UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

		For the quarterly period ended September 27, 2003

		OR

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

		For the transition period from to

Commission File Number 333-61713

American Tire Distributors, Inc.


A Delaware Corporation		IRS Employer Identification No. 56-0754594

12200 Herbert Wayne Court

Suite 150

Huntersville, North Carolina 28078

(704) 992-2000

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

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

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

TABLE OF CONTENTS


				Page

PART I.		FINANCIAL INFORMATION

	ITEM 1.	Financial Statements
			Condensed Consolidated Balance Sheets — September 27, 2003 (unaudited) and December 28, 2002		1
			Consolidated Statements of Operations (unaudited) — Quarters and Nine Months Ended September 27, 2003 and September 28, 2002		2
			Consolidated Statements of Cash Flows (unaudited) — Nine Months Ended September 27, 2003 and September 28, 2002		3
			Notes to Consolidated Financial Statements		4

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			17

	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk			21

	ITEM 4.	Controls and Procedures			21

PART II.		OTHER INFORMATION

	ITEM 1.	Legal Proceedings			22

	ITEM 6.	Exhibits and Reports on Form 8-K			22

		Signatures			23

Cautionary Statement on Forward-Looking Information

This report contains “forward-looking statements,” which are statements other than statements of historical facts. These forward-looking statements use phrases such as “expects” or “anticipates”. The forward-looking statements include, among other things, the Company’s expectations and estimates about its business operations, strategy, and its expectations and estimates about its future financial performance, including its financial position, cash flows from operations, capital expenditures and ability to refinance indebtedness. The forward-looking statements in this Form 10-Q are intended to be subject to the safe harbor protection provided by the federal securities laws.

The forward-looking statements are subject to risks, uncertainties and assumptions about the Company and about the future, and could prove not to be correct. Cautionary statements describing factors that could cause actual results to differ materially from the Company’s expectations are discussed in this report, including in conjunction with the forward-looking statements included in this report. All subsequent written or oral forward-looking statements attributable to the Company or to persons acting on behalf of the Company are expressly qualified in their entirety by those cautionary statements.

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

American Tire Distributors, Inc.

Condensed Consolidated Balance Sheets — September 27, 2003 and December 28, 2002

(in thousands, except share amounts)


				September 27, 2003			December 28, 2002

				(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	3,710		$	2,693
	Accounts receivable, net of allowances of $1,027 and $1,231				110,773			94,674
	Inventories				165,706			156,722
	Deferred income taxes				623			3,785
	Other current assets				11,759			11,899

		Total current assets			292,571			269,773

Property and equipment, net					18,397			20,634
Goodwill, net					93,940			93,940
Other intangible assets, net					2,430			3,572
Deferred income taxes					15,331			18,440
Other assets					4,631			4,911

			Total assets	$	427,300		$	411,270

Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	176,576		$	165,409
	Accrued expenses				24,395			18,549
	Current maturities of long-term debt				2,394			2,742

		Total current liabilities			203,365			186,700

Revolving credit facility and other long-term debt					139,339			149,793
Series D Senior Notes					28,600			28,600
Capital lease obligations					14,263			14,709
Other liabilities					3,817			3,944
Redeemable preferred stock (Note 10)					10,535			11,035
Commitments and contingencies (Note 12)
Stockholders’ equity:
	Preferred stock (Note 11)				49,717			46,035
	Common stock, par value $.01 per share; 50,000,000 shares authorized; 5,086,917 shares issued and outstanding				51			51
	Additional paid-in capital				22,388			22,388
	Warrants				1,782			1,782
	Notes receivable from sale of stock				(17	)		(17	)
	Accumulated deficit				(46,540	)		(53,750	)

		Total stockholders’ equity			27,381			16,489

			Total liabilities and stockholders’ equity	$	427,300		$	411,270

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

American Tire Distributors, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands)



		Quarters Ended						Nine Months Ended

		September 27,			September 28,			September 27,			September 28,
		2003			2002			2003			2002

Net sales		$	291,858		$	280,059		$	835,187		$	809,205
Cost of goods sold			237,194			228,663			681,465			660,669

	Gross profit		54,664			51,396			153,722			148,536
Selling, general and administrative expenses			42,340			41,794			125,009			125,815

	Operating income		12,324			9,602			28,713			22,721

Other income (expense):
	Interest expense		(3,110	)		(4,153	)		(10,796	)		(14,761	)
	Gain on repurchase of Series D Senior Notes		—			—			—			49,759
	Other income (expense), net		(17	)		155			235			312

Income from continuing operations before income taxes			9,197			5,604			18,152			58,031
Provision for income taxes			3,678			2,241			7,260			23,213

Income from continuing operations			5,519			3,363			10,892			34,818
Loss on disposal of discontinued operations, net of income tax benefit of $0, $24, $0 and $243.			—			(36	)		—			(364	)

Net income		$	5,519		$	3,327		$	10,892		$	34,454

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

American Tire Distributors, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



			Nine Months Ended

			September 27,			September 28,
			2003			2002

Cash flows from operating activities:
	Net income		$	10,892		$	34,454
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Loss on disposal of discontinued operations		—			364
		Gain on repurchase of Series D Senior Notes		—			(49,759	)
		Depreciation and amortization of other intangibles		4,920			6,228
		Amortization of other assets		906			995
		Deferred income taxes		6,271			20,983
		Other, net		41			225
	Change in operating assets and liabilities:
		Accounts receivable, net		(16,099	)		(16,053	)
		Inventories		(8,984	)		1,870
		Other current assets		140			3,347
		Accounts payable and accrued expenses		17,013			(4,003	)
		Other, net		(1,089	)		(3,910	)

		Net cash provided by (used in) continuing operating activities		14,011			(5,259	)

Cash flows from investing activities:
	Purchase of property and equipment			(1,315	)		(874	)
	Proceeds from sale of property and equipment			566			2,080
	Other, net			(50	)		(92	)

		Net cash provided by (used in) investing activities		(799	)		1,114

Cash flows from financing activities:
	Net proceeds from (repayments of) revolving credit facility and other long-term debt			(9,369	)		32,749
	Repurchase of Series D Senior Notes			—			(64,959	)
	Net proceeds from sale-leaseback transaction			—			13,285
	Proceeds received from issuance of preferred stock			—			28,913
	Principal payments on other long-term debt			(2,326	)		(4,612	)
	Cash paid for Series A preferred stock redemption			(500	)		—
	Other, net			—			(40	)

		Net cash provided by (used in) financing activities		(12,195	)		5,336

Net increase in cash and cash equivalents				1,017			1,191
Cash and cash equivalents, beginning of period				2,693			4,131

Cash and cash equivalents, end of period			$	3,710		$	5,322

Supplemental disclosures of cash flow information —
	Cash payments for interest		$	9,522		$	13,942

	Cash payments for income taxes, net		$	1,119		$	2,178

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

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1. Nature of Business:

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

2. Basis of Presentation:

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

3. New Accounting Pronouncements:

In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002.” This statement contains a number of changes under existing GAAP, including the elimination of extraordinary item classification of most debt extinguishments that was previously required under SFAS No. 4. The provisions of this statement related to the rescission of Statement 4 apply in fiscal years beginning after May 15, 2002. The Company adopted the provisions of SFAS No. 145 in the first quarter of fiscal year 2003, which required reclassification of the Company’s 2002 extraordinary gain (Note 9).

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” This statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost (other than employee termination benefits), as defined, was recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company adopted the provisions of SFAS No. 146 in the first quarter of fiscal year 2003. The adoption of this statement had no material impact on the Company’s financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. (“FIN”) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others — an interpretation of FASB Statements No. 5, 57, and 107 and a rescission of FASB Interpretation No. 34.” FIN 45 elaborates on the disclosures to be made regarding obligations under certain guarantees in interim and annual financial statements. It also clarifies the requirement of a guarantor to recognize a liability at the inception of the guarantee based on the fair value of the obligation. The provisions relating to the initial recognition and measurement of a liability are applicable on a prospective basis for guarantees issued or

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

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

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

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” an amendment of SFAS No. 123, “Accounting for Stock-Based Compensation.” The transition guidance and annual disclosure provisions are effective for fiscal years ending after December 15, 2002 and the interim disclosure provisions are effective for interim periods beginning after December 15, 2002. This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require more prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results. At this time, the Company has not voluntarily adopted the fair value method of accounting under SFAS No. 123, but is required to provide certain pro forma disclosures, which are presented below.

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

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



	For the Quarters Ended						For the Nine Months Ended

	September 27,			September 28,			September 27,			September 28,
	2003			2002			2003			2002

	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net income, as reported	$	5,519		$	3,327		$	10,892		$	34,454
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of tax		(160	)		(198	)		(315	)		(395	)

Pro forma net income	$	5,359		$	3,129		$	10,577		$	34,059

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

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

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

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

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

4. Inventories:

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

5. Shipping and Handling Costs:

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

6. Deferred Income Taxes:

The Company has deferred tax assets of $16.0 million and $22.2 million at September 27, 2003 and December 28, 2002, respectively. The decrease in net deferred tax assets is primarily attributable to current period income and the corresponding net operating loss carryforward (“NOLs”) utilization. Management has evaluated the Company’s deferred tax assets and has concluded that the realizability of the deferred tax assets is “more likely than not,” except as it relates to certain state NOLs, for which a valuation allowance of $1.0 million is recorded as of September 27, 2003, unchanged from December 28, 2002. This evaluation considered the historical and long-term expected profitability of the Company. Given the timing of the reversal of its temporary differences and the expiration date of its NOLs, the Company believes that taxable income generated in current and future years will be sufficient to utilize the remaining net deferred tax assets. The Company’s ability to generate future taxable income is dependent on numerous factors including general economic conditions, the state of the replacement tire market and other factors beyond management’s control. There can be no assurance that the Company will meet its expectation of future taxable income and adjustments to the valuation allowance may be required in the future.

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

7. Financing Arrangements:

Revolving Credit Facility

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

The Revolver term expires in March 2005, extendable by the Company and the banks for an additional five years. Borrowings under the Revolver bear interest, at (i) the Base Rate, as defined, plus the applicable margin (1.50% as of September 27, 2003) or (ii) the Eurodollar Rate, as defined, plus the applicable margin (3.00% as of September 27, 2003). These margins are subject to performance-based step-downs resulting in margins ranging from 0.75% to 2.0% for Base Rate loans and 2.0% to 3.5% for Eurodollar Rate loans, respectively.

The Revolver, as amended, requires the Company to meet certain covenants, including minimum EBITDA, fixed charge coverage and tangible capital funds, all as defined, and minimum loan availability and certain covenants which, among other things, restrict the ability of the Company to incur additional indebtedness; enter into guarantees; make loans and investments; make capital expenditures; declare dividends; engage in mergers, consolidations and asset sales; enter into transactions with affiliates; create liens and encumbrances; enter into sale/leaseback transactions; modify material agreements; and change the business it conducts. As of November 12, 2003, the Company was in compliance with these covenants, as amended. The Company’s obligations under the Revolver are secured by all inventories and accounts receivable.

Capital Lease Obligations

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

Debt Maturities

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


Year Ending
December:

2003 (remainder)	$	731
2004		2,139
2005		138,477
2006		169
2007		53
Thereafter		28,764

	$	170,333

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

Derivative Instruments

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

8. Discontinued Operations:

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

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

9. Gain on Repurchase of Series D Senior Notes:

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

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

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

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

10. Redeemable Preferred Stock:

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


		September 27, 2003		December 28, 2002

		(Unaudited)
Redeemable preferred stock Series A — 4% cumulative; 7,000 shares authorized; 6,500 and 7,000 shares issued and outstanding		$	6,500	$	7,000
Redeemable preferred stock Series B — variable rate cumulative; 4,500 shares authorized, issued and outstanding			4,035		4,035

	Total redeemable preferred stock	$	10,535	$	11,035

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

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

11. Stockholders’ Equity:

Amendment to Articles of Incorporation

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

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

Preferred Stock

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


		September 27, 2003		December 28, 2002

		(Unaudited)
Preferred stock Series C — 12% cumulative; 1,333,334 shares authorized, issued and outstanding		$	15,600	$	14,520
Preferred stock Series D — 12% cumulative; 9,637,592 shares authorized, issued and outstanding			34,117		31,515

	Total preferred stock	$	49,717	$	46,035

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

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

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

12. Commitments and Contingencies:

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

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

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

13. Subsidiary Guarantor Financial Information:

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

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



				As of September 27, 2003

				Parent			Subsidiary
				Company			Guarantors			Eliminations			Consolidated


				(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	3,668		$	42		$	—		$	3,710
	Accounts receivable, net				79,921			30,852			—			110,773
	Inventories				116,456			49,250			—			165,706
	Deferred income taxes and other current assets				11,820			562			—			12,382
	Intercompany receivables				52,293			—			(52,293	)		—

		Total current assets			264,158			80,706			(52,293	)		292,571

Property and equipment, net					14,379			4,018			—			18,397
Goodwill and other intangible assets, net					51,557			44,813			—			96,370
Investment in subsidiaries					74,888			—			(74,888	)		—
Deferred income taxes and other assets					19,498			464			—			19,962

			Total assets	$	424,480		$	130,001		$	(127,181	)	$	427,300

Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	176,576		$	—		$	—		$	176,576
	Accrued expenses				22,450			1,945			—			24,395
	Current maturities of long-term debt				2,384			10			—			2,394
	Intercompany payables				—			52,293			(52,293	)		—

		Total current liabilities			201,410			54,248			(52,293	)		203,365

Revolving credit facility and other long-term debt					139,339			—			—			139,339
Series D Senior Notes					28,600			—			—			28,600
Capital lease obligations					14,263			—			—			14,263
Other liabilities					2,952			865			—			3,817
Redeemable preferred stock					10,535			—			—			10,535
Stockholders’ equity:
	Intercompany investment				—			76,633			(76,633	)		—
	Preferred stock				49,717			—			—			49,717
	Common stock, par value $.01 per share; 50,000,000 shares authorized; 5,086,917 shares issued and outstanding				51			—			—			51
	Additional paid-in capital				22,388			—			—			22,388
	Warrants				1,782			—			—			1,782
	Notes receivable from sale of stock				(17	)		—			—			(17	)
	Accumulated deficit				(46,540	)		(1,745	)		1,745			(46,540	)

		Total stockholders’ equity			27,381			74,888			(74,888	)		27,381

			Total liabilities and stockholders’ equity	$	424,480		$	130,001		$	(127,181	)	$	427,300

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)



				As of December 28, 2002

				Parent			Subsidiary
				Company			Guarantors			Elimination			Consolidated

				(Unaudited)			(Unaudited)			(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	2,538		$	155		$	—		$	2,693
	Accounts receivable, net				67,514			27,160			—			94,674
	Inventories				109,143			47,579			—			156,722
	Deferred income taxes and other current assets				14,727			957			—			15,684
	Intercompany receivables				54,577			—			(54,577	)		—

		Total current assets			248,499			75,851			(54,577	)		269,773

Property and equipment, net					15,742			4,892			—			20,634
Goodwill and other intangible assets, net					51,856			45,656			—			97,512
Investment in subsidiaries					69,142			—			(69,142	)		—
Deferred income taxes and other assets					22,812			539			—			23,351

			Total assets	$	408,051		$	126,938		$	(123,719	)	$	411,270

Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	165,206		$	203		$	—		$	165,409
	Accrued expenses				16,550			1,999			—			18,549
	Current maturities of long-term debt				2,742			—			—			2,742
	Intercompany payables				—			54,577			(54,577	)		—

		Total current liabilities			184,498			56,779			(54,577	)		186,700

Revolving credit facility and other long-term debt					149,793			—			—			149,793
Series D Senior Notes					28,600			—			—			28,600
Capital lease obligations					14,709			—			—			14,709
Other liabilities					2,927			1,017			—			3,944
Redeemable preferred stock					11,035			—			—			11,035
Stockholders’ equity:
	Intercompany investment				—			76,633			(76,633	)		—
	Preferred stock				46,035			—			—			46,035
	Common stock, par value $.01 per share; 50,000,000 shares authorized; 5,086,917 shares issued and outstanding				51			—			—			51
	Additional paid-in capital				22,388			—			—			22,388
	Warrants				1,782			—			—			1,782
	Notes receivable from sale of stock				(17	)		—			—			(17	)
	Accumulated deficit				(53,750	)		(7,491	)		7,491			(53,750	)

		Total stockholders’ equity			16,489			69,142			(69,142	)		16,489

			Total liabilities and stockholders’ equity	$	408,051		$	126,938		$	(123,719	)	$	411,270

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

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



		For the Quarter Ended
		September 27, 2003

		Parent			Subsidiary
		Company			Guarantors		Elimination			Consolidated


		(Unaudited)
Net sales		$	203,512		$	88,346	$	—		$	291,858
Cost of goods sold			164,539			72,655		—			237,194

	Gross profit		38,973			15,691		—			54,664
Selling, general and administrative expenses			31,689			10,651		—			42,340

	Operating income		7,284			5,040		—			12,324
Other income (expense):
	Interest expense		(3,110	)		—		—			(3,110	)
	Other income (expense), net		(91	)		74		—			(17	)
	Equity in net income of subsidiaries		3,069			—		(3,069	)		—

Income from continuing operations before income taxes			7,152			5,114		(3,069	)		9,197
Provision for income taxes			1,633			2,045		—			3,678

Net income		$	5,519		$	3,069	$	(3,069	)	$	5,519



		For the Quarter Ended
		September 28, 2002

		Parent			Subsidiary
		Company			Guarantors		Elimination			Consolidated


		(Unaudited)
Net sales		$	198,463		$	81,596	$	—		$	280,059
Cost of goods sold			161,108			67,555		—			228,663

	Gross profit		37,355			14,041		—			51,396
Selling, general and administrative expenses			29,792			12,002		—			41,794

	Operating income		7,563			2,039		—			9,602
Other income (expense):
	Interest income (expense)		(4,155	)		2		—			(4,153	)
	Other income, net		58			97		—			155
	Equity in net income of subsidiaries		1,311			—		(1,311	)		—

Income from continuing operations before income taxes			4,777			2,138		(1,311	)		5,604
Provision for income taxes			1,414			827		—			2,241

Income from continuing operations			3,363			1,311		(1,311	)		3,363
Loss on disposal of discontinued operations			(36	)		—		—			(36	)

Net income		$	3,327		$	1,311	$	(1,311	)	$	3,327

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

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



		For the Nine Months Ended
		September 27, 2003

		Parent			Subsidiary
		Company			Guarantors		Elimination			Consolidated


		(Unaudited)
Net sales		$	593,991		$	241,196	$	—		$	835,187
Cost of goods sold			481,840			199,625		—			681,465

	Gross profit		112,151			41,571		—			153,722
Selling, general and administrative expenses			92,808			32,201		—			125,009

	Operating income		19,343			9,370		—			28,713
Other income (expense):
	Interest expense		(10,796	)		—		—			(10,796	)
	Other income, net		29			206		—			235
	Equity in net income of subsidiaries		5,746			—		(5,746	)		—

Income from continuing operations before income taxes			14,322			9,576		(5,746	)		18,152
Provision for income taxes			3,430			3,830		—			7,260

Net income		$	10,892		$	5,746	$	(5,746	)	$	10,892



		For the Nine Months Ended
		September 28, 2002

		Parent			Subsidiary
		Company			Guarantors			Elimination			Consolidated


		(Unaudited)
Net sales		$	578,051		$	231,154		$	—		$	809,205
Cost of goods sold			468,980			191,689			—			660,669

	Gross profit		109,071			39,465			—			148,536
Selling, general and administrative expenses			88,897			36,918			—			125,815

	Operating income		20,174			2,547			—			22,721
Other income (expense):
	Interest expense		(14,701	)		(60	)		—			(14,761	)
	Gain on repurchase of Series D Senior Notes		49,759			—			—			49,759
	Other income, net		96			216			—			312
	Equity in net income of subsidiaries		1,715			—			(1,715	)		—

Income from continuing operations before income taxes			57,043			2,703			(1,715	)		58,031
Provision for income taxes			22,225			988			—			23,213

Income from continuing operations			34,818			1,715			(1,715	)		34,818
Loss on disposal of discontinued operations			(364	)		—			—			(364	)

Net income		$	34,454		$	1,715		$	(1,715	)	$	34,454

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)

Consolidating statements of cash flows for the nine months ended September 27, 2003 and September 28, 2002 are as follows:



				For the Nine Months Ended
				September 27, 2003

				Parent			Subsidiary
				Company			Guarantors			Elimination			Consolidated


				(Unaudited)
Cash flows from operating activities:
	Net income			$	10,892		$	5,746		$	(5,746	)	$	10,892
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization of other intangibles and other assets			3,669			2,157			—			5,826
		Other, net			6,282			30			—			6,312
		Equity in net income of subsidiaries			(5,746	)		—			5,746			—
	Change in operating assets and liabilities:
		Accounts receivable, net			(12,407	)		(3,692	)		—			(16,099	)
		Inventories			(7,313	)		(1,671	)		—			(8,984	)
		Other current assets			(255	)		395			—			140
		Accounts payable and accrued expenses			17,270			(257	)		—			17,013
		Other, net			(1,010	)		(79	)		—			(1,089	)

			Net cash provided by continuing operations		11,382			2,629			—			14,011

Cash flows from investing activities:
	Purchase of property and equipment				(773	)		(542	)		—			(1,315	)
	Proceeds from sale of property and equipment				495			71			—			566
	Other, net				(50	)		—			—			(50	)
	Intercompany				2,259			(2,259	)		—			—

			Net cash provided by (used in) investing activities		1,931			(2,730	)		—			(799	)

Cash flows from financing activities:
	Net repayments of revolving credit facility and other long-term debt				(9,369	)		—			—			(9,369	)
	Principal payments on other long-term debt				(2,314	)		(12	)		—			(2,326	)
	Cash paid for Series A preferred stock redemption				(500	)		—			—			(500	)

			Net cash used in financing activities		(12,183	)		(12	)		—			(12,195	)

Net increase (decrease) in cash and cash equivalents					1,130			(113	)		—			1,017
Cash and cash equivalents, beginning of period					2,538			155			—			2,693

Cash and cash equivalents, end of period				$	3,668		$	42		$	—		$	3,710

American Tire Distributors, Inc.

Notes to Consolidated Financial Statements — (Continued)



				For the Nine Months Ended
				September 28, 2002

				Parent			Subsidiary
				Company			Guarantors			Elimination			Consolidated


				(Unaudited)
Cash flows from operating activities:
	Net income			$	34,454		$	1,715		$	(1,715	)	$	34,454
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Loss on disposal of discontinued operations			364			—			—			364
		Gain on repurchase of Series D Senior Notes			(49,759	)		—			—			(49,759	)
		Depreciation and amortization of other intangibles and other assets			3,881			3,342			—			7,223
		Other, net			17,422			3,786			—			21,208
		Equity in net income of subsidiaries			(1,715	)		—			1,715			—
	Change in operating assets and liabilities:
		Accounts receivable, net			(13,930	)		(2,123	)		—			(16,053	)
		Inventories			(567	)		2,437			—			1,870
		Other current assets			3,290			57			—			3,347
		Accounts payable and accrued expenses			(4,459	)		456			—			(4,003	)
		Other, net			(3,465	)		(445	)		—			(3,910	)

			Net cash provided by (used in) continuing operations		(14,484	)		9,225			—			(5,259	)

Cash flows from investing activities:
Purchase of property and equipment					(674	)		(200	)		—			(874	)
Proceeds from sale of property and equipment					1,471			609			—			2,080
Other, net					(92	)		—			—			(92	)
Intercompany					8,779			(8,779	)		—			—

			Net cash provided by (used in) investing activities		9,484			(8,370	)		—			1,114

Cash flows from financing activities:
Net proceeds from revolving credit facility and other long-term debt					32,749			—			—			32,749
Repurchase of Series D Senior Notes					(64,959	)		—			—			(64,959	)
Net proceeds from sale-leaseback transaction					13,285			—			—			13,285
Proceeds received from issuance of preferred stock					28,913			—			—			28,913
Principal payments on other long-term debt					(3,728	)		(884	)		—			(4,612	)
Other					(40	)		—			—			(40	)

			Net cash provided by (used in) financing activities		6,220			(884	)		—			5,336

Net increase (decrease) in cash and cash equivalents					1,220			(29	)		—			1,191
Cash and cash equivalents, beginning of period					3,423			708			—			4,131

Cash and cash equivalents, end of period				$	4,643		$	679		$	—		$	5,322


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations.*

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

Results of Operations

Quarter Ended September 27, 2003 Compared to Quarter Ended September 28, 2002

Consolidated net sales in the third quarter 2003 increased by $11.8 million, or 4.2% to $291.9 million from $280.1 million in the third quarter 2002. The sales increase is primarily attributable to an increase in the volume of passenger, light truck tire, and custom wheel sales that is partially offset by a decrease in large truck tire sales.

Gross profit increased by $3.3 million, or 6.4% to $54.7 million in the third quarter 2003 from $51.4 million in the third quarter 2002. Gross profit as a percentage of sales increased 0.3% to 18.7% in the third quarter 2003 compared to 18.4% in the third quarter 2002. Margin increases were primarily attributable to increased custom wheel sales, which carry higher margins.

Selling, general and administrative expenses increased by $0.5 million in the third quarter 2003 representing 14.5% as a percentage of sales compared to 14.9% in the third quarter 2002. The increase in these expenses is primarily due to increased business activity during the period.

Interest expense decreased $1.0 million in the third quarter of 2003 to $3.1 million from $4.2 million in the third quarter of 2002. The decrease is primarily attributable to the decline in interest rates and reduced debt levels as well as a $0.4 million net reduction in interest expense relating to the change in fair value of the interest rate swap agreement entered into in the second quarter of 2003.

Pre-tax income for the third quarter 2003 was $9.2 million resulting in an income tax provision of $3.7 million compared to pre-tax income of $5.6 million in third quarter 2002 resulting in an income tax provision of $2.2 million. The effective tax rate in each quarter was approximately 40%.

Nine Months Ended September 27, 2003 Compared to Nine Months Ended September 28, 2002

Consolidated net sales for the nine-month period in 2003 increased by $26.0 million, or 3.2% to $835.2 million from $809.2 million in the nine-month period in 2002. The sales increase is primarily attributable to an increase in the volume of passenger, light truck tire, and custom wheel sales that is partially offset by a decrease in large truck tire sales. The increase in sales experienced by the Company was more than that of the industry as a whole. Units of replacement passenger and light truck tires shipped for the industry were down approximately 0.1% for the nine-month period in 2003 versus the nine-month period in 2002.

Gross profit increased by $5.2 million, or 3.5% to $153.7 million in the nine-month period in 2003 from $148.5 million in the nine-month period in 2002. Gross profit as a percentage of sales remained at 18.4% for the nine-month period in 2003 compared to the nine-month period 2002. Margins in 2003 benefited from increased custom wheels sales, which carry higher margins, offset by an aggressive first quarter 2003 marketing program, which resulted in reduced margins on selected products.

Selling, general and administrative expenses decreased by $0.8 million in the nine-month period ending September 27, 2003 representing 15.0% as a percentage of sales compared to 15.5% in the nine-month period ending September 28, 2002. This decrease was primarily a result of reduced costs associated with the Company’s workers compensation plan due to new safety initiatives implemented by the Company as well as a reduction in amortization expense relating to noncompete agreements that ended during 2003. These decreases were partially offset by increased costs associated with the Company’s group health plan.

Interest expense decreased $4.0 million in the nine-month period in 2003 to $10.8 million from $14.8 million in the nine-month period in 2002. The decrease is primarily due to lower outstanding principal on the Company’s Series D Senior Notes and other debt levels as well as a decline in interest rates.

Pre-tax income for the nine-month period ending September 27, 2003 was $18.2 million resulting in an income tax provision of $7.3 million compared to pre-tax income of $58.0 million for the nine-month period ending September 28, 2002 resulting in an income tax provision of $23.2 million. The nine-month period ending September 28, 2002 included the $49.8 million gain on repurchase of Series D Senior Notes and the related tax provision of $19.9 million. The effective tax rate for each of the nine-month periods was approximately 40%.

Liquidity and Capital Resources

At September 27, 2003, the combined net indebtedness (net of cash and excluding capital lease obligations) of the Company was $166.6 million compared to $178.4 million at December 28, 2002. Total commitments by the lenders under the Company’s revolving credit facility (“Revolver”) were $180.0 million at September 27, 2003. As of September 27, 2003, the Company had $34.5 million available for additional borrowings. The amount available to borrow is limited by the Borrowing Base computation, as defined in the agreement.

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 generally accepted accounting principles. The following table is a reconciliation of income from continuing operations to EBITDA:



	For the Quarters Ended				For the Nine Months Ended

	September 27,		September 28,		September 27,		September 28,
	2003		2002		2003		2002


	in thousands				in thousands
Income from continuing operations	$	5,519	$	3,363	$	10,892	$	34,818
Interest expense		3,110		4,153		10,796		14,761
Provision for income taxes		3,678		2,241		7,260		23,213
Depreciation and amortization of other intangibles		1,490		2,078		4,920		6,228
Gain on repurchase of Series D Senior Notes		—		—		—		(49,759	)

EBITDA	$	13,797	$	11,835	$	33,868	$	29,261

EBITDA from continuing operations increased to $13.8 million for the third quarter 2003 from $11.8 million for third quarter 2002. This increase is primarily attributed to higher sales and gross profit margins in the third quarter 2003 that were partially offset by slightly higher operating costs.

EBITDA from continuing operations increased to $33.9 million for the nine-month period 2003 from $29.3 million for the nine-month period 2002. The increase is primarily attributable to increased sales and reduced operating costs in 2003.

The Company’s principal sources of cash during the nine-month period ending September 27, 2003 came from operations and were offset by cash used to make capital expenditures and payments of long-term debt. Net working capital at September 27, 2003 totaled $89.2 million compared to $83.1 million at December 28, 2002, an increase of $6.1 million. The increase in working capital is primarily attributable to increased business activity during the period resulting in higher accounts receivable and inventory balances partially offset by an increase in accounts payable and accrued expenses.

Capital expenditures for the nine-month period ending September 27, 2003 and September 28, 2002 amounted to $1.3 million and $0.9 million, respectively. Capital expenditures in 2003 were primarily for warehouse racking and leasehold improvements.

At September 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.

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

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.

Income Taxes

New Accounting Pronouncements

statement were adopted in the first quarter of fiscal year 2003 and had no material impact on the Company’s financial position or results of operations.

In 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.

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

For the period ended September 27, 2003, the Company did not experience any material changes from the quantitative and qualitative disclosures about market risk presented in the Company’s Report on Form 10-K for the fiscal year ended December 28, 2002.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed,

summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Controls

During the quarter ended September 27, 2003, there was no change in the Company’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

There have been no material developments in legal proceedings involving the Company since those reported in the Company’s Report on Form 10-K for the fiscal year ended December 28, 2002.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits


	3.1	Fourth Restated Certificate of Incorporation of American Tire Distributors, Inc.


	31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K


	Report on Form 8-K was filed on August 12, 2003 relating to the press release reporting second quarter 2003 financial results.

SIGNATURES

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

Date: November 12, 2003


	AMERICAN TIRE DISTRIBUTORS, INC.


	By:	/s/ SCOTT A. DEININGER



	Scott A. Deininger
	Senior Vice President of
	Finance and Administration
	(On behalf of the Registrant and
	as Principal Financial Officer)

AMERICAN TIRE DISTRIBUTORS INC 10-Q