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UNITED STATES

FORM 10-Q

Commission File Number 333-61713

American Tire Distributors, Inc.

12200 Herbert Wayne Court

(704) 992-2000

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

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

      Number of common shares outstanding at November 12, 2003: 5,086,917

TABLE OF CONTENTS

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

      The forward-looking statements are subject to risks, uncertainties and assumptions about the Company and about the future, and could prove not to be correct. 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.

PART I.     FINANCIAL INFORMATION

American Tire Distributors, Inc.

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

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American Tire Distributors, Inc.

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

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American Tire Distributors, Inc.

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

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American Tire Distributors, Inc.

1.     Nature of Business:

      American Tire Distributors, Inc. (together with its subsidiaries, the “Company”) (formerly Heafner Tire Group, Inc.), is a Delaware corporation primarily engaged in the wholesale distribution of tires and tire accessories. On May 30, 2002, the Company changed its name from Heafner Tire Group, Inc. to American Tire Distributors, Inc.

2.     Basis of Presentation:

      The unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and changes in financial position in conformity with generally accepted accounting principles. In the opinion of the Company, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial position of the Company, the results of its operations and cash flows have been made. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s consolidated financial statements reported on Form 10-K for the fiscal year ended December 28, 2002. The results of the operations for the quarter and nine months ended September 27, 2003 are subject to year-end audit adjustments, and are not necessarily indicative of the operating results for the full fiscal year. Certain prior period amounts have been reclassified to conform to the current period presentation.

3.     New Accounting Pronouncements:

      In April 2002, the Financial Accounting Standards Board (“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 most debt extinguishments that was previously required under SFAS No. 4. The provisions of this statement related to the rescission of Statement 4 apply in fiscal years beginning after May 15, 2002. The Company adopted the provisions of SFAS No. 145 in the first quarter of fiscal year 2003, which required reclassification of the Company’s 2002 extraordinary gain (Note 9).

      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).” 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 (other than employee termination benefits), as defined, was recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company adopted the provisions of SFAS No. 146 in the first quarter of fiscal year 2003. The adoption of this statement had no material impact on the Company’s financial position or results of operations.

      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 rescission of FASB Interpretation No. 34.” FIN 45 elaborates on the disclosures to be made regarding obligations under certain guarantees in interim and annual financial statements. It also clarifies the requirement of a guarantor to recognize a liability at the inception of the guarantee based on the fair value of the obligation. The provisions relating to the initial recognition and measurement of a liability are applicable on a prospective basis for guarantees issued or

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Notes to Consolidated Financial Statements — (Continued)

modified subsequent to December 31, 2002. The disclosure requirements of FIN 45 are effective for interim and annual financial statements for periods ending after December 15, 2002. The Company adopted the disclosure provisions of this statement effective December 15, 2002. The liability recognition provisions of this statement were adopted in the first quarter of fiscal year 2003 and had no material impact on the Company’s financial position or results of operations.

      In November 2002, the EITF reached a consensus on Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Cash Considerations Received from a Vendor.” Issue No. 02-16 provides guidance on how cash consideration received by a customer or reseller should be classified in the customer’s statement of earnings. Issue No. 02-16 is effective for all transactions with vendors after December 31, 2002. The adoption of Issue No. 02-16 did not have a material impact on the Company’s consolidated 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, but is required to provide certain pro forma disclosures, which are presented below.

      The Company accounts for stock option grants in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Pursuant to APB No. 25, compensation expense is recognized for financial reporting purposes using the intrinsic value method over the vesting period. The amount of compensation expense to be recognized is determined by the excess of the fair value of common stock over the exercise price of the related option at the date of grant. Accordingly, no compensation expense has been recorded in the consolidated statements of operations, as the exercise price of all stock options was equal to fair value of the underlying common stock at the date of grant.

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

      The Company granted options for 158,308 shares in first quarter 2003 and 2,462,426 shares in second quarter 2002 with an exercise price of $3.00 and $1.40, respectively. The weighted average fair value of options granted during 2003 and 2002 estimated on the date of grant using the Black-Scholes option pricing model was $1.00 and $0.55, respectively. The fair value of options granted in the first quarter 2003 and second quarter 2002 were determined using the following assumptions: a risk-free interest rate of 4.05% and 4.93%,

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Notes to Consolidated Financial Statements — (Continued)

respectively, no dividend yield, expected life of 10 years which equals the terms of the options, and no expected volatility.

      In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on the Company’s consolidated financial position or results of operations.

      In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how financial instruments with characteristics of both liabilities and equity should be measured and classified and requires that an issuer classify a financial instrument that is within its scope as a liability. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities. For nonpublic entities, as defined, mandatorily redeemable financial instruments are subject to the provisions of SFAS No. 150 for the first fiscal period beginning after December 15, 2003. Accordingly, the Company is required to adopt the provisions of SFAS No. 150 in the first quarter of fiscal 2004 and does not expect the adoption to have a material impact on the results of operations or financial position in the foreseeable future.

4.     Inventories:

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

5.     Shipping and Handling Costs:

      Outbound shipping and handling costs are classified as selling, general and administrative expenses in the accompanying consolidated statements of operations. Such expenses totaled $17.1 million and $16.4 million for the quarters ended September 27, 2003 and September 28, 2002, respectively, and $50.5 million and $48.3 million for the nine months ended September 27, 2003 and September 28, 2002, respectively.

6.     Deferred Income Taxes:

      The Company has deferred tax assets of $16.0 million and $22.2 million at September 27, 2003 and December 28, 2002, respectively. The decrease in net deferred tax assets is primarily attributable to current period income and the corresponding net operating loss carryforward (“NOLs”) utilization. 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 NOLs, for which a valuation allowance of $1.0 million is recorded as of September 27, 2003, unchanged from December 28, 2002. This evaluation considered the historical and long-term expected profitability of the Company. Given the timing of the reversal of its temporary differences and the expiration date of its NOLs, the Company believes that taxable income generated in current and future years will be sufficient to utilize the remaining net deferred tax assets. The Company’s ability to generate future taxable income is dependent on numerous factors including general economic conditions, the state of the replacement tire market and other factors beyond management’s control. There can be no assurance that the Company will meet its expectation of future taxable income and adjustments to the valuation allowance may be required in the future.

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Notes to Consolidated Financial Statements — (Continued)

7.     Financing Arrangements:

     Revolving Credit Facility

      At September 27, 2003, the Company’s revolving credit facility (“Revolver”), as amended, provides for borrowings in the aggregate principal amount of up to the lesser of $180.0 million less defined reserves or the Borrowing Base, as defined in the agreement, which is based on 85% of eligible accounts receivable plus 50%-65% of eligible inventories less defined reserves.

      The Revolver term expires in March 2005, 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 (1.50% as of September 27, 2003) or (ii) the Eurodollar Rate, as defined, plus the applicable margin (3.00% as of September 27, 2003). 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 covenants, 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. As of November 12, 2003, the Company was in compliance with these covenants, as amended. The Company’s obligations under the Revolver are secured by all inventories and accounts receivable.

     Capital Lease Obligations

      On March 27, 2002, the Company completed an agreement for the sale and leaseback of three of its owned facilities generating cash proceeds of $13.9 million. In connection therewith, the Company recorded a $14.0 million capital lease obligation during the first quarter of 2002. All cash paid to the lessor is recorded as interest expense and the capital lease obligation will be reduced when the Company no longer has continuing involvement with the properties. The initial term of the lease is for 20 years, followed by two 10-year renewal options. The annual rent paid under the terms of the lease is $1.6 million (paid quarterly) and is adjusted for CPI changes every two years. In addition, the purchaser received warrants to purchase 153,597 shares of the Company’s common stock. The warrants have a term of 10 years with a stated exercise price of $3.00 per share. The Company recorded these warrants at fair value and has presented them as a component of stockholders’ equity.

     Debt Maturities

      Aggregate annual maturities of long-term debt (excluding capital lease obligations and reflecting the debt restructuring discussed in Note 9) at September 27, 2003, are as follows (in thousands):

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Notes to Consolidated Financial Statements — (Continued)

     Derivative Instruments

      During second quarter 2003, the Company entered into an interest rate swap agreement (“Swap”) to manage exposure to fluctuations in interest rates. The Swap represents a contract to exchange floating rate for fixed interest payments periodically over the life of the agreement without exchange of the underlying notional amount. The notional amount of the Swap is used to measure interest to be paid or received and does not represent the amount of exposure to credit loss. At September 27, 2003, the Swap in place covers a notional amount of $50.0 million of indebtedness at a fixed interest rate of 2.14% and expires in June 2006. This Swap has not been designated for hedge accounting treatment. Accordingly, the Company recognizes the fair value of the Swap in the accompanying unaudited condensed consolidated balance sheets and any changes in the fair value are recorded as adjustments to interest expense in the accompanying consolidated statements of operations. The fair value of the Swap is the estimated amount that the Company would pay or receive to terminate the agreement at the reporting date. As of September 27, 2003, the fair value of the Swap was an asset of $0.1 million, and is included in other assets in the accompanying unaudited condensed consolidated balance sheets at September 27, 2003. As a result of the change in fair value, $0.4 million and $0.1 million net reductions to interest expense were recorded for the quarter and nine months ended September 27, 2003, respectively.

8.     Discontinued Operations:

      Effective May 15, 2001, the Company completed a transaction pursuant to a Stock Purchase Agreement to sell all the capital stock in Winston Tire Company (“Winston”), the Company’s retail segment, to Performance Management, Inc. for a purchase price of approximately $10.0 million. As of September 27, 2003, $2.8 million of the purchase price remains outstanding and a reserve is maintained for the full amount. The Company has initiated legal proceedings to collect the $2.8 million. This segment has been reflected as a discontinued operation in the accompanying consolidated financial statements.

      The Company remains liable as a guarantor on certain of Winston’s leases. As of September 27, 2003, total obligations of the Company, as guarantor on these leases, is approximately $14.1 million extending over 16 years. However, the Company has secured assignments or sublease agreements for the vast majority of these commitments with contractually assigned or subleased rental of approximately $11.9 million. A provision has been made for the estimated shortfall.

9.     Gain on Repurchase of Series D Senior Notes:

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

      In connection with the Restructuring Transactions, the Company issued warrants to several vendors, which permit the holders to acquire up to 307,193 shares of the Company’s common stock at $.01 per share. The warrants expire on March 27, 2005. The Company recorded these warrants at fair value and has presented them as a component of stockholders’ equity.

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Notes to Consolidated Financial Statements — (Continued)

      The Company recorded a pre-tax gain of $49.8 million on the repurchase of the Senior Notes and a related income tax provision of $19.9 million for the nine months ended September 28, 2002.

10.     Redeemable Preferred Stock:

      The following represents the Company’s issued and outstanding redeemable preferred stock, reflecting the amendment and modifications discussed in Note 11 below (in thousands, except share amounts):

      The stated value of Series A preferred stock is $1,000 per share. Holders of Series A preferred stock are entitled to receive, when and if declared by the Board of Directors, cumulative cash dividends at an annual rate of 4%, subject to adjustment based on the volume of purchases from the supplier. Additional dividends will accrue, when and if declared by the Board of Directors, and are payable on the last business day of January. For the nine months ended September 27, 2003, the Company declared and paid a dividend based on a 4% rate. The Series A preferred stock is classified as a liability in the accompanying unaudited condensed consolidated balance sheets and the related dividends are included in interest expense in the accompanying consolidated statements of operations. The Series A preferred stock can be redeemed by the Company, beginning on the last business day of December 2002 and on the last business day of each June and December thereafter, through June 2007. In June 2003, the Company redeemed 500 shares of the Series A preferred stock for $0.5 million.

      The stated value of Series B preferred stock is initially $1,000 per share, to be adjusted based on tire purchase credits as determined by the number of units purchased under a purchase agreement with a supplier entered into in May 1997. If the Company does not meet certain tire purchase requirements, holders of Series B preferred stock are entitled to receive dividends payments, when and if declared by the Board of Directors, at the prime rate. The remaining value of Series B preferred stock shall be redeemed by the Company on the last business day of June 2007 at a price equal to the adjusted stated value plus all accrued and unpaid dividends. The Series B preferred stock is classified as a liability in the accompanying unaudited condensed consolidated balance sheets. To date, the Company has met the purchase requirements, thus no dividends have been declared and paid.

11.     Stockholders’ Equity:

     Amendment to Articles of Incorporation

      In conjunction with the Restructuring Transactions, the Company amended and restated its articles of incorporation to authorize 50,000,000 shares of a single class of $.01 par value common stock and 10,982,426 shares of $.01 par value preferred stock. Of the 10,982,426 shares of preferred stock, 7,000 shares are initially designated Series A preferred stock, 4,500 shares are initially designated Series B preferred stock, 1,333,334 shares are initially designated Series C preferred stock and 9,637,592 shares are initially designated Series D preferred stock. The conversion price of the Series C preferred stock was reduced to $3.00 per common share and the holders’ redemption rights were eliminated.

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Notes to Consolidated Financial Statements — (Continued)

     Preferred Stock

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

      Shares of Series C preferred stock accrue dividends at an annual rate of 12% and are redeemable by the Company at the initial price plus any cumulative unpaid dividends as of the redemption date. However, as long as any shares of Series A preferred stock or Series B preferred stock remain outstanding, no dividends may be paid, nor redemption occur. Shares of Series C preferred stock are convertible into common stock at a conversion price of $3.00 per common share.

      On March 27, 2002, the Company issued 9,637,592 shares of Series D preferred stock for $3.00 per share in exchange for $28.9 million in cash contributed by certain of its principal stockholders. The proceeds were used to repurchase certain of the Company’s Senior Notes. Shares of Series D preferred stock accrue dividends at an annual rate of 12% and are redeemable at the option of the Company at the initial price plus any cumulative unpaid dividends as of the redemption date. However, as long as any shares of Series A preferred stock or Series B preferred stock remain outstanding, no dividends may be paid, nor shall redemption occur. Shares of Series D preferred stock are convertible into common stock at a conversion price of $3.00 per common share.

      On October 31, 2003, the Company amended and restated its articles of incorporation to eliminate the redemption clause of the Series C and Series D preferred stock. No dividends have been declared or paid to date on the Series C or Series D preferred stock.

12.     Commitments and Contingencies:

      See “PART II — OTHER INFORMATION, Item 1. Legal Proceedings.”

      The Company is party to various lawsuits and claims, including purported class actions, arising in the normal course of business. In the opinion of management, these lawsuits and claims are not, singularly or in the aggregate, material to the Company’s financial position or results of operations.

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Notes to Consolidated Financial Statements — (Continued)

13.     Subsidiary Guarantor Financial Information:

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

      Condensed consolidating balance sheets as of September 27, 2003 and December 28, 2002, are as follows:

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Notes to Consolidated Financial Statements — (Continued)

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Notes to Consolidated Financial Statements — (Continued)

      Consolidating statements of operations for the quarters ended September 27, 2003 and September 28, 2002 are as follows: