            JANUARY 31, 1998  JANUARY 25, 1997  JANUARY 27, 1996
                            ----------------  ----------------  ----------------
Service cost ...................  $    10          $  11          $     8   
Interest cost ..................      420            379              392
Return on plan assets ..........   (1,337)           287           (1,907)
Net amortization and deferral ..      861           (809)           1,503
                                  -------          -----          -------
                                  $   (46)         $(132)         $    (4)
                                  =======          =====          =======

                                      F-20
<PAGE>
      A reconciliation of the Plans' projected benefit obligation to the prepaid
pension asset included in the accompanying consolidated balance sheets is as
follows (in thousands):

                                           JANUARY 31, 1998  JANUARY 25, 1997
                                           ----------------  ----------------
      Actuarial present value of 
          benefit obligations:
         Vested benefits.................       $ 5,919         $  5,420
         Nonvested benefits..............             -                3
                                               --------        ---------

         Accumulated benefit obligation..         5,919            5,423
         Effect of projected salary increases         -               57
                                               --------        ---------
         Projected benefit obligation for 
          services rendered to date......         5,919            5,480

      Plan assets at fair value, primarily
        cash and cash equivalents and fixed 
        income securities                         8,205            7,087
                                               --------        ---------
      Plan assets in excess of projected 
        benefit obligation                        2,286            1,607
      Unrecognized net loss..............           758            1,390
                                               --------        ---------

      Noncurrent prepaid pension cost....       $ 3,044         $  2,997
                                                =======         ========

The rates used in determining the actuarial present value of benefit obligations
are as follows:

                                               YEAR ENDED         YEAR ENDED
                                            JANUARY 31, 1998   JANUARY 25, 1997
      Actuarial assumptions:
         Investment return................        7.75%             7.75%
         Discount rate....................        7.00%             7.75%
         Salary increase..................          -                 -

      The Company also has the A.P.S., Inc. Partnership Plan (the "Partnership
Plan"), a defined contribution plan covering substantially all employees who
have completed one year of service and reached the age of 21. Employees may
contribute 2% to 15% of their annual compensation, which is matched 50% by the
Company up to 6% of the employees' contribution. Employees become fully vested
in the Company's contribution to the plan after five years of service. The cost
of Company contributions for fiscal years ended January 31, 1998, January 25,
1997 and January 27, 1996 was approximately $1,180,000, $1,225,000 and $926,000,
respectively.

      During the fiscal year ended January 25, 1997, the Company implemented the
A.P.S., Inc. Executive 401(K) Deferral Plan (the "Deferral Plan"), a defined
contribution plan covering a group of key management employees who also
participate at the maximum contribution level of 3% in the Company's Partnership
Plan. Participants in the Deferral Plan may contribute up to 28% of their annual
compensation, in addition to their contribution to the Partnership Plan. Such
contributions will be matched 50% by the Company up to 6% of the participants'
combined contributions to both plans. Participants' vesting rates in the
Partnership Plan carry over to the Deferral Plan and participants become fully
vested in the Company's contributions to both plans after five years. The cost
of the Company contributions for fiscal year ended January 31, 1998 was
approximately $63,000.

10.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

      The cost, gross realized holding loss and fair value of the Company's
available-for-sale securities at January 31, 1998 was approximately $2,500,000,
$1,916,000 and $584,000, respectively. The fair value of the Company's Notes
($39,000,000 at January 31, 1998 and $106,250,000 at January 25, 1997) is based
upon quoted market prices. The fair value of the Company's interest rate swap
agreements (none at January 31, 1998 and $1,615 at January 25, 1997) is based on
estimates obtained from counterparties and represents the Company's cash outlay
if the agreements had been settled at year end. The estimated fair values of all
of the Company's other financial 

                                      F-21
<PAGE>
instruments approximate their carrying amounts in the Consolidated Balance
Sheets.

11.  RELATED PARTY TRANSACTIONS:

      Clayton, Dubilier & Rice, Inc. ("CD&R"), which organized APS Holding and
related entities for the purpose of acquiring A.P.S., Inc. (the "Acquisition"),
is a private investment firm specializing in leveraged acquisitions involving
management participation. In connection with the Acquisition, a CD&R-managed
private investment fund, The Clayton & Dubilier Private Equity Fund IV Limited
Partnership ("C&D Fund IV"), purchased Class A Common Stock. At January 25, 1998
and January 27, 1997, C&D Fund IV held approximately 30% of APS Holding's Class
A Common Stock that was outstanding as of such dates. In addition, two
professional employees of CD&R hold positions on the Company's board of
directors. As a result, C&D Fund IV is in a position to significantly influence
the Company's affairs. The Company agreed to pay CD&R an annual management fee
of up to $450,000 for financial advisory and management consulting services.
Management fee expense for each of the years ended January 25, 1998, January 27,
1997 and January 28, 1995 was $300,000.

      The Company has receivables due from officers which were used by the
officers of the Company to purchase Class A Common Stock of the Company. The
amount of such officer receivables outstanding at January 31, 1998 was
approximately $293,000. Previously in Fiscal Years 1997 and 1996, the Company
had guaranteed bank loans used by these officers to purchase Class A common
Stock of the Company. The amount of such loans outstanding at January 25, 1997
and January 27, 1996 was approximately $332,000 and $505,000, respectively.
These bank loans were paid by the Company on behalf of the employees prior to
January 31, 1998 and were recorded as officer receivables, accordingly.

12.  UNAUDITED QUARTERLY FINANCIAL INFORMATION:
                                                QUARTER ENDED
                            ---------------------------------------------------
                             APRIL 25        JULY 25    OCTOBER 25   JANUARY 31
                            ----------     ---------    ----------- -----------
                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED JANUARY 31, 1998:
Net sales ................  $ 211,743      $ 220,391   $ 201,594   $ 179,214
Gross profit .............     71,743         69,636      64,821      53,146
Operating income (loss) ..      4,468         (7,708)     (1,828)    (41,498)
Net loss .................       (936)        (9,650)     (5,266)    (79,441)
Basic and diluted net
  loss per share .........      (0.07)         (0.70)      (0.38)      (5.76)

      The results for the quarter ended July 25, 1997 include a restructuring
charge of approximately $8.7 million. Such charge consisted of approximately
$2.2 million for estimated costs to close facilities, approximately $1.4 million
of employee severance benefits related to personnel reductions of approximately
570 employees, approximately $3.2 million for future lease and related
obligations and approximately $1.9 million of asset impairments. In addition, in
connection with such restructuring program, approximately $1.3 million was
charged to cost of goods sold during the quarter ended July 25, 1997 for
inventory write-offs expected in connection with facility closures, and
approximately $1.8 million was charged to selling, general and administrative
expenses for incremental bad debt expected in connection with such closures.

      In the fourth quarter of Fiscal Year 1998, the Company recorded non-cash
charges of approximately $15.8 million and $4.5 million for writedowns of
intangible assets and property and equipment. The intangible assets writedowns
consisted of approximately $14.5 million related to excess of purchase price
over fair value of net assets acquired and, $1.3 million related to the
associate jobber network. The intangible assets and property and equipment
writedowns were based on estimated future cash flows, which were impacted by
management's review of certain Company-owned stores, ISWs and distribution
centers that potentially could be closed. The writedowns are included in "Asset
impairment and restructuring charge" in the accompanying consolidated statement
of operations.

      In addition to the absence of recording a deferred tax benefit for losses
incurred in the quarter ended January 31, 1998, the Company recorded a deferred
tax expense of approximately $28.2 million to record a deferred 

                                      F-22
<PAGE>
tax asset valuation allowance (see Note 7). 

                                                QUARTER ENDED
                             ---------------------------------------------------
                                 APRIL 25   JULY 25      OCTOBER 25  JANUARY 25
                                ---------- ---------     ----------- -----------
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED JANUARY 25, 1997:
Net sales ....................    $217,566    $234,305    $217,592    $ 189,276
Gross profit .................      73,366      79,057      75,950       47,211
Operating income (loss) ......       7,551      14,627      14,009      (32,348)
Net income (loss) ............       1,355       5,963       6,100      (24,254)
Basic and diluted net
income (loss) per share ......         .10        0.43        0.44        (1.76)

      The results for the quarter ended January 25, 1997 include $30.1 million
of pretax charges associated primarily with the Company's ISW division. Such
charges principally include an inventory loss adjustment of $11.8 million as
well as an increase in the bad debts provision, a charge for the cost of
returning excess and slow-moving inventories and a reserve for costs related to
facility closures and consolidations. The inventory loss adjustment, some of
which may be attributable to earlier quarters of the year, is a result of the
Company's inability during fiscal 1997 to quickly identify inventory
discrepancies due to ISW system incompatibilities and shortfalls in systems
controls.

      During the quarters ended July 25, 1996, October 25, 1996 and January 25,
1997, the Company recognized one-time supplier changeover and acquisition
incentives in connection with the integration of Parts, Inc. into the Company in
the amounts of $2.2 million, $5.7 million and $4.2 million, respectively. Such
incentives were used to offset direct and indirect costs associated with the
integration effort.

      Gross profit and selling, general and administrative expenses for the each
of the quarters in the year ended January 25, 1997 differ from the amounts
previously reported in the Company's Forms 10-Q for such respective periods due
to reclassifications relating to capitalized overhead.

                                      F-23
<PAGE>
SCHEDULE  I

     CONDENSED FINANCIAL INFORMATION OF APS HOLDING CORPORATION
                        (PARENT COMPANY ONLY)
                           (IN THOUSANDS)
                                                                
BALANCE SHEET:                              JANUARY 31, 1998   JANUARY 25, 1997
                                            ----------------   ----------------
                  ASSETS
Investment in and advances to subsidiary .......$  18,614         $ 114,569
                                                ---------         ---------
                                                $  18,614         $ 114,569
                                                =========         =========
   LIABILITIES AND STOCKHOLDERS' EQUITY                        
Stockholders' equity:                                          
  Class A common stock .........................$     138         $     137
  Additional paid-in capital ...................  155,601           155,363
  Accumulated deficit .......................... (137,005)          (41,712)
  Treasury stock, at cost ......................     (120)             (120)
  Unrealized gain on available-for-sale                     
    securities .................................     --                 901
                                                ---------         ---------
      Total stockholders' equity ...............   18,614           114,569
                                                ---------         ---------
                                                $  18,614         $ 114,569
                                                =========         =========

                                          YEAR ENDED     YEAR ENDED  YEAR ENDED
                                          JANUARY 31,    JANUARY 25, JANUARY 27,
STATEMENT OF OPERATIONS:                     1998           1997         1996
                                             ----           ----         ----
Equity in income (loss) of
subsidiary ..............................  $(95,168)     $(10,701)     $ 6,956  
General and administrative expenses .....      (125)         (135)        (188)
                                           --------      --------      -------  
Net income (loss) .......................  $(95,293)     $(10,836)     $ 6,768
                                           ========      ========      =======  
STATEMENT OF CASH FLOWS:                                              
Cash flows from operating                                             
 activities:                                                           
  Net income (loss) .....................  $(95,293)     $(10,836)     $ 6,768
  Equity in (income) loss of                                          
    subsidiary ..........................    95,168        10,701       (6,956)
                                           --------      --------      -------  
  Net cash used in operating                                          
    activities ..........................      (125)         (135)        (188)
                                           ========      ========      =======  
Cash flows from investing                                             
 activities:                                                           
  Subsidiary payments on behalf of                                    
    parent ..............................       125           135          188
  Investment in subsidiary ..............      (239)         (174)         (44)
                                           --------      --------      -------  
  Net cash provided (used) in                                         
    investing activities ................      (114)          (39)         144
                                           ========      ========      =======  
Cash flows from financing                                             
 activities:                                                           
  Proceeds from issuance of common                                    
    stock ...............................       239           174           44
                                           --------      --------      -------  
  Net cash provided by financing                                      
    activities ..........................       239           174           44
                                           --------      --------      -------  
Net increase  (decrease) in cash and                                  
  cash equivalents ......................      --            --           --
Cash and cash equivalents at                                          
  beginning of period ...................      --            --           --
                                           --------      --------      -------  
Cash and cash equivalents at end of     
  period ...............................   $   --         $  --         $ --
                                           ========      ========      =======  

See notes to consolidated financial statements of APS Holding Corporation and
Subsidiaries.

                                      F-24
<PAGE>
SCHEDULE   II

                     APS HOLDING CORPORATION AND SUBSIDIARIES

                         VALUATION AND QUALIFYING ACCOUNTS
                                  (IN THOUSANDS)
<TABLE>
<CAPTION>
                                            Balance at                               Balance at
                                            Beginning                                   End
         Description                        of Period     Additions    Deductions(1) of Period
-----------------------------------------------------------------------------------------------
<S>                                         <C>           <C>          <C>          <C>      
YEAR ENDED January 31, 1998:
   Allowance for Doubtful Accounts          $  11,164     $  12,809    $   5,818    $  18,155
   Deferred Tax Valuation Allowance                 -     $  44,980          -      $  44,980

YEAR ENDED January 25, 1997:
   Allowance for Doubtful Accounts          $   5,048     $   9,472    $   3,356   $   11,164
   Deferred Tax Valuation Allowance                 -             -            -            -

YEAR ENDED January 27, 1996:
   Allowance for Doubtful Accounts          $   2,776     $   4,899(2) $   2,627   $    5,048
   Deferred Tax Valuation Allowance                 -             -            -            -
-----------------------------------------------------------------------------------------------
</TABLE>
(1) With regards to the allowance for doubtful accounts, such amounts represents
accounts written off net of recoveries.

(2) Includes allowance for doubtful accounts of $1,113 acquired in connection
with the PI Acquisition.

                                      F-25