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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

OR

Commission File Number 333-61713

American Tire Distributors, Inc.

12200 Herbert Wayne Court, Suite 150

(704) 992-2000

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

None

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

None

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

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

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

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

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

TABLE OF CONTENTS

PART I

Item 1.     Description of Business.

General Development of Business

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

      Founded in 1935, the Company has grown over the past five years both by consistent growth in revenues which exceeded the industry average, and by acquisitions. The Company acquired Winston Tire Company (formerly Oliver & Winston) (“Winston”) in 1997, Speed Merchant, d/b/a Competition Parts Warehouse (“CPW”) in 1998 and merged with ITCO Logistics Corporation (“ITCO”) in 1998. The Company acquired California Tire Company (“California Tire”) in 1999 and in 2000, the Company acquired certain assets of Tire Centers, LLC (“TCI”), the outstanding common stock of T.O. Haas Tire Company (“Haas”) and the distribution operations of Merchant’s, Inc., known as American Tire Distributors (“ATD”).

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

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

Industry Overview

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

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

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

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

Products

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

Suppliers

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

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

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

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

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Customers

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

Competition

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

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

Trademarks

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

	•	REGUL® tires,
	•	WINSTON® tires,
	•	DYNATRAC®,
	•	PACER® custom wheels,
	•	ICW® custom wheels, and
	•	MAGNUM® automotive lifts.

Seasonality and Inventory

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

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

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Working Capital Practices

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

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

Environmental Matters

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

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

Employees

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

Business Subject to Governmental Contracts

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

Cautionary Statements on Forward-Looking Information

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

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

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

Item 2.     Description of Properties.

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

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

Item 3.     Legal Proceedings.

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

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

      Not applicable.

PART II

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

      Not applicable.

Item 6.     Selected Financial Data.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Critical Accounting Policies

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

Revenue Recognition

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

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Allowance for Doubtful Accounts

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

Valuation of Goodwill and Other Intangible Assets

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

Deferred Taxes

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

Discontinued Operations

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

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Liquidity and Capital Resources

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Contractual Commitments

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

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

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

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

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Recently Issued Accounting Pronouncements

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

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

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

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

Cautionary Statement on Forward-Looking Information

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

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

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

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

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

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Item 8.     Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Report of Independent Accountants

To the Board of Directors and Stockholders of

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

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

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

/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina

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Report of Predecessor Auditor (Arthur Andersen LLP) on

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

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

Report of Independent Public Accountants

To Heafner Tire Group, Inc. and Subsidiaries:

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

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

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Heafner Tire Group, Inc. and subsidiaries as of December 29, 2001 and December 30, 2000*, and the results of their operations and their cash flows for each of the three years in the period ended December 29, 2001*, in conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Charlotte, North Carolina

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

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American Tire Distributors, Inc.

Consolidated Balance Sheets

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

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American Tire Distributors, Inc.

Consolidated Statements of Operations

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

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American Tire Distributors, Inc.

Consolidated Statements of Stockholders’ Investment

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

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American Tire Distributors, Inc.

Consolidated Statements of Cash Flows