UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

OR

COMMISSION FILE NUMBER 0-11579

TBC CORPORATION

Registrant’s telephone number, including area code: (561) 227-0955

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

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

COMMON STOCK

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

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. o

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

INDEX TO EXHIBITS at page 61 of this Report

DOCUMENT INCORPORATED BY REFERENCE

TBC Corporation’s Proxy Statement for its Annual Meeting of Stockholders to be held on May 12, 2005. Definitive copies of the Proxy Statement will be filed with the Commission within 120 days after the end of the Company’s fiscal year. Only such portions of the Proxy Statement as are specifically incorporated by reference under Part III of this Report shall be deemed filed as part of this Report.

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Table of Contents

PART I

Item 1. BUSINESS

     TBC Corporation’s business began in 1956 under the name Cordovan Associates, Incorporated. The Company was incorporated in Delaware in 1970 under the name The Tire and Battery Corporation. In 1983, the Company changed its name to TBC Corporation.

     On November 19, 2004, the Company completed a corporate reorganization to implement a holding company structure. As a result of the reorganization, the existing TBC Corporation (“Old TBC”) became a wholly-owned subsidiary of a new Delaware holding company (the “Holding Company”), the name of Old TBC was changed to “TBC Private Brands, Inc.,” and the name of the Holding Company was changed to “TBC Corporation.” Share certificates formerly representing shares of Common Stock of Old TBC are now deemed to represent shares of Common Stock of the Holding Company, and the Holding Company is the successor issuer of Old TBC for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934.

     The Company and its wholly owned subsidiaries are principally engaged in the marketing of tires in the automotive replacement market. The Company is one of the nation’s largest independent marketers of tires for the automotive replacement market. The Company has two reportable operating segments: the Company’s Retail Division and the Company’s Wholesale Division. Net sales in 2004 for the retail segment totaled $1.2 billion, which represented 64.3% of the Company’s consolidated net sales. Net sales during 2004 for the wholesale segment were $662.1 million, or 35.7% of total sales. (See Note 15 to the consolidated financial statements included in this Report for additional financial information about each of the reportable segments.) Unless the context indicates otherwise, the term “Company” refers to TBC Corporation and its subsidiaries, taken as a whole.

Retail Business

     The retail segment of the Company’s business (the “Retail Business”) consists of both Company-operated retail tire stores and franchised stores. The Company-operated stores are operated by a number of the Company’s wholly owned subsidiaries, including Tire Kingdom, Inc. (“Tire Kingdom”), Merchant’s, Incorporated (“Merchant’s”) and NTW Incorporated (“NTW”). The Company acquired Merchant’s on April 1, 2003 and NTW (which operates its retail business under the trade name “National Tire & Battery”, or “NTB”) on November 29, 2003. The Company’s franchised retail tire business is conducted by its Big O Tires, Inc. subsidiary (“Big O”).

     The retail tire and automotive service centers operated by the Company are located primarily in the eastern two-thirds of the United States. At the end of 2004, there were 605 locations in the Company-operated retail network, an increase of 14 stores compared to the end of 2003, when the Company had 591 locations. The Company has two distribution centers dedicated solely to servicing its Company-operated retail network and also utilizes the distribution centers operated by its wholesale segment to supply products to certain of its retail stores. The Company-operated retail stores market a broad selection of tires under nationally advertised brands and private brands, including the Company’s own Sigma® brand. In addition, the stores provide full service tire replacement including tire balancing, wheel alignment, extended service programs and warranties, and also perform maintenance and mechanical services such as brake repairs, suspension system replacement, and oil changes.

     Big O franchises retail tire and automotive service stores located primarily in the western and mid-western United States and sells Big O® brand tires and other tires to these franchisees. At December 31, 2004, the Company had a total of 567 Big O stores, serviced by 6 distribution centers. Included in the 567 total outlets were 552 franchisee-owned stores and 15 stores owned by joint ventures in which the Company has an equity interest. Big O products are also sold by Big O to 34 unaffiliated retail stores in British Columbia, Canada. Big O franchise agreements grant a ten-year license to sell Big O brand tires and to use Big O trademarks and trade secrets in the operation of a retail store at a specific location within a defined trade area. With the exception of retail tire stores converting to the Big O franchise system, each franchisee is required to pay an initial franchise fee. All franchisees are required to pay monthly royalty fees.

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Wholesale Business

     The wholesale segment of the Company’s business (the “Wholesale Business”) markets and distributes the Company’s proprietary brands of tires, as well as other tires and related products, on a wholesale basis to distributors and independent tire dealers located throughout the United States, Canada and Mexico. These distributors operate under written distributor agreements with the Company and resell the Company’s products to retailers or through retail outlets primarily consisting of independent tire dealers. The Wholesale Business operates a total of 30 warehouse distribution centers, all of which are located in the United States.

     Tires marketed under the Company’s proprietary brand trademarks are manufactured for the Company by leading manufacturers. The Company believes that its Cordovan®, Multi-Mile®, Sigma® and Vanderbilt® lines of tires are among the most complete lines in the replacement tire market, covering the majority of tire sizes and types available for automobiles, light trucks and sport utility vehicles. The Company also distributes tires under other brands for automobile, truck, sport utility vehicle, farm, industrial, recreational and other applications.

Products and Suppliers

     Sales of tires accounted for approximately 75% of the Company’s total sales in 2004, 79% in 2003, and 85% in 2002. Tire and mechanical services performed by Company-operated retail stores represented approximately 23%, 19% and 12% of total sales in 2004, 2003 and 2002, respectively. The remainder of the Company’s sales includes tubes, wheels, and other products for the automotive replacement market.

     The Company purchases its products, in finished form, from a number of major tire manufacturers and other suppliers to the automotive replacement market. In the case of tires bearing the Company’s trademarks, the Company owns most of the molds in which they are made.

     The Company has supply agreements with many of its suppliers. The Company purchases tires from the Goodyear Tire & Rubber Company (“Goodyear”) pursuant to a supply agreement entered into in 1977 and a commitment letter that extends until 2013. This ongoing supply relationship with Goodyear began in 1963. The Company also has a supply agreement with Cooper Tire and Rubber Company, which extends until 2011. Effective April 1, 2004, the Company entered into a supply agreement with Michelin North America, Inc., which extends through 2005. In addition to these three major suppliers, the Company has written contracts with certain other suppliers. The Company has no minimum purchase commitments or requirements with these suppliers.

     From time to time, the tire industry has faced shortages and supply disruptions affecting the availability of particular sizes of tires, for reasons such as production difficulties, labor unrest, and recalls. While the Company has not been immune from difficulties in purchasing products in quantities desired, the Company believes that its long-term relationships with its primary suppliers have been beneficial in minimizing the impact of any industry shortages or supply disruptions. In the event that any of its primary suppliers curtail their manufacturing or otherwise encounter difficulties in meeting the Company’s production requirements, the Company’s business would be adversely affected pending the implementation of contingency plans. Such contingency plans, which are continually updated to reflect changing industry conditions, are designed to mitigate any long-term adverse effect of a significant supply disruption and include the use of alternate suppliers. In addition to the Company’s current suppliers, there are a number of other large tire manufacturers on a worldwide basis that may have the desire and capacity to meet the Company’s needs for its proprietary lines of tires.

Trademarks

     In addition to its Cordovan®, Multi-Mile®, Sigma®, Vanderbilt®, Big O®, Tire Kingdom®, Merchant’s®, and NTB National Tire & Battery® trademarks, the Company also holds federal registrations for trademarks such as Grand Prix®, Grand Am®, Grand Spirit®, Wild Spirit®, Aqua Flow®, Wild Country®, Wild Trac®, Turbo-Tech®, Supreme®, Stampede®, Power King®, Harvest King®, Big Foot®,

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Legacy®, Prestige®, and Sun Valley®.

     The ability to offer products and services under established trademarks represents an important marketing advantage in the automotive replacement industry, and the Company regards its trademarks as valuable assets of its business.

Customers

     The Company’s ten largest customers in its Wholesale Business accounted for approximately 29.8% of total wholesale sales and 10.7% of the Company’s total consolidated sales in 2004, with the largest customer accounting for 3.6% of total consolidated sales. The loss of a major customer in the Wholesale Business could have a material adverse effect upon this segment and the Company’s business as a whole, pending the establishment of a replacement customer to market the Company’s products. See Note 4 to the consolidated financial statements and Item 13 of this Report for additional information concerning major customers.

     Sales to domestic customers represented 96% of the Company’s consolidated sales in 2004, 96% in 2003 and 94% in 2002. The remainder of the Company’s sales was attributable to customers located primarily in Mexico and Canada. The Company has no significant foreign currency translation risks, since its sales to customers located outside the United States are made and settled in U.S. dollars.

Seasonality and Inventory

     The Company normally experiences its highest level of sales in the third quarter of each year, with the first quarter exhibiting the lowest level. During the two-year period from January 1, 2001 through December 31, 2002, first quarter sales averaged approximately 23% of annual sales; the second quarter and third quarters 25% and 27%, respectively; and the fourth quarter 25%. In 2003, the trend was slightly different from the historical pattern, due to the impact of acquisitions during the year. First quarter sales in 2003 represented approximately 20% of total sales, the second quarter 25%, the third quarter 27%, and the fourth quarter 28%. In 2004, the trend was slightly different from the historical pattern, due to the impact of the NTB acquisition completed in November 2003. First quarter sales in 2004 represented approximately 23% of total sales, the second quarter 25%, the third quarter 26%, and the fourth quarter 26%.

     Orders for the Company’s products, except for those sold directly to consumers in the retail segment, are usually placed with the Company by computer, facsimile, or telephone. These orders are filled either out of the Company’s inventory or by direct shipment to the customer from the manufacturers’ plants at the Company’s request.

     Since customers look to the Company to fulfill their needs on short notice, the Company maintains a large inventory of tires and other products, both for its Wholesale Business and its Retail Business segments. Average inventories, based on quarter-end levels on hand and in transit, were $286.4 million during 2004. The Company’s inventory turn rate (cost of sales, including the cost of direct shipments from manufacturers to customers, divided by average inventory) was 4.1 for 2004.

Competition

     The industry in which the Company operates is highly competitive. In the case of the Company’s Wholesale Business, many of the Company’s competitors are significantly larger and have greater financial and other resources than the Company. These competitors include the Company’s own suppliers, other tire manufacturers, other wholesale tire distributors, as well as mass merchandisers and retailers with sufficient purchasing power to command wholesale prices.

     The Company believes its Wholesale Business is able to compete successfully because of its ability to offer quality products under proprietary brand names at competitive prices, its efficient distribution systems, its good relationships with customers and suppliers, and its established presence in the markets it serves.

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     In the case of the Company’s Retail Business, competition is based primarily upon market presence in a specific geographic area. Big O’s 567 franchised retail outlets are primarily concentrated in western and mid-western states, which gives Big O a significant market share in many of the retail markets it serves. The market position for TBC’s Company-operated retail stores varies depending upon the city or region. For example, in the states of Florida and Virginia, the Company is one of the leading tire retailers, with 171 and 72 Company-operated outlets, respectively. Retail competitors include stores operated by tire manufacturers, other retail outlets such as warehouse clubs, chains and mass merchandisers, and other independent tire dealers, some of whom are customers or who buy from customers of the Company’s Wholesale Business.

Employees

     As of December 31, 2004, the Company employed approximately 9,400 persons, of which approximately 8,800 were in its Retail Business. None of the Company’s employees are represented by a union, and the Company considers its employee relations to be excellent.

Internet Website Address and Availability of SEC Filings

     The Company maintains an internet website, www.tbccorp.com. The Company makes its SEC filings, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, immediately available on its website after filing, via an electronic link from the Company’s website to the SEC’s EDGAR database. Paper copies of such SEC filings are also available free of charge from the Company, upon request. Additionally, all public filings may be obtained at the Operations of the Public Reference Room located at 450 Fifth Street, N.W., Washington, DC 20549 or by calling the SEC at 1-800-SEC-0330.

Item 2. PROPERTIES

     TBC Corporation’s executive offices are located in a leased facility in Palm Beach Gardens, Florida. The Company has a total of 40 warehouse distribution facilities, totaling approximately four million square feet, located in 17 states across the United States. The Company owns the office building where its wholesale business is headquartered and two of its distribution facilities. The remainder of the distribution facilities, totaling approximately 3.7 million square feet, are leased under operating leases. The majority of the retail tire and service centers operated by the Company are in leased facilities. Additionally, the Company owns certain buildings situated on leased land. See Note 9 to the consolidated financial statements for information regarding the Company’s operating lease commitments.

Item 3. LEGAL PROCEEDINGS

     The Company is involved in various legal proceedings which are routine to the conduct of its business, none of which is believed to be material to the Company. Some of these proceedings involve personal injury lawsuits based upon alleged defects in products sold by the Company. The Company believes that in substantially all such product liability cases, it is covered by its manufacturers’ indemnity agreements or product liability insurance. The Company also maintains its own product liability insurance, as well as coverage for damages, workmanship and claims relating to repairs and services performed by its Retail Business.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

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EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table presents certain information concerning the executive officers of the Company. The term of office of all executive officers of the Company is until the next Annual Meeting of Directors (May 12, 2005) or until their respective successors are elected.

     Mr. Day has been the Company’s Chief Executive Officer since October 1999 and President since October 1998. Mr. Day served as the Company’s Chief Operating Officer from the time he joined the Company in April 1998 until his election as Chief Executive Officer. Mr. Day was President and Chief Executive Officer of Monro Muffler Brake, Inc. from 1995 to 1998. Prior to joining Monro in 1993, Mr. Day was Vice President of Montgomery Ward’s Auto Express Division. His experience in the tire industry includes 13 years in a series of managerial positions with the Firestone Tire & Rubber Company.

     Mr. Garvey has been Executive Vice President and Chief Financial Officer of the Company since January 2001 and also served as Treasurer from January 2001 to August 2002. From 1993 to January 2001, Mr. Garvey was Executive Vice President and Chief Financial Officer of Tire Kingdom, which TBC acquired in June 2000. From 1987 to 1992, Mr. Garvey served as Executive Vice President and Chief Financial Officer of Fisher Scientific Company.

     Mr. Dick has been President and Chief Executive Officer of the TBC Wholesale Division since November 2003 and prior to that was President of the TBC Private Brands Division since its formation in July 2001. From 2000 until July 2001, Mr. Dick served as the Company’s Executive Vice President of Sales and was Senior Vice President Sales of the Company from 1988 until 2000. From 1982 until 1988, Mr. Dick was the Company’s Vice President of Sales. Mr. Dick joined the Company in 1971 and served in a number of sales management positions prior to his election as Vice President.

     Mr. Gravatt has been Executive Vice President Purchasing since November 2003 and prior to that served as the Company’s Senior Vice President of Purchasing. From 1987 until his election as Senior Vice President in 1999, Mr. Gravatt was a Vice President of the Company. Mr. Gravatt joined the Company in 1984 as Manager of Purchasing and served in that role until his election as a Vice President.

     Mr. Potts has been Senior Vice President of Human Resources since November 2003 and prior to that served as Vice President of Human Resources since joining the Company in 1998. From 1994 until joining the Company, Mr. Potts was Vice President, Human Resources of Millard Refrigerated Services, Inc., and from 1988 to 1994 was Corporate Director of Human Resources for Griffin Industries, Inc.

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EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)

     Mr. Wolford has been the President and Chief Executive Officer of Tire Kingdom since it was acquired by TBC in June 2000 and has served as President and Chief Executive Officer of Merchant’s and NTW since each was acquired by TBC in 2003, when TBC purchased the company. From 1997 until joining the Company in May 2000, he served as Regional Vice President for Olson Tire, and prior to that was the President and Chief Executive Officer of Automotive Industries from 1989 until 1997. Until that time, Mr. Wolford worked within the Firestone Corporation for 20 years, with his last assignment there as Regional Vice President for the North and Central Regions which had 325 stores.

     Mr. Olsen has been Senior Vice President and Chief Marketing Officer of the Company since December 2004. Before joining the Company, Mr. Olsen was Vice President of Sales for Michelin’s North America Passenger and Light Truck Division. Prior to joining Michelin in 1997, Mr. Olsen held marketing and sales positions with Ralston Foods, The Clorox Company and Proctor and Gamble.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     The Common Stock of the Company is traded on The Nasdaq Stock Market under the symbol TBCC. As of December 31, 2004, the Company had approximately 4,000 stockholders based on the number of holders of record and an estimate of the number of individual participants represented by security position listings. Historically, the Company has not paid cash dividends and the Company has no intention to do so in the foreseeable future. In addition, the Company’s short-term and long-term credit facilities restrict its ability to declare cash dividends (see the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 7 to the consolidated financial statements).

     The following table sets forth for the periods indicated the high and low sales prices for the Company’s Common Stock on the Nasdaq National Market System.

     See Item 12 for certain information with respect to compensation plans under which shares of Common Stock of the Company are authorized for issuance.

     During the year ended December 31, 2004, the Company made no repurchases of Common Stock.

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Item 6. SELECTED FINANCIAL DATA

     Set forth below is selected financial information of the Company for each year in the five-year period ended December 31, 2004. The following years, 2003 through 2000, have been restated to reflect the change in accounting policies described in Note 3 – Restatement to the Company’s consolidated financial statements. The selected financial information should be read in conjunction with the consolidated financial statements of the Company and notes thereto which appear elsewhere in this Report. Specific reference should be made to the discussions of the acquisitions during 2003 of Merchant’s and NTW in Note 5 to the consolidated financial statements. Information regarding the 2000 acquisition of Tire Kingdom, Inc. was last included in Note 5 to the consolidated financial statements included in Form 10-K for the year ended December 31, 2002. The Company did not declare any cash dividends during the five-year period ended December 31, 2004.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     The following tables highlight the financial information, stated both as dollar amounts and as percentage, which is discussed in greater detail below:

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     RESULTS OF OPERATIONS (Continued)

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Restatement

     During the second quarter of 2004, but effective on January 1, 2004, the Company changed its inventory costing method from LIFO to FIFO. The method was changed to obtain a more current inventory valuation at period end, to achieve a better matching of revenues and expenses and to move to one method of inventory valuation on a Company-wide basis. In addition, since costing for retail inventories has historically been on the FIFO method, as this segment grows, continuing liquidation of LIFO layers would have resulted in any event. Principally, the Wholesale Segment historically used the last-in, first-out (“LIFO”) method for approximately 45% of the Company’s inventories, with the remaining inventories valued on a first-in, first-out (“FIFO”) basis. The Company has applied this change retroactively by restating its financial statements for 2003 and 2002 as required by Accounting Principles Board No. 20, “Accounting Changes,” and accordingly, previously reported retained earnings as of January 1, 2002 has been increased by $1.8 million. The effect of the change on the previously reported net income and earnings per share are reflected in the table below (in thousands):

Consolidated Results of Operations

     The Company has two operating segments: retail and wholesale. The retail segment includes the franchised retail tire business conducted by Big O Tires, Inc., as well as the operation of retail tire and service centers by Tire Kingdom, Inc., Merchant’s, Incorporated (“Merchant’s) and NTW Incorporated (“NTW”). The Company’s wholesale segment markets and distributes TBC’s proprietary brands of tires, as well as other tires and related products, on a wholesale basis to distributors who resell to or operate independent tire dealers.

     A total of 337 Company-operated stores were added to the Company’s retail segment as a result of the Company’s acquisitions of Merchant’s on April 1, 2003 and NTW from Sears, Roebuck & Co. on November 29, 2003 (the “Purchased Companies”). Thus, there were a number of significant changes in income statement line items between 2003 and 2004. The Company’s 2003 consolidated results from operations include the results from the Purchased Companies only from the dates they were acquired. The Purchased Companies have also impacted the Company’s overall seasonality pattern, since many of the acquired stores operate in geographic areas that have different sales trends than the Company experienced in the past. While the first quarter has historically been the Company’s weakest and the third quarter the strongest in terms of sales and earnings, overall results are now expected to be more heavily skewed toward the last half of the year.

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2004 Compared to Restated 2003

     Net sales (which equals revenues from sales of products and services, plus franchise and royalty fees, less estimated returns, allowances and customer rebates) increased $536.9 million, or 40.7%, during 2004 versus 2003 which included a $459.3 million, or 62.6%, increase for the retail segment and a $77.6 million, or 13.3%, increase for the wholesale segment. The $459.3 million increase in retail net sales during 2004 included a $277.4 million increase in tire sales, a $185.2 million gain in service revenues at Company-operated stores, and a $3.3 million decrease primarily related to sales of products other than tires. The increased retail tire sales dollars was principally due to a 44.4% gain in retail unit volume and a 10.9% increase in the average retail tire sales price due to product mix changes driven by the Purchased Companies and an effective pass-through of supplier cost increases. Additionally, service revenues increased 76.3% as compared to 2003 which was mainly attributable to the acquisition of the Purchased Companies. At the end of December 2004, the Company had 9, or 1.6%, fewer franchised stores and 14, or 2.4%, more Company-operated stores than at December 31, 2003. For comparative purposes, excluding the impacts of the Purchased Companies on the 2004 results of operations, net sales would have increased $70.5 million, or 5.9%. Net sales within the wholesale segment increased $77.6 million which was driven by an increase in total unit tire volume of 5.0% coupled with an increase in average tire sales prices of 8.0%. The increase in average tire sales prices was due to the pass-through of price increases from suppliers and a favorable shift in the product mix toward specialty tires.

     The percentage of total sales attributable to tires declined from 78.8% in 2003 to 75.1% in 2004, due to the impact of increased service revenues at the Company-operated retail stores. Total unit tire volume in 2004 increased 19.6% compared to 2003 primarily due to the Purchased Companies. Excluding the Purchased Companies, total unit tire volume in 2004 would have increased 4.1% versus 2003. Unit tire shipments for the replacement tire industry as a whole increased approximately 3.0% during 2004 (based on available industry data as of December 31, 2004). Additionally, average tire sales prices for the Company as a whole increased 12.2% compared to a year earlier, due largely to favorable mix changes.

     Gross profit increased $260.9 million from $433.9 million, or 32.9% of net sales in 2003 to $694.8 million, or 37.5% of net sales in 2004. The increases were primarily driven by the expansion of the Company’s retail segment with the addition of the Purchased Companies. Gross profit percentages on sales by the Company’s retail segment increased from 47.2% in 2003 to 50.1% in 2004. The increase in gross profit percentages was attributable to a favorable product mix shift towards the Company’s private label tires and an expansion into higher margin automotive services. Wholesale margins as a percentage of sales decreased from 15.0% in 2003 to 14.6% in 2004. The decrease in wholesale margins primarily pertains to increased volume on lower margin product sold to international customers as compared to 2003.

     Distribution expenses increased by $12.9 million from $61.4 million, or 4.7% of net sales in 2003, to $74.3 million, or 4.0% of net sales in 2004. The increase in dollars was primarily due to the Purchased Companies which added 337 Company-operated stores along with the adverse impact of higher fuel prices which increased the Company’s transportation costs. As a percentage of net sales, the improvement in 2004 as compared to 2003 reflected improved cost leveraging as the Company was able to utilize its existing distribution networks to service the acquired stores.

     Selling, administrative and retail store expenses increased by $233.5 million from $314.8 million, or 23.9% of net sales in 2003 to $548.3 million, or 29.6% of net sales in 2004. The increases were principally due to the greater number of Company-operated retail stores as a result of the Purchased Companies. Excluding the impact of expenses associated with the stores acquired during 2003, selling, administrative and retail store expenses increased by $10.2 million, or 4.1%, versus an increase in comparable net sales of 5.9%. The resulting increase was due to the addition of 14 Company-operated retail stores during 2004, $2.3 million in repair expenses related to damage caused by the four major hurricanes and $3.0 million in consulting fees related to the on-going assessment, documentation and testing of the Company’s control environment as required by Section 404 of the Sarbanes-Oxley Act.

     Net interest expense increased by $8.3 million, or 80.0%, during 2004 compared to 2003. The increase was due principally to an increase in average borrowing levels on the Company’s credit facility primarily used to fund the acquisition of the Purchased Companies. The impact of the increased credit facility borrowings was partially offset by continued efforts by the Company to keep interest rate spreads to a minimum. The weighted average borrowing rate on average borrowings during 2004 decreased 35 basis points as compared to 2003.

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     Net other income in 2004 increased by $2.2 million as compared to 2003. The increase is principally due to the equity earnings in a joint venture during 2004 coupled with a $744,000 charge recorded in 2003 in connection with the exit from a joint venture. Net other income consists primarily of the Company’s equity interest in joint ventures and net gains and/or losses on sales of assets and miscellaneous other income and expense items.

     The Company recorded tax provisions of $20.6 million and $17.7 million in 2004 and 2003, respectively. The Company’s effective tax rate for both 2004 and 2003 was approximately 35.5%, which reflects the impact of certain tax saving initiatives. During 2004, the American Jobs Creation Act of 2004 (Jobs Creation Act) was signed into law. Beginning in 2005, the Jobs Creation Act includes relief for domestic manufacturers by providing a tax deduction for qualified production activities. In addition, the Job Creation Act phases out the exclusion for extraterritorial income (“ETI”) during 2005 and 2006. While the Company has historically benefited from ETI, its repeal will not materially impact the Company’s effective tax rate. With respect to the tax deduction provided for domestic manufacturers, the Company has initially determined that the deduction should not have an impact on its effective tax rate in future periods. The Company expects its effective tax rate to increase; however, the actual rate will depend on a number of factors, including the amount of pre-tax income by jurisdiction and any incremental tax savings initiatives that might be identified and implemented.

Restated 2003 Compared to Restated 2002

     Net sales (which equals revenues from sales of products and services, plus franchise and royalty fees, less estimated returns, allowances and customer rebates) increased $208.9 million, or 18.8%, during 2003 versus the 2002 level which included a $222.2 million, or 43.4%, increase for the retail segment and a $13.3 million, or 2.2%, decline for the wholesale segment. The $222.2 million increase in retail net sales during 2003 included a $110.2 million increase in tire sales, a $108.8 million gain in service revenues at Company-operated stores, and a $3.2 million increase related to franchise and royalty fees and to sales of products other than tires. The increased retail tire sales dollars was principally due to a 24.2% gain in retail unit volume. In addition, the average retail tire sales price was 5.7% greater in 2003 as compared to 2002 due largely to changes in the product mix which was principally driven by the acquisition of the Purchased Companies. An increased number of franchised and Company-operated stores was the primary reason for the growth in retail tire volume and service revenues compared to 2002. At the end of 2003, the Company had 40 more franchised stores and 369 more Company-operated stores than at the end of 2002, with the acquisitions of Merchant’s in April 2003 and NTW in November 2003 adding 112 and 225 Company-operated stores, respectively, to the retail segment. The acquired Merchant’s stores contributed $126.0 million to 2003 retail sales during the nine months following the acquisition. In the one-month period following the NTW acquisition, the acquired NTW stores contributed net sales of $44.9 million. The $13.3 million decrease in net sales by the wholesale segment in 2003 was primarily due to a 4.5% decline in unit tire shipments that exceeded the impact of a 3.4% increase in the average wholesale tire sales price.

     The percentage of total sales attributable to tires declined from 85% in 2002 to 79% in 2003, due to the impact of increased service revenues at Company-operated retail stores. Total unit tire volume in 2003 increased 4.5% compared to the 2002 level. In comparison, unit tire shipments for the replacement tire industry as a whole increased approximately 1.7% during 2003 (based on available industry data as of December 31, 2003). Average tire sales prices for the Company as a whole increased 6.4% compared to a year earlier, due largely to favorable mix changes.

     Gross profit increased $133.6 million from $300.3 million, or 27.1% of net sales in 2002 to $433.9 million, or 32.9% of net sales in 2003. The increases were primarily driven by the increased contribution from the retail segment and the increased level of service revenues within the retail segment. In addition, the Company’s growth over the past several years has resulted in greater purchasing leverage and an improvement in net purchase costs from tire suppliers. Gross profit percentages on sales by the Company’s retail segment increased from 42.5% in 2002 to 47.2% in 2003. Wholesale margins as a percentage of sales increased from 13.9% in 2002 to 15.0% in 2003.

     Distribution expenses increased $8.2 million from $53.1 million, or 4.8% of net sales in 2002 to $61.4 million, or 4.7% of net sales in 2003. The increase in dollars was primarily due to the Purchased Companies. The decrease as a percentage of sales is primarily due to improved cost leveraging associated with the Purchased Companies as well as improved efficiencies related to warehousing and product delivery expenses.

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     Selling, administrative and retail store expenses increased by $116.0 million from $198.8 million, or 17.9% of net sales in 2002 to $314.8 million, or 23.9% of net sales in 2003. The increases were principally due to the addition of 72 Company-operated retail and franchised stores and 337 stores added resulting from the Purchased Companies. Excluding the impact of expenses associated with the acquired stores during 2002 and 2003, selling, administrative and retail store expenses increased by $26.9 million, or 13.5%, in 2003 compared to 2002. The resulting increased expenses was largely due to the impact of the 72 Company-operated retail and franchised stores.

     Net interest expense increased by $1.7 million, or 19.6%, during 2003 compared to 2002. The increase was due largely to a 21.5% increase in average borrowing levels on the Company’s credit facility primarily used to fund the acquisition of the Purchased Companies. The impact of the increased credit facility was partially offset by the Company’s cash from operations which totaled $37.7 million during 2003. The impact of amended credit facilities associated with the acquisitions caused interest rate spreads to increase; however, average borrowing rates were 2.3% lower in 2003 than in 2002 due to a decline in market interest rates. In both 2003 and 2002, the Company made significant efforts to keep interest rate spreads and borrowing rates to a minimum.

     Net other income in 2003 was relatively unchanged compared to 2002, increasing by 5.6%. A net decrease in the Company’s equity in operating results from joint ventures, which in 2003 included a $744,000 charge in connection with the exit from a joint venture, was more than offset by an aggregate increase in other income items. Net other income consists primarily of the Company’s equity interest in joint ventures and net gains and/or losses on sales of assets and miscellaneous other income and expense items.

     The Company’s effective tax rate was 35.5% in 2003 compared to 37.2% in 2002, due principally to reduced provisions for state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

     On March 31, 2003, the Company executed a new borrowing agreement with a group of 11 banks, which modified its existing bank borrowing facilities. The new agreement was amended and restated on November 29, 2003 to enable the Company to consummate its acquisition of NTW and again on November 19, 2004 to permit the Company to implement the holding company reorganization described in Item 1. The amended and restated agreement includes a term loan facility and a revolving loan facility, both of which mature on April 1, 2008. The revolving loan facility allows the Company to borrow up to $121.5 million, with the option to increase that amount by an additional $28.5 million. At December 31, 2004, $41.0 million was borrowed under the revolving loan facility and $124.8 million was outstanding under the term loan facility. The Company’s long-term debt at the end of 2004 also included a total of $72.0 million in Senior Notes. Of the total $237.8 million borrowed at December 31, 2004 under these combined credit arrangements, which exclude capital lease obligations, $81.4 million was classified as current on the Company’s balance sheet and the remaining $156.4 million was considered non-current.

     Under the agreements with its lenders, the Company is subject to certain financial covenants dealing with, among other things, the Company’s funded indebtedness, leverage, fixed charge coverage ratio, accounts receivable and inventories. The agreements also include certain restrictions that affect the Company’s ability to incur additional debt, acquire other companies, make certain investments, repurchase its own common stock, sell or place liens upon assets, provide guarantees and pay cash dividends. The Company was in compliance with all of its borrowing covenants as of December 31, 2004 and for the year then ended. The bank credit facilities and the Senior Notes are collateralized by substantially all of the Company’s assets and contain cross-default provisions.

     The Company had working capital of $138.6 million at December 31, 2004 and its current ratio was 1.40. During 2004, total cash generated by operating activities totaled $17.9 million. The Company’s strong annual cash flow, solid financial position and sizable credit facilities allowed it to make the acquisitions of the Purchased Companies in 2003 (see Note 5 to the consolidated financial statements). The Company was also able to fund capital expenditures totaling $25.5 million in 2004. Capital expenditures, including those during 2004 and 2003, have historically been primarily for equipment and tire molds. The Company had no material commitments for capital expenditures at the end of 2004. The Company anticipates expending approximately $25.0 million in capital expenditures in 2005.

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     The Company expects to fund 2005 day-to-day operating expenses and normally recurring capital expenditures out of operating funds and its present financial resources. The Company expects its future growth to include additional strategic acquisitions. Depending upon their size, future acquisition could require additional capital resources and would involve new or amended credit facilities. See “Forward-Looking Statements and Risks”, which identifies certain risks associated with the Company’s acquisition strategy, as well as many of the other factors which influence the Company’s operating results, its future growth potential and the industry in which it operates.

OFF-BALANCE SHEET ARRANGEMENTS

     Financial guarantees - As discussed in Note 14 to the consolidated financial statements, the Company’s Big O Tires, Inc. subsidiary has provided certain financial guarantees associated with real estate leases and financing of its franchisees. Although the guarantees were issued in the normal course of business to meet the financing needs of its franchisees, they represent credit risk in excess of the amounts reported on the balance sheet as of December 31, 2004. The contractual amounts of the guarantees, which represent the Company’s maximum exposure to credit loss in the event of non-performance by the franchisees, totaled $3.5 million as of December 31, 2004. The credit risk associated with these guarantees is essentially the same as that involved in extending loans to the franchisees. Big O evaluates each franchisee’s creditworthiness and requires that sufficient collateral and security interests be obtained by the third party lenders or lessors, before the guarantees are issued. There are no cash requirements associated with the guarantees, except in the event that an actual financial loss is subsequently incurred due to non-performance by the franchisees.

     Variable Interest Entities - As discussed in Note 16 to the consolidated financial statements, in January 2003 and December 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46), and its revision, FIN 46-R, respectively. FIN 46 and FIN 46-R provide guidance on the consolidation of entities whose equity holders have either not provided sufficient equity at risk to allow the entity to finance its own activities or do not possess certain characteristics of a controlling financial interest. FIN 46 and FIN 46-R require the consolidation of these entities, known as variable interest entities (VIE’s), by the primary beneficiary of the entity and also require certain disclosures by primary beneficiaries and other significant variable interest holders. The primary beneficiary is the entity, if any, that is subject to a majority of the risk of loss from the VIE’s activities, entitled to receive a majority of the VIE’s residual returns, or both. In applying such guidance for purposes of determining whether an entity is a VIE, the Company has reviewed arrangements created after that date in which it has: 1) an economic interest in an entity or obligations to that entity; 2) issued guarantees related to the liabilities of an entity; 3) transferred assets to an entity; 4) managed the assets of an entity; or 5) leased assets from an entity or provided that entity with financing.

     As of December 31, 2004, the Company has determined that it holds interests in certain VIE’s in connection with the franchise business activities conducted at Big O Tires, Inc.. However, there were no material expected losses that the Company would have been required to absorb nor were there any significant residual returns that the Company expected to receive from such entities as of December 31, 2004, and therefore no VIE’s are included in the consolidated financial statements of the Company as of December 31, 2004 and for the year then ended.

CONTRACTUAL OBLIGATIONS

     In addition to the debt obligations discussed in the Liquidity and Capital Resources section, the Company has operating and capital lease commitments as set forth in Note 8 to the consolidated financial statements. The table below summarizes the Company’s known material contractual obligations as of December 31, 2004 (in thousands).

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CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. Actual results could differ from those estimates. Significant accounting policies employed by the Company, including the use of estimates and assumptions, are presented in the Notes to Consolidated Financial Statements. Management bases its estimates on its historical experience, together with other relevant factors, in order to form the basis for making judgments, which will affect the carrying values of assets and liabilities. On an ongoing basis, management evaluates its estimates and makes revisions as deemed necessary. The following areas are considered to be of critical importance:

     Net sales - Net sales include revenues from sales of products and services, plus franchise and royalty fees charged to Big O franchisees, less estimated returns, allowances and customer rebates. Sales are recognized at the time products are shipped or services are rendered and the estimated costs of returns, allowances and rebates are accrued at the same time. Historically, management’s estimates for the costs of returns, allowances and rebates have not been materially different than the actual costs later incurred. Each Big O franchisee is required to pay an initial franchise fee as well as monthly royalty fees of 2% of gross sales. Initial franchise fees are deferred and recognized when all material services or conditions relating to the sale or transfer of the franchise have been substantially completed.

     Income Tax Accounting - We determine our income tax provision using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We also recognize future tax benefits associated with tax loss and credit carryforwards as deferred tax assets. Our deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We measure deferred tax assets and liabilities using enacted tax rates in effect for the year in which we expect to recover or settle the temporary differences. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted.

     Allowance for doubtful accounts and notes - The Company maintains an allowance for doubtful accounts and notes for estimated losses resulting from the inability of its customers to make required payments. The allowance is based on review of the overall condition of receivable balances and review of significant past due accounts. The Company evaluated its allowance for doubtful account at December 31, 2004 and determined that such amount was adequate but not excessive, based on facts and conditions known at that time. If the financial condition of the Company’s customers were to deteriorate in such a way as to impair their ability to make payments, additional allowances may be required.

     Inventories - Inventories, consisting of tires and other automotive products held for resale, are valued at the lower of cost or market. The Company historically used the last-in, first-out (“LIFO”) method for approximately 45% of its inventories, with the remaining inventories valued on a first-in, first-out (“FIFO”) basis. Effective January 1, 2004, the Company changed its method of determining the cost of its LIFO inventories to the FIFO method. The Company has applied this change retroactively by restating its financial statements as required by Accounting Principles Board No. 20, “Accounting Changes,” and accordingly, previously reported retained earnings as of January 1, 2002 has been increased by $1.8 million.

         During the second quarter of 2004, but effective on January 1, 2004, the Company changed its inventory costing from LIFO to FIFO. The method was changed to obtain a more current inventory valuation at period end and to achieve a better matching of revenues and expenses. Costing for retail inventories has historically been on the FIFO method and it is expected that continued growth in this segment will result in the continuing liquidation of LIFO layers. The financial statements presented for 2003, 2002, 2001 and 2000 have been retroactively restated to reflect this change. For the effect of the change on previously reported net income and earnings per share see Note 3 – Restatement.

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     Goodwill, Trademarks and Other Intangible Assets - Goodwill represents the excess of cost over the fair value of identifiable net assets acquired. Under the provisions of SFAS No. 142, the amortization of goodwill and other indefinite-lived intangible assets ceased effective January 1, 2002, with charges being recorded only if impairment is found to exist. The Company performs its annual impairment assessment in the first quarter of each fiscal year unless circumstances dictate more frequent assessments. The Company compares the carrying values of its “reporting units” to their fair value, with a reporting unit being defined as an operating segment or one level below a segment if discrete financial information is prepared and reviewed regularly by management. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is required to be recognized. Fair value is estimated using the discounted cash flow method. When available and as appropriate, the Company uses comparative market multiples to corroborate discounted cash flow results. In applying this methodology, the Company relies on a number of factors, including actual operating results, future business plans, economic prospects and market data. No impairment to the recorded value of Company’s indefinite-lived assets was found to exist as a result of the required testing.

     Warranty costs - The costs of anticipated adjustments for workmanship and materials that are the responsibility of the Company are estimated based on historical experience and charged against earnings currently. Management reviews these estimates on a regular basis and adjusts the warranty provisions as actual experience differs from historical estimates or other information becomes available. Reserves for future warranty claims and service are included in liabilities in the balance sheets.

     Self-Insured Reserves — The Company is self-insured for general and automobile liability, workers’ compensation and health care claims, although the Company maintains stop-loss coverage with third-party insurers to limit its total liability exposure. A reserve for liabilities associated with these losses is established for claims filed and claims incurred but not yet reported based upon the Company’s estimate of ultimate cost, which is calculated using analyses of historical data, severity factors and valuations provided by third-party actuaries. The Company monitors new claims and claim development as well as negative trends related to the claims incurred but not reported in order to assess the adequacy of its insurance reserves. On an annual basis, the Company also reviews its assumptions with its third-party actuaries. While the Company does not expect the amounts ultimately paid to differ significantly from its estimates, the Company’s self-insurance reserves and corresponding selling, general and administrative expenses could be affected if future claim experience differs significantly from historical trends and actuarial assumptions.

     Retirement plan obligations - The values of certain assets and liabilities associated with the Company’s retirement plan obligations are determined on an actuarial basis and include estimates and assumptions such as the expected return on plan assets and discount rates. Expected returns on plan assets are determined based on a weighted average expected long-term return on the target asset allocation as described in Note 11 – Retirement Plans and adjusted depending upon returns expected on the various asset classes. Discount rates are determined based on rates of high quality, fixed income investments. Actual changes in the fair market value of plan assets, differences between the actual return and the expected return on plan assets and changes in the discount rate affect the amount of the pension expense recognized.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

     In May 2004, the FASB issued FASB Staff Position, or FSP, 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” FSP 106-2 addresses the appropriate accounting and disclosure requirements for companies that sponsor a postretirement health care plan that provides prescription drug benefits. The new guidance was deemed necessary as a result of the 2003 Medicare prescription law which includes a federal subsidy for qualifying companies. The effective date of FSP 106-2 is the first interim or annual period beginning after June 15, 2004. The adoption of FSP 106-2 had no impact on the Company’s financial position, results of operations or related footnote disclosure.

     In November 2004, the FASB issued SFAS No. 151, “Inventory Costs”. The new statement amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. This statement requires that those items be recognized as current-period charges and requires that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. This statement is effective for fiscal years beginning after June 15, 2005. The Company does not expect the adoption of this statement to have a material impact on the Company’s financial condition or results of operations.

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     In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”, or SFAS No. 123R. SFAS No. 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and subsequently issued stock option related guidance. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. Entities will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.

     The Company is required to apply SFAS No. 123R to all awards granted, modified or settled as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The Company is also required to use either the modified-prospective method or modified-retrospective method. Under the modified-prospective method, we must recognize compensation cost for all awards subsequent to adopting the standard and for the unvested portion of previously granted awards outstanding upon adoption. Under the modified-retrospective method, the Company must restate its previously issued financial statements to recognize the amounts previously calculated and reported on a pro forma basis, as if the prior standard had been adopted. Under both methods, the Company is permitted to use either the straight line or an accelerated method to amortize the cost as an expense for awards with graded vesting. The standard permits and encourages early adoption.

     The Company has commenced its analysis of the impact of SFAS No. 123R, but has not yet decided: (1) whether it will elect to early adopt, (2) if it will elect to early adopt, what date we would do so, (3) whether it will use the modified-prospective or modified-retrospective method, and (4) whether it will elect to use straight line or an accelerated method. Accordingly, the Company has not determined the impact that the adoption of SFAS No. 123R will have on the Company’s financial position or results of operations.

FORWARD-LOOKING STATEMENTS AND RISKS

     This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements containing the words, “believes”, “expects”, “anticipates”, “estimates” and words of similar import. Such forward-looking statements relate to expectations for future financial performance, which involve known and unknown risks, uncertainties and other factors. Such factors include, but are not limited to: changes in economic and business conditions in the world; increased competitive activity; consolidation within and among competitors, suppliers and customers; unexpected changes in the replacement tire market; the Company’s inability to attract as many new franchisees or open as many Company-operated retail outlets as planned; changes in the Company’s ability to identify and acquire additional companies in the replacement tire industry and successfully integrate acquisitions and achieve anticipated synergies or savings; fluctuations in tire prices charged by manufacturers, including fluctuations due to changes in raw material and energy prices; product shortages and supply disruptions; changes in interest and foreign exchange rates; the cyclical nature of the automotive industry and the loss of a major customer or program. It is not possible to foresee or identify all such factors. Any forward-looking statements in this report are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are not a guarantee of future performance and actual results or developments may differ materially from those projected.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to certain financial market risks. The most predominant of these risks is the fluctuation in interest rates associated with bank borrowings, since changes in interest expense affect the Company’s operating results. At December 31, 2004, the Company owed a total of $165.8 million to banks under its credit facilities, of which $154.5 million was not hedged by interest-rate swap agreements and was thus subject to market risk for a change in interest rates. If interest rates increase by 25 basis points, the Company’s annual interest expense would increase by approximately $386,000 based on the outstanding balance which was not hedged at December 31, 2004. See Note 7 to the consolidated financial statements for information regarding the Company’s interest rate swap agreements.

     The Company has no significant foreign currency translation risks associated with its sales to customers located outside the United States since these sales are made and settled in U.S. dollars. The Company does have significant risk in foreign currency translation associated with its share of earnings and losses from certain equity investments.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements and supplementary financial information required by this Item 8 are included on the following 31 pages of this Report.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors
  of TBC Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of TBC Corporation and its subsidiaries at December 31, 2004 and December 31, 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 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 audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (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, 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.

/s/  PricewaterhouseCoopers LLP

Memphis, Tennessee
March 31, 2005

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TBC CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS

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

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TBC CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY

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

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TBC CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

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

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TBC CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)

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

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TBC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)