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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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, 2004: 5,086,917

TABLE OF CONTENTS

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Cautionary Statements on Forward-Looking Information

      This Annual Report on Form 10-K contains forward-looking statements relating to the Company’s business and financial outlook, which are based on the Company’s current expectations, estimates, forecast and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or other comparable terminology. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any such statement to reflect new information, the occurrence of future events or circumstances or otherwise.

      The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provided prospective information about their companies without fear of litigation. The Company would like to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act in connection with the forward-looking statements included in this document.

      Factors that could cause actual results to differ materially from those indicated by the forward-looking statements or that could contribute to such differences include, but are not limited to, integration of new systems, unanticipated expenditures, acquisitions and the successful integration of acquisitions into the business, changing relationships with customers, suppliers and strategic partners, changes to governmental regulation of the tire industry, the impact of competitive products, changes to the competitive environment, the acceptance of new products in the market, the economy and world events.

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PART I

Item 1.     Description of Business.

General Development of Business

      American Tire Distributors, Inc. (together with its subsidiaries, the “Company”) (formerly Heafner Tire Group, Inc.), is the leading national distributor of tires to the replacement tire market in the United States. The Company operates 60 distribution centers servicing all or parts of 35 states. Through this distribution network, the Company currently serves approximately 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 national organization with an unmatched, coast-to-coast footprint in the distribution market. The move follows two years of reorganization during which the Company divested its retail operations.

      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, 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 $22.5 billion on new replacement tires in 2003. Of that amount, passenger tires accounted for approximately 60.0% of sales, light truck tires accounted for approximately 16.0%, truck tires accounted for approximately 20.4% and farm, specialty and other types of tires accounted for approximately 3.6%. 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 228.5 million tires in 2003. 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 2003.

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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 Company is the leading national distributor to the replacement tire market.

      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 2003, flag brands constituted approximately 59% of the United States passenger and light truck replacement tire markets, associate brands made up approximately 17% 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 87.3% of sales from continuing operations in fiscal 2003, 87.7% in fiscal 2002 and 90.3% in fiscal 2001. 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 exclusively 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 good 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

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      The Company currently purchases approximately 78% of its tire products from three tire suppliers. The Company does not have long-term supply agreements with these vendors for purchases of the vendor’s branded products. The operating results of the Company could be adversely affected if the Company was unable to purchase tires from these three suppliers. The Company believes it has a good relationship with these suppliers and does not anticipate a shortage in the supply of tires from these vendors.

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 extend terms for its larger customers. In fiscal 2003, the Company’s continuing operations served approximately 35,000 customers each month. The Company’s largest customer and its subsidiaries accounted for less than 2% and its top 25 customers accounted for less than 9% of net sales from continuing operations in fiscal 2003.

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® tires,
	•	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.

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

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. The Company’s 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. The Company had $43.7 million available for additional borrowings at December 27, 2003.

      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.

      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 27, 2003, the Company’s continuing operations employed approximately 1,894 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.

      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 27, 2003, the Company had a total of 60 warehouse distribution centers located in 20 states, aggregating approximately 4.5 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.

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      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 will have a material adverse effect on its financial condition or results of operations.

      Not applicable.

PART II

      As of March 15, 2004, there were ten holders of record of the Company’s common stock. There is no public trading market for the Company’s common stock.

      As of December 27, 2003, the Company has not declared or paid dividends on its common stock and has no intention to do so in the foreseeable future. In addition, the Company’s Revolver contains certain covenants, which among other things, restricts the Company’s ability to pay dividends.

      Information regarding securities authorized for issuance under equity compensation plans is set forth in Item 12 of this Form 10-K.

      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 1999 through 2003 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 27, 2003 and December 28, 2002 and for each of the three years in the period ended December 27, 2003 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 TCI. In May 2000, the Company acquired 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 and $55.9 million of inter-segment sales from the Company to Winston for 2001, 2000 and 1999, respectively.
(e)	The Company evaluates performance based on several factors, of which the primary financial measure is earnings from continuing operations before interest, taxes, depreciation and amortization and gain on repurchase of Series D Senior Notes (“EBITDA”). 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, or more meaningful than, 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. See table below for reconciliation of income (loss) from continuing operations to EBITDA.

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(f)	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.
(g)	Amount represents amortization of deferred financing charges which is included in interest expense.
(h)	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 (ii) fixed charges are comprised of interest expense and capitalized interest, if any. In fiscal 2001, earnings were insufficient to cover fixed charges by approximately $23.8 million.

      Reconciliation of income (loss) from continuing operations 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.

Results of Operations

Year Ended December 27, 2003 Compared to the Year Ended December 28, 2002

      Consolidated net sales from continuing operations for fiscal 2003 increased $52.1 million, or 4.9%, to $1,112.5 million from $1,060.4 million in fiscal 2002. The sales increase is primarily due to an industry increase in the average selling price of passenger and light truck tires in addition to a continuing trend of selling more high performance, higher priced tires.

      Gross profit increased $12.0 million, or 6.1%, to $209.9 million in fiscal 2003 from $197.9 million in fiscal 2002 due primarily to an increase in sales of the Company’s higher margin tires and wheels, partially offset by an aggressive first quarter 2003 marketing program, which resulted in reduced margins on certain products. Gross profit as a percentage of sales increased 0.2% to 18.9% in fiscal 2003 compared to 18.7% in fiscal 2002.

      Selling, general, and administrative expenses increased $2.2 million to $168.7 million in fiscal 2003 compared to $166.5 million in fiscal 2002. The slight increase in selling, general and administrative expenses is primarily due to increased costs associated with the Company’s group health plan ($2.3 million), higher freight costs ($1.1 million) and other net increases ($1.9 million) partially offset by a reduction in amortization expense ($2.0 million) relating to noncompete agreements that ended during fiscal 2003 and a reduction in the provision for doubtful accounts ($1.1 million). As a percentage of sales, selling, general and administrative expenses decreased to 15.2% in fiscal 2003 compared to 15.7% in fiscal 2002.

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      Interest expense decreased $4.6 million in fiscal 2003 to $14.1 million from $18.7 million in fiscal 2002 due primarily to the Company’s repurchase of the majority of its Series D Senior Notes in 2002 (see “Repurchase of Senior Notes” below), as well as a decline in interest rates on the Company’s Revolver.

      Pre-tax income for fiscal 2003 was $27.2 million resulting in an income tax provision of $11.1 million compared to pre-tax income of $62.7 million in fiscal 2002 resulting in an income tax provision of $24.8 million. Pre-tax income for fiscal 2002 includes the $49.8 million gain on repurchase of Series D Senior Notes and the related income tax provision of $19.7 million. Excluding the gain on repurchase of Series D Senior Notes, fiscal 2003 pre-tax income increased $14.2 million from fiscal 2002. The effective tax rate for fiscal 2003 is approximately 41% compared to 40% in fiscal 2002.

      Loss from discontinued operations for fiscal 2003 was approximately $0.1 million, net of income tax benefits of $57 thousand, compared to $0.5 million, net of income tax benefits of $0.3 million, for fiscal 2002. The 2003 loss from discontinued operations is primarily due to adjustments to estimated liabilities for leases where the Company is a guarantor.

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

      Consolidated net sales from continuing operations for fiscal 2002 decreased $47.5 million, or 4.3%, to $1,060.4 million from $1,107.9 million in fiscal 2001. The sales decrease is due primarily to the sale of the Haas retail stores in October 2001 ($20.2 million or 1.8%), the sale of Winston in May 2001 ($15.8 million or 1.4%) and the exit of the Company’s parts line of products in the Western division in fiscal 2001 ($2.4 million or 0.2%). Other net sales declined by $9.1 million, or 0.9%, in fiscal 2002 compared to fiscal 2001 due primarily to weaker consumer demand from an overall slower economy.

      Gross profit in fiscal 2002 decreased by $12.5 million, or 6.0%, to $197.9 million compared to $210.4 million in fiscal 2001. This decrease is due primarily to the sale of the Haas retail stores, the sale of Winston and the exit of the Company’s parts line of products in the Western division. As a percentage of sales, gross profit decreased to 18.7% in fiscal 2002 compared to 19.0% in fiscal 2001. This decline in margin is primarily due to weaker consumer demand creating competitive pricing pressure. The fiscal 2002 margin decline is offset by a $5.0 million charge in fiscal 2001 for inventory impairments resulting from a management decision to exit the majority of the Company’s parts line of products in the Western division.

      Selling, general, and administrative expenses decreased $39.8 million in fiscal 2002 representing 15.7% of sales, compared to 18.6% of sales in fiscal 2001. The decrease in selling, general and administrative expenses is primarily due to the Company’s cost reduction initiatives as well as discontinued amortization of the Company’s goodwill as required by new accounting standards.

      During fiscal 2002, the Company 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 those charges relate to estimated future rentals of the closed facilities.

      Interest expense decreased $9.9 million in fiscal 2002 to $18.7 million from $28.6 million in fiscal 2001 due primarily to the Company’s repurchase of the majority of its Series D Senior Notes in 2002 (see “Repurchase of Senior Notes” below), as well as a decline in interest rates on the Company’s Revolver.

      Pre-tax income for fiscal 2002 was $62.7 million resulting in an income tax provision of $24.8 million compared to a pre-tax loss of $23.8 million in fiscal 2001 resulting in a tax benefit of $6.2 million. Pre-tax income for fiscal 2002 includes the $49.8 million gain on repurchase of Series D Senior Notes and the related income tax provision of $19.7 million. Excluding the gain on repurchase of the Series D Senior Notes, fiscal 2002 pre-tax income increased $36.7 million from fiscal 2001. The effective tax rate in fiscal 2002 is approximately 40% compared to 26% in fiscal 2001, which is lower than expected primarily due to non-deductible goodwill amortization.

      Loss from discontinued operations for fiscal 2002 was approximately $0.5 million, net of income tax benefits of $0.3 million, compared to $0.8 million, net of income tax benefits of $0.5 million, for fiscal 2001.

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EBITDA

      The Company evaluates performance based on several factors, of which the primary financial measure is earnings from continuing operations before interest, taxes, depreciation and amortization and gain on repurchase of Series D Senior Notes (“EBITDA”). EBITDA should not be considered an alternative to, or more meaningful than, net income or cash flow as determined 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. The following table is a reconciliation of income (loss) from continuing operations to EBITDA:

      EBITDA from continuing operations increased $8.0 million to $48.2 million in fiscal 2003 compared to $40.2 million in fiscal 2002. The increase in EBITDA is a result of higher gross profit margins partially offset by an increase in selling, general and administrative expenses.

      EBITDA from continuing operations increased $17.9 million to $40.2 million in fiscal 2002 compared to $22.4 million in fiscal 2001. This increase in EBITDA is due primarily to the parts-related charge of $5.0 million taken in fiscal 2001 and decreased selling, general and administrative expenses in fiscal 2002 as a result of the Company’s cost reduction initiatives.

Critical Accounting Policies and Estimates

      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 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 when delivery is made to the customer. The Company also permits customers from time to time to return certain products but there is no contractual 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 provisions established have been adequate, the Company cannot guarantee that it will continue to experience the same return rates that it has in the past. If future returns increase significantly, operating results would be adversely affected.

Allowance for Doubtful Accounts

      The allowance for doubtful accounts provides for losses believed to be inherent within the Company’s accounts receivable balance. Management evaluates both the creditworthiness of specific customers and the

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Valuation of Goodwill and Other Intangible Assets

      In July 2001, the Financial Accounting Standards Board (“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 first quarter of fiscal 2002. In accordance with SFAS No. 142, the Company performed the required annual impairment test in fiscal 2003 and fiscal 2002 and determined that no goodwill impairment existed. The Company will continue to perform goodwill impairment reviews annually or more frequently if facts or circumstances warrant a review. Future adverse developments in market conditions or the Company’s current or projected 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 $1.0 million was provided at December 27, 2003, unchanged from December 28, 2002. The valuation allowance relates to certain deferred tax assets that in management’s assessment may not be realized due to the sale of Winston in May 2001. This evaluation considered the historical and long-term expected profitability of the Company’s continuing operations, the sale of the Company’s retail segment, the efficiencies gained from efforts initiated in 2001 to streamline operations and the gain on repurchase of the Series D Senior Notes 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 fiscal 2003 and the Company is forecasting taxable income in fiscal 2004 and the foreseeable future. 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

      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 $10.0 million. As of December 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 and previously reported financial results for all periods have been restated to reflect this treatment.

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      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 the third quarter of 2002 by a return of merchandise of approximately $0.5 million and the receipt of certain unencumbered trademark rights for the state of California as a result of the rejection of licenses by Winston. The intangible asset recorded for this trademark is being amortized on a straight-line basis over a period of five years.

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

      The only significant remaining liability related to discontinued operations is the exposure related to leases that the Company has guaranteed. As of December 27, 2003, total obligations of the Company, as guarantor on the Winston leases, is approximately $13.8 million extending over 15 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 $11.7 million. A provision has been made for the estimated shortfall of $2.1 million. In January 2004, the Company executed an agreement to settle any and all claims relating to one of the Winston guarantee leases resulting in a net reduction of $1.6 million of that shortfall. The accrual for lease liabilities could be materially affected by factors such as the credit worthiness of lessors, assignees and sublessees and the Company’s success at negotiating early termination agreements with lessors. These factors are significantly dependent on general economic conditions. While the Company believes that its current estimates of discontinued operations liabilities are adequate, it is possible that future events could require significant adjustments to those estimates.

Liquidity and Capital Resources

      At December 27, 2003 the combined net indebtedness (net of cash) of the Company was $179.4 million compared to $193.7 million at December 28, 2002. Total commitments by the lenders under the Company’s Revolver were $180.0 million at December 27, 2003, of which $43.7 million was available for additional borrowings. The amount available to borrow is limited by the Borrowing Base computation, as defined in the agreement.

Cash Flows from Operating Activities

      The Company’s principal source of cash during fiscal 2003 was provided by operations. Net cash from operating activities increased to $17.7 million for fiscal 2003, an increase of $4.2 million, compared to $13.5 million in fiscal 2002. The increase is primarily due to improvements in the Company’s gross profit margins and an overall increase in the profitability of the Company (excluding the gain on repurchase of the Series D Senior Notes in 2002), partially offset by an increase in the Company’s ending inventory balance at December 27, 2003. Net working capital at December 27, 2003 totaled $99.0 million, compared to $83.1 million at December 28, 2002, an increase of $15.9 million.

      Net cash from operating activities increased to $13.5 million in fiscal 2002, an increase of $15.3 million, compared to $(1.8) million in fiscal 2001 due primarily to improvements in the business operations, reductions in selling, general and administrative expenses and a decrease in interest expense resulting from the Series D Senior Note repurchase in 2002.

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Cash Flows from Investing Activities

      Net cash from investing activities decreased $15.3 million from $13.4 million in fiscal 2002 to $(1.9) million in fiscal 2003 due primarily to proceeds from the Company’s sales leaseback transaction in fiscal 2002 which generated net proceeds of $13.3 million. Capital expenditures remained consistent from fiscal 2002 to fiscal 2003. Capital expenditures during fiscal 2003 of $2.5 million were primarily for warehouse racking, leasehold improvements and information technology upgrades. In fiscal 2001, the Company’s net cash from investing activities was $8.2 million and was primarily provided by the total proceeds of $11.5 million received from the sale of discontinued operations and the Haas distribution outlets.

Cash Flows from Financing Activities

      Net cash from financing activities decreased $13.3 million in fiscal 2003 due primarily to the repurchase of Series D Senior Notes in fiscal 2002, offset by proceeds from the issuance of preferred stock and additional borrowings on the Revolver, both of which were used in part for the Series D Senior Note repurchase. Net cash from financing activities of $0.5 million in fiscal 2001 was provided by proceeds received from the sale of preferred stock reduced by payments on the Company’s Revolver and long-term debt.

Revolving Credit Facility

      At December 27, 2003, the Company’s 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.

      Borrowings under the Revolver bear interest at (i) the Base Rate, as defined, plus the applicable margin (1.25% as of December 27, 2003) or (ii) the Eurodollar Rate, as defined, plus the applicable margin (2.50% as of December 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. At December 27, 2003, borrowings under the Revolver were at a weighted average interest rate of 4.2%.

      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 as well as 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 December 27, 2003, the Company was in compliance with these covenants, as amended. The Company’s obligations under the Revolver are guaranteed by all subsidiaries of the Company and are secured by all inventories and accounts receivable. The Revolver term expires in March 2005, and is extendable by the Company and the banks for an additional five years.

      On March 19, 2004, the Company executed a Third Amended and Restated Loan and Security Agreement (the “Amended Revolver”). The Borrowers to the Amended Revolver are the Company, The Speed Merchant, Inc., T.O. Haas Holding Co., Inc. and T.O. Haas Tire Company, Inc. The Amended Revolver provides for borrowings in the aggregate principal amount of up to the lesser of $245.0 million, less defined reserves, or the Borrowing Base, as defined. The Amended Revolver requires the Company to meet a fixed charge coverage test, as defined, as well as 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 Amended Revolver are secured by all inventories and accounts receivable. The Amended Revolver expires February 15, 2008.

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      During the 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 December 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 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 December 27, 2003, the fair value of the Swap was an asset of $0.2 million, and is included in other assets in the accompanying consolidated balance sheet. As a result of the change in fair value, $0.2 million net reductions to interest expense were recorded for the year ended December 27, 2003.

      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.

Repurchase of Senior Notes

      On March 27, 2002, the Company repurchased $121.4 million in outstanding principal amount of the 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 Fourth Supplemental Indenture to the Indenture. The amendments to the Indenture were effected primarily to permit the Restructuring Transactions and make other required modifications.

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Contractual Commitments

      As described in Notes 4 and 6 in the Notes to Consolidated Financial Statements included in Item 8 of this report, as of December 27, 2003, 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 27, 2003 in the aggregate amount of $5.8 million.

      In addition to the above, the Company has contingent obligations relating to the redemption of its Series A preferred stock ($6.5 million at December 27, 2003) and Series B preferred stock ($4.0 million at December 27, 2003). 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 (see Note 11 in the Notes to Consolidated Financial Statements included in Item 8 of this report). 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 and B preferred stock each contain a provision whereby upon the early termination of the Tire Supply Agreement (see Note 6 in the Notes to Consolidated Financial Statements included in Item 8 of this report), the Company shall redeem all shares of preferred stock outstanding at a price equal to the sum of the stated value and the applicable premium, as defined, plus all accrued and unpaid dividends. If at any time a change of control occurs, as defined, the Supplier may request redemption of all outstanding shares. Otherwise, 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 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 10 in the Notes to Consolidated Financial Statements included in Item 8 of this report. In June 2003, the Company redeemed 500 shares of the Series A preferred stock for $0.5 million.

Recently Issued Accounting Pronouncements

      In April 2002, the FASB issued 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 Generally Accepted Accounting Principles (“GAAP”), including the elimination of extraordinary item classification of most debt extinguishments that was previously required under SFAS No. 4. The Company adopted the provisions of SFAS No. 145 in the first quarter of fiscal 2003, which required reclassification of the Company’s 2002 extraordinary gain (see Note 8 in the Notes to Consolidated Financial Statements included in Item 8 of this report).

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      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. The Company adopted the provisions of SFAS No. 146 in the first quarter of fiscal 2003. The adoption of this statement had no material impact on the Company’s consolidated 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 modified subsequent to December 31, 2002. The Company adopted the disclosure provisions of this statement during 2002. The liability recognition provisions of this statement were adopted in the first quarter of fiscal 2003 and had no material impact on the Company’s consolidated 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 Company adopted Issue No. 02-16 in the first quarter of fiscal 2003. The adoption had no 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. However, appropriate disclosures about the effect on reported net income of the Company’s accounting policy with respect to stock-based employee compensation are provided (see Note 1 in the Notes to Consolidated Financial Statements included in Item 8 of this report).

      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 Company adopted SFAS No. 149 in the third quarter of fiscal 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

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      In November 2003, the EITF reached a consensus on Issue No. 03-10, “Application of EITF Issue No. 02-16 by Resellers to Sales Incentives Offered to Consumers by Manufacturers”. Issue No. 03-10 provides guidance on the accounting for consideration received by a reseller in the form of a reimbursement by the vendor for honoring the vendors’ sales incentives offered directly to consumers. The transition provisions apply prospectively to arrangements with vendors entered into or modified in fiscal periods beginning in the Company’s first fiscal quarter in 2004. The Company does not expect the adoption of Issue No. 03-10 to have a material impact on the Company’s consolidated financial position or results of operations.

      In December 2003, the Staff of the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which supercedes SAB 101, “Revenue Recognition in Financial Statements.” SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements and revises the SEC’s “Revenue Recognition in Financial Statements Frequently Asked Questions and Answers” that have been codified in Topic 13. SAB 104 was effective immediately and did not have a material impact on the Company’s consolidated financial reporting and disclosures.

      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 Base Rate, as defined in the agreement, or LIBOR. At December 27, 2003, the Company had $124.1 million outstanding under the Revolver, of which $74.1 million was not hedged by an interest rate swap agreement and was thus subject to exposure to interest rate changes. An increase of 1% in such interest rate percentages would increase the annual interest expense by $0.7 million, based on borrowings that have not been hedged at December 27, 2003. See Note 4 in the Notes to Consolidated Financial Statements included in Item 8 of this report for more information regarding the Company’s interest rate swap agreement.

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Item 8.     Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Report of Independent Auditors

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 27, 2003 and December 28, 2002, and the results of their operations and their cash flows for the years 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 audits 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 audits provide a reasonable basis for our opinion. The Company’s consolidated financial statements as of December 29, 2001, and for the year 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 the year 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 in Note 1 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 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 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 YEAR ENDED DECEMBER 29, 2001 TO INCLUDE THE TRANSITIONAL DISCLOSURES REQUIRED BY STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 142, “GOODWILL AND OTHER INTANGIBLE ASSETS.” THE ANDERSEN REPORT DOES NOT EXTEND TO THESE CHANGES. THE REVISIONS TO THE 2001 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 the related consolidated statements of operations, stockholders’ equity 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 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 29, 2001 and the consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 1999 and December 30, 2000 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’ Equity

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

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American Tire Distributors, Inc.

Consolidated Statements of Cash Flows