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 28, 2013

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 333-124878

American Tire Distributors Holdings, Inc.

(Exact name of registrant as specified in its charter)

A Delaware Corporation	59-3796143
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

12200 Herbert Wayne Court

Suite 150

Huntersville, North Carolina 28078

(Address of principal executive office)

(704) 992-2000

(Registrant’s telephone number, including area code)

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  ¨    No  x *

* The registrant is a voluntary filer of reports required to be filed by certain companies under Section 13 or 15(d) of the Securities and Exchange Act of 1934 and has filed all reports that would have been required to have been filed by the registrant during the preceding 12 months had it been subject to such filing requirements during the entirety of such period.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Number of common shares outstanding at November 4, 2013: 1,000

Cautionary Statements on Forward-Looking Information

This Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements relating to our business and financial outlook that are based on our current expectations, estimates, forecasts and projections. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or other comparable terminology.

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates and assumptions. Actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any of these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and is expressly qualified in its entirety by the cautionary statements included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 29, 2012, particularly under the caption “Risk Factors”. We undertake no obligation to update any such statement to reflect new information, or the occurrence of future events or changes in circumstances, after we distribute this Form 10-Q, except as required by the federal securities laws. Many factors could cause actual results to differ materially from those indicated by the forward-looking statements or could contribute to such differences including:

• general business and economic conditions in the United States, Canada and other countries, including uncertainty as to changes and trends;

• our ability to execute key strategies, including pursuing acquisitions and successfully integrating and operating acquired companies;

• our ability to develop and implement the operational and financial systems needed to manage our operations;

• the ability of our customers and suppliers to obtain financing related to funding their operations in the current economic market;

• the financial condition of our customers, many of which are small businesses with limited financial resources;

• changing relationships with customers, suppliers and strategic partners;

• changes in laws or regulations affecting the tire industry;

• changes in capital market conditions, including availability of funding sources and fluctuations in currency exchange rates;

• impacts of competitive products and changes to the competitive environment;

• acceptance of new products in the market; and

• unanticipated expenditures.

Some of the significant risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 29, 2012. These risks are not the only risks and uncertainties facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Where You Can Find More Information

We file reports and other information with the Securities and Exchange Commission (“SEC”). You can inspect, read and copy these reports and other information at the SEC’s Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information regarding the operation of the SEC’s Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that makes available reports, proxy statements and other information regarding issuers that file electronically.

We make available free of charge at www.atd-us.com (in the “Investor Relations” section) copies of materials we file with, or furnish to, the SEC. By referring to our corporate website, www.atd-us.com, we do not incorporate such website or its contents into this Quarterly Report on Form 10-Q.

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AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC.

FORM 10-Q

INDEX

				Page
PART I	FINANCIAL INFORMATION
	Item 1	-	Financial Statements (unaudited):
			Condensed Consolidated Balance Sheets - As of September 28, 2013 and December 29, 2012		4
			Condensed Consolidated Statements of Comprehensive Income (Loss) - For the quarters and nine months ended September 28, 2013 and September 29, 2012		5
			Condensed Consolidated Statement of Stockholders’ Equity - For the nine months ended September 28, 2013		6
			Condensed Consolidated Statements of Cash Flows - For the nine months ended September 28, 2013 and September  29, 2012		7
			Notes to Condensed Consolidated Financial Statements		8
	Item 2	-	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
	Item 3	-	Quantitative and Qualitative Disclosures about Market Risk		44
	Item 4	-	Controls and Procedures		44
PART II	OTHER INFORMATION
	Item 1	-	Legal Proceedings		45
	Item 1A	-	Risk Factors		45
	Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds		45
	Item 3	-	Defaults Upon Senior Securities		45
	Item 4	-	Mine Safety Disclosures		45
	Item 5	-	Other Information		45
	Item 6	-	Exhibits		45
	SIGNATURES				46

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

American Tire Distributors Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

In thousands, except share amounts	September 28, 2013			December 29, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	27,321		$	25,951
Accounts receivable, net		323,877			301,303
Inventories		759,649			721,672
Income tax receivable		369			369
Deferred income taxes		15,957			16,458
Assets held for sale		3,369			7,151
Other current assets		16,794			20,695
Total current assets		1,147,336			1,093,599
Property and equipment, net		143,242			129,882
Goodwill		504,045			483,143
Other intangible assets, net		731,298			738,698
Other assets		52,232			58,680
Total assets	$	2,578,153		$	2,504,002
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	514,042		$	502,221
Accrued expenses		64,671			44,916
Current maturities of long-term debt		533			493
Total current liabilities		579,246			547,630
Long-term debt		1,020,820			950,711
Deferred income taxes		277,987			285,345
Other liabilities		17,358			14,662
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $.01 per share; 1,000 shares authorized, issued and outstanding		—			—
Additional paid-in capital		758,385			756,338
Accumulated earnings (deficit)		(71,445	)		(50,541	)
Accumulated other comprehensive income (loss)		(4,198	)		(143	)
Total stockholders’ equity		682,742			705,654
Total liabilities and stockholders’ equity	$	2,578,153		$	2,504,002

See accompanying notes to condensed consolidated financial statements.

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American Tire Distributors Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

In thousands	Quarter Ended September 28, 2013			Quarter Ended September 29, 2012			Nine Months Ended September 28, 2013			Nine Months Ended September 29, 2012
Net sales	$	987,894		$	915,340		$	2,782,947		$	2,583,837
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below		817,544			765,768			2,328,192			2,166,865
Selling, general and administrative expenses		146,353			129,159			421,424			377,939
Transaction expenses		1,015			799			4,304			2,060
Operating income (loss)		22,982			19,614			29,027			36,973
Other income (expense):
Interest expense		(20,625	)		(18,744	)		(55,252	)		(52,475	)
Other, net		(648	)		(1,418	)		(3,556	)		(2,802	)
Income (loss) from operations before income taxes		1,709			(548	)		(29,781	)		(18,304	)
Income tax provision (benefit)		485			10,054			(8,877	)		(5,754	)
Net income (loss)	$	1,224		$	(10,602	)	$	(20,904	)	$	(12,550	)
Other comprehensive income (loss):
Unrealized gain (loss) on rabbi trust assets, net of tax		68			58			187			113
Foreign currency translation		3,000			—			(4,242	)		—
Other comprehensive income (loss)		3,068			58			(4,055	)		113
Comprehensive income (loss)	$	4,292		$	(10,544	)	$	(24,959	)	$	(12,437	)

See accompanying notes to condensed consolidated financial statements.

5

American Tire Distributors Holdings, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

													Accumulated
	Total							Additional		Accumulated			Other
	Stockholders’			Common Stock				Paid-In		Earnings			Comprehensive
In thousands, except share amounts	Equity			Shares		Amount		Capital		(Deficit)			(Loss) Income
Balance, December 29, 2012	$	705,654			1,000	$	—	$	756,338	$	(50,541	)	$	(143	)
Net income (loss)		(20,904	)		—		—		—		(20,904	)		—
Unrealized gain (loss) on rabbi trust assets, net of tax		187			—		—		—		—			187
Foreign currency translation		(4,242	)		—		—		—		—			(4,242	)
Stock-based compensation expense		2,047			—		—		2,047		—			—
Balance, September 28, 2013	$	682,742			1,000	$	—	$	758,385	$	(71,445	)	$	(4,198	)

See accompanying notes to condensed consolidated financial statements.

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American Tire Distributors Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

In thousands	Nine Months Ended September 28, 2013			Nine Months Ended September 29, 2012
Cash flows from operating activities:
Net income (loss)	$	(20,904	)	$	(12,550	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		78,456			65,656
Amortization of other assets		3,294			3,648
Benefit for deferred income taxes		(17,864	)		(11,897	)
Inventory step-up amortization		5,007			—
Provision for doubtful accounts		1,673			1,546
Stock-based compensation		2,047			2,761
Other, net		2,317			2,679
Change in operating assets and liabilities:
Accounts receivable		(13,549	)		(28,809	)
Inventories		(18,031	)		(53,836	)
Income tax receivable		644			1,232
Other current assets		4,005			(4,410	)
Accounts payable and accrued expenses		12,965			9,632
Other, net		(913	)		(1,179	)
Net cash provided by (used in) operating activities		39,147			(25,527	)
Cash flows from investing activities:
Acquisitions, net of cash acquired		(70,566	)		(19,224	)
Purchase of property and equipment		(34,924	)		(42,177	)
Purchase of assets held for sale		(1,924	)		(3,281	)
Proceeds from sale of property and equipment		88			84
Proceeds from sale of assets held for sale		5,389			3,078
Net cash provided by (used in) investing activities		(101,937	)		(61,520	)
Cash flows from financing activities:
Borrowings from revolving credit facility		2,239,558			2,513,600
Repayments of revolving credit facility		(2,168,837	)		(2,423,995	)
Outstanding checks		(3,582	)		(928	)
Payments of deferred financing costs		(1,106	)		—
Payments of other long-term debt		(292	)		(1,807	)
Net cash provided by (used in) financing activities		65,741			86,870
Effect of exchange rate changes on cash		(1,581	)		—
Net increase (decrease) in cash and cash equivalents		1,370			(177	)
Cash and cash equivalents - beginning of period		25,951			14,979
Cash and cash equivalents - end of period	$	27,321		$	14,802
Supplemental disclosures of cash flow information:
Cash payments for interest	$	38,535		$	34,913
Cash payments (receipts) for taxes, net	$	12,876		$	6,197
Supplemental disclosures of noncash activities:
Capital expenditures financed by debt	$	—		$	515

See accompanying notes to condensed consolidated financial statements.

7

American Tire Distributors Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Business:

American Tire Distributors Holdings, Inc. (“Holdings”) is a Delaware corporation that owns 100% of the issued and outstanding capital stock of American Tire Distributors, Inc. (“ATDI”), a Delaware corporation. Holdings has no significant assets or operations other than its ownership of ATDI. The operations of ATDI and its subsidiaries constitute the operations of Holdings presented under accounting principles generally accepted in the United States. ATDI is primarily engaged in the wholesale distribution of tires, custom wheels and accessories, and related tire supplies and tools. Its customer base is comprised primarily of independent tire dealers with the remainder of other customers representing various national and corporate accounts. ATDI serves a majority of the contiguous United States, as well as Canada, through one operating and reportable segment. Unless the context otherwise requires, “Company” herein refers to Holdings and its consolidated subsidiaries.

2. Basis of Presentation:

The accompanying condensed consolidated financial statements reflect the consolidated operations of the Company and have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) as defined by the Financial Accounting Standards Board (“FASB”) within the FASB Accounting Standards Codification (“FASB ASC”). In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the consolidated unaudited results for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the American Tire Distributors Holdings, Inc., Annual Report on Form 10-K for the fiscal year ended December 29, 2012. Certain changes in classification of amounts reported in prior years have been made to conform to the 2013 classification.

The Company’s fiscal year is based on either a 52- or 53-week period ending on the Saturday closest to each December 31. Therefore, the financial results of 53-week fiscal years, and the associated 14-week quarter, will not be comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13 weeks. The quarters ended September 28, 2013 and September 29, 2012 each contain operating results for 13 weeks. The nine months ended September 28, 2013 and September 29, 2012 each contain operating results for 39 weeks. It should be noted that the Company and its recently acquired subsidiaries, TriCan Tire Distributors (“TriCan”) and Regional Tire Distributors Inc. (“RTD”), have different year-end and quarter-end reporting dates. Both TriCan and RTD have a calendar year-end and quarterly reporting date. The impact from this difference on the consolidated financial statements is not material.

On May 28, 2010, pursuant to an Agreement and Plan of Merger, dated as of April 20, 2010, the Company was acquired by TPG Capital, L.P. and certain co-investors for an aggregate purchase price valued at $1,287.5 million (the “Merger”). The Merger was financed by $635 million in aggregate principal amount of debt financing as well as common equity capital. In connection with the Merger, the Company conducted cash tender offers for its existing outstanding debt securities, all of which were subsequently purchased and retired. Although the Company continues to operate as the same legal entity subsequent to the Merger and related change in control, a new entity was created for accounting purposes as of May 28, 2010. As a result, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair market values at the date of acquisition. As well, under the guidance of the SEC, push-down accounting is required when such transactions result in an entity being substantially wholly-owned. Therefore, the basis in shares of the Company’s common stock have been pushed down from the accounts of the parent and recorded on the financial statements of the subsidiary.

3. Recent Accounting Pronouncements

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment” which amended the guidance on the annual impairment testing of indefinite-lived intangible assets other than goodwill. The amended guidance will allow a company the option to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, based on the qualitative assessment, it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if a company concludes otherwise, quantitative impairment testing is not required. This new guidance will be effective for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company adopted this guidance on December 30, 2012 the first day of the Company’s 2013 fiscal year; the Company performs its annual impairment test in the fourth quarter and does not expect the impact of adopting this standard to have a material effect on the consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which amended the guidance for reporting reclassifications out of accumulated other comprehensive

8

income. The amended guidance will require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is entirely reclassified to net income, as required by U.S. GAAP. For other amounts, that are not required by U.S. GAAP to be entirely reclassified to net income, an entity is required to cross-reference other disclosures that will provide additional detail concerning these amounts. The amendments are effective for reporting periods beginning after December 15, 2012. The Company adopted this guidance on December 30, 2012 and its adoption did not have an effect on the Company’s consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 clarifies guidance and eliminates diversity in practice on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective for annual reporting periods beginning on or after December 15, 2013 and subsequent interim periods. The Company is currently assessing the impact, if any, on the condensed consolidated financial statements.

4. Acquisitions:

On August 30, 2013, the Company entered into a Stock Purchase Agreement with Tire Distributors, Inc. (“TDI”) to acquire 100% of the outstanding capital stock of TDI. TDI owned and operated one distribution center serving over 1,700 customers across Maryland and northeastern Virginia. The acquisition was completed on August 30, 2013 and was funded through the Company’s ABL Facility. The Company does not believe the acquisition of TDI is a material transaction subject to the disclosures and supplemental pro forma information required by ASC 805 – Business Combinations. As a result, the information is not presented.

The acquisition of TDI was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations and non-controlling interest. The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. A majority of the net assets acquired relate to a customer list intangible asset, which had an acquisition date fair value of $3.4 million. The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $1.7 million. The premium in the purchase price paid for the acquisition of TDI reflects the anticipated realization of operational and cost synergies. As additional information is obtained about these assets and liabilities within the measurement period, the Company expects to refine its estimates of fair value to allocate the purchase price more accurately.

On March 22, 2013, TriCan and ATDI entered into a Share Purchase Agreement with Regional Tire Holdings Inc., a corporation formed under the laws of the Province of Ontario (“Holdco”), RTD, a corporation formed under the laws of the Province of Ontario and a 100% owned subsidiary of Holdco, and the shareholders of Holdco, pursuant to which TriCan agreed to acquire from the shareholders of Holdco all of the issued and outstanding shares of Holdco for a purchase price of $62.5 million. Holdco has no significant assets or operations other than its ownership of RTD. The operations of RTD constitute the operations of Holdco. RTD is a wholesale distributor of tires, tire parts, tire accessories and related equipment in the Ontario and Atlantic provinces of Canada. The acquisition of RTD significantly expands the Company’s presence in the Ontario and Atlantic Provinces of Canada and complements the Company’s current operations in Canada.

The acquisition of RTD was completed on April 30, 2013 for aggregate cash consideration of approximately $64.9 million (the “Adjusted Purchase Price”) which includes initial working capital adjustments. The acquisition of RTD was funded by borrowings under the Company’s ABL Facility and FILO Facility, as more fully described in Note 9. The Adjusted Purchase Price was subject to certain post-closing adjustments, including, but not limited to, the finalization of working capital adjustments. Of the $64.9 million Adjusted Purchase Price, $6.3 million is held in escrow pending the resolution of the post-closing adjustments and other escrow release conditions in accordance with the terms of the purchase agreement and escrow agreement. During third quarter 2013, the Company and the shareholders of Holdco agreed on the post-closing working capital adjustments in accordance with the purchase agreement. This adjustment increased the Adjusted Purchase Price by $1.0 million to $65.9 million with a corresponding increase to goodwill of $1.0 million.

9

The acquisition of RTD was recorded using the acquisition method of accounting in accordance with current accounting guidance for business combinations and non-controlling interest. As a result, the Adjusted Purchase Price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. The allocation of the Adjusted Purchase Price is as follows:

In thousands
Cash	$	904
Accounts receivable		10,093
Inventory		21,685
Other current assets		998
Property and equipment		1,050
Intangible assets		42,990
Other assets		52
Total assets acquired		77,772
Debt		—
Accounts payable		7,817
Accrued and other liabilities		12,740
Deferred income taxes		11,692
Total liabilities assumed		32,249
Net assets acquired		45,523
Goodwill		20,375
Purchase price	$	65,898

The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $20.4 million. The premium in the purchase price paid for the acquisition of RTD primarily relates to growth opportunities from expanding the Company’s distribution footprint into Eastern Canada and through operating synergies available via the consolidation of certain distribution centers in Eastern Canada.

Cash and cash equivalents, accounts receivable and accounts payable were stated at their historical carrying values, which approximate their fair value, given the short-term nature of these assets and liabilities. Inventory was recorded at fair value, based on computation which considered many factors including the estimated selling price of the inventory, the cost to dispose the inventory as well as the replacement cost of the inventory, where applicable.

The Company recorded intangible assets based on their estimated fair value which consisted of the following:

In thousands	Estimated Useful Life	Estimated Fair Value
Customer list	16 years	$	40,720
Tradenames	5 years		1,900
Favorable leases	4 years		370
Total		$	42,990

RTD contributed net sales of approximately $60.6 million to the Company for the period from May 1, 2013 to September 28, 2013. Net loss contributed by RTD since the acquisition date was approximately $1.0 million which included non-cash amortization of the inventory step-up of $2.7 million and non-cash amortization expense on acquired intangible assets of $3.1 million.

On November 30, 2012, ATDI and ATD Acquisition Co. V Inc. (“Canada Acquisition”), a newly-formed direct 100% owned Canadian subsidiary of ATDI, entered into a Share Purchase Agreement with 1278104 Alberta Inc. (“Seller”), Triwest Trading (Canada) Ltd., a 100% owned subsidiary of Seller (“Triwest”) and certain shareholders of Seller pursuant to which Canada Acquisition agreed to acquire from Seller all of the issued and outstanding common shares of Triwest along with an outstanding loan owed to Seller by Triwest for approximately $97.5 million, subject to certain post-closing adjustments, including, but not limited to, working capital adjustments. Of the $97.5 million purchase price, $15.0 million is held in escrow pending the resolution of the post-closing adjustments and other escrow release conditions in accordance with the terms of the purchase agreement and escrow agreement. As a result of the acquisition, Triwest became a direct 100% owned subsidiary of Canada Acquisition. Triwest (dba: TriCan Tire Distributors, or “TriCan”) is a wholesale distributor of tires, tire parts, tire accessories and related equipment in Canada with 15 distribution centers stretching across the country. The acquisition of TriCan expanded the

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Company’s footprint and distribution services into Canada for the first time. During second quarter 2013, the Company and the Seller agreed on the post-closing working capital adjustment in accordance with the purchase agreement. This adjustment reduced the purchase price by $3.4 million to $94.1 million with a corresponding decrease to goodwill of $3.4 million.

The acquisition of TriCan was completed on November 30, 2012 and funded through the Company’s ABL Facility. The acquisition of TriCan was recorded using the acquisition method of accounting in accordance with current accounting guidance for business combinations and non-controlling interest. As a result, the total purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. The allocation of the purchase price is as follows:

In thousands
Cash	$	1,344
Accounts receivable		35,518
Inventory		45,445
Other current assets		495
Property and equipment		1,191
Intangible assets		49,940
Other assets		755
Total assets acquired		134,688
Debt		—
Accounts payable		37,576
Accrued and other liabilities		14,609
Deferred income taxes		13,003
Other liabilities		475
Total liabilities assumed		65,663
Net assets acquired		69,025
Goodwill		25,044
Purchase price	$	94,069

The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $25.0 million. The premium in the purchase price paid for the acquisition of TriCan primarily relates to growth opportunities from expanding the Company’s distribution footprint into Canada.

Cash, and cash equivalents, accounts receivable and accounts payable were stated at their historical carrying values, which approximate their fair value, given the short-term nature of these assets and liabilities. Inventory was recorded at fair value, based on computations which considered many factors including the estimated selling price of the inventory, the cost to dispose the inventory as well as the replacement cost of the inventory, where applicable.

The Company recorded intangible assets based on their estimated fair value which consisted of the following:

In thousands	Estimated Useful Life	Estimated Fair Value
Customer list	16 years	$	44,621
Tradenames	7 years		4,958
Favorable leases	6 years		361
Total		$	49,940

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The following unaudited pro forma supplementary data gives effect to the acquisitions of TriCan and RTD as if these transactions had occurred on January 1, 2012 (the first day of the Company’s 2012 fiscal year). The pro forma supplementary data is provided for informational purposes only and should not be construed to be indicative of the Company’s results of operations had the TriCan and RTD acquisitions been consummated on the date assumed or of the Company’s results of operations for any future date.

	Pro Forma
In thousands	Quarter Ended September 29, 2012			Nine Months Ended September 28, 2013			Nine Months Ended September 29, 2012
Net sales	$	994,312		$	2,817,147		$	2,777,157
Net income (loss)		(9,410	)		(23,840	)		(13,065	)

The pro forma supplementary data for the quarter and nine months ended September 29, 2012 and for the nine months ended September 28, 2013 includes $3.3 million, $10.2 million and $2.3 million, respectively, as an adjustment to historical amortization expense as a result of acquired intangible assets.

On May 24, 2012, the Company entered into a Stock Purchase Agreement with Firestone of Denham Springs, Inc. d/b/a Consolidated Tire & Oil (“CTO”) to acquire 100% of the outstanding capital stock of CTO. CTO owned and operated three distribution centers in Baton Rouge, Slidell and Lafayette, Louisiana serving over 500 customers. The acquisition was completed on May 24, 2012 and was funded through the Company’s ABL Facility. The Company does not believe the acquisition of CTO is a material transaction subject to the disclosures and supplemental pro forma information required by ASC 805 – Business Combinations. As a result, the information is not presented.

The acquisition of CTO was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations and non-controlling interest. The purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. A majority of the net assets acquired relate to a customer list intangible asset, which had an acquisition date fair value of $15.9 million. The excess of the purchase price over the amounts allocated to identifiable assets and liabilities is included in goodwill, and amounted to $10.1 million. The premium in the purchase price paid for the acquisition of CTO reflects the anticipated realization of operational and cost synergies.

5. Inventories:

Inventories consist primarily of tires, custom wheels and accessories and tire supplies and tools. Reported amounts are valued at the lower of cost, determined on the first-in, first-out (“FIFO”) method, or fair market value. 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. A majority of the Company’s tire vendors allow for the return of tire products, subject to certain limitations, specified in supply arrangements with the vendors. In addition, the Company’s inventory is collateral under the ABL Facility and the FILO Facility. See Note 9 for further information.

As a result of the TriCan, RTD and TDI acquisitions, the carrying value of the acquired inventory was increased by $6.3 million, $2.7 million and $0.2 million, respectively, to adjust to estimated fair value in accordance with the accounting guidance for business combinations. The step-up in inventory value for each acquisition was amortized into cost of goods sold over the period of the Company’s normal inventory turns, which approximates two months. Amortization of the inventory step-up included in cost of goods sold in the accompanying condensed consolidated statements of comprehensive income (loss) for the quarter and nine months ended September 28, 2013 was $0.1 million and $5.0 million, respectively.

6. Assets Held for Sale:

In accordance with current accounting standards, the Company classifies assets as held for sale in the period in which all held for sale criteria is met. Assets held for sale are reported at the lower of their carrying amount or fair value less cost to sell and are no longer depreciated. At September 28, 2013, assets held for sale totaled $3.4 million, of which $1.1 million were residential properties that were acquired as part of employee relocation packages. The Company is actively marketing these properties and anticipates that they will be sold within a twelve-month period from the date in which they are classified as held for sale.

As part of the Am-Pac Tire Dist., Inc (“Am-Pac”) acquisition in 2008, the Company acquired a distribution center in California which contained office space that served as Am-Pac’s headquarters. The facility was used as a warehouse within the Company’s distribution operations until its activities were absorbed into nearby existing locations during 2011. During the first quarter of 2013, the Company determined that the carrying value of the facility exceeded its fair value due to the current market conditions. As a result, the Company recorded a $0.5 million adjustment related to the fair value of this facility. During the third quarter of 2013, the Company received $3.9 million in cash for the sale of this facility. The carrying value of the facility was $4.0 million. Accordingly, the Company has recognized a pre-tax loss on the sales of this facility of $0.1 million within the accompanying condensed consolidated statement of comprehensive income (loss).

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On February 1, 2012, the Company reacquired one of three facilities originally included in a sale-leaseback transaction completed in 2002 that had an initial lease term of 20 years, followed by two 10 year renewal options. The facility was used as a distribution center within the Company’s operations until its activities were relocated to an expanded location during the second quarter of 2012. As a result, the Company classified the facility as held for sale during the third quarter of 2012 when the appropriate criteria was met. During the third quarter of 2013, the Company determined that the carrying value of this facility exceeded its fair value due to current market conditions. As a result, the Company recorded a $0.3 million adjustment related to the fair value of this facility. At September 28, 2013, the carrying value of the facility was $1.5 million. See Note 15 for information on the sale of this facility subsequent to the quarter end.

During the quarter ended September 28, 2013, the Company classified a facility located in Georgia as held for sale. The facility was previously used as a distribution center within the Company’s operations until its activities were relocated to an expanded facility. The Company is actively marketing this property and anticipates that it will be sold within a twelve-month period. As of September 28, 2013, the carrying value of the facility was $0.8 million.

7. Goodwill:

The Company records as goodwill the excess of the purchase price over the fair value of the net assets acquired. Once the final valuation has been performed for each acquisition, adjustments may be recorded. Goodwill is tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset may be less than the carrying amount of the asset.

The changes in the carrying amount of goodwill are as follows:

In thousands
Balance, December 29, 2012	$	483,143
Purchase accounting adjustments		(1,348	)
Acquisitions		23,652
Currency translation		(1,402	)
Balance, September 28, 2013	$	504,045

At September 28, 2013, the Company has recorded goodwill of $504.0 million, of which approximately $26.4 million of net goodwill is deductible for income tax purposes in future periods. The balance primarily relates to the Merger on May 28, 2010, in which $418.6 million was recorded as goodwill. The Company does not have any accumulated goodwill impairment losses.

On August 30, 2013, the Company entered into a Stock Purchase Agreement to acquire 100% of the outstanding capital stock of TDI. The acquisition was completed on August 30, 2013 and was funded through the Company’s ABL Facility. The purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. As a result, the Company recorded $1.7 million as goodwill. See Note 4 for additional information.

On April 30, 2013, TriCan completed the acquisition of RTD pursuant to a Share Purchase Agreement entered into on March 22, 2013. The acquisition was funded through the Company’s ABL Facility and FILO Facility. The purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. During third quarter 2013, the Company finalized the post-closing working capital adjustments in accordance with the purchase agreement. This adjustment increased goodwill by $1.0 million to $20.4 million at September 28, 2013. See Note 4 for additional information.

In addition, the Company acquired the inventory and accounts receivable of a small Canadian distributor in February 2013. The purchase price was allocated to the assets acquired based on their estimated fair market value, which resulted in an increase to goodwill of $1.6 million.

On November 30, 2012, ATDI and Canada Acquisition entered into a Share Purchase Agreement to acquire all of the issued and outstanding common shares of TriCan. The acquisition was completed on November 30, 2012 and was funded through the Company’s ABL Facility. The purchase price has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. During the nine months ended September 28, 2013, the Company adjusted the fair market value of certain working capital items. These adjustments increased goodwill by $1.4 million to $25.0 million at September 28, 2013. See Note 4 for additional information.

On May 24, 2012, the Company entered into a Stock Purchase Agreement to acquire 100% of the outstanding capital stock of CTO. The acquisition was completed on May 24, 2012 and was funded through the Company’s ABL Facility. The purchase price

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has been allocated to assets acquired and liabilities assumed based on the estimated fair market value of such assets and liabilities at the date of acquisition. During second quarter 2013, the Company finalized the post-closing working capital adjustments in accordance with the purchase agreement. This adjustment increased goodwill by $0.6 million to $10.1 million at September 28, 2013. See Note 4 for additional information.

8. Intangible Assets:

Indefinite-lived intangible assets are tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset may be less than the carrying amount of the asset. All other intangible assets with finite lives are being amortized on a straight-line or accelerated basis over periods ranging from one to nineteen years.

The following table sets forth the gross amount and accumulated amortization of the Company’s intangible assets at September 28, 2013 and December 29, 2012:

	September 28, 2013				December 29, 2012
In thousands	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Customer lists	$	675,221	$	208,526	$	632,589	$	156,249
Noncompete agreements		12,110		5,467		7,898		2,841
Favorable leases		712		86		360		5
Tradenames		10,746		3,305		9,043		1,990
Total finite-lived intangible assets		698,789		217,384		649,890		161,085
Tradenames (indefinite-lived)		249,893		—		249,893		—
Total intangible assets	$	948,682	$	217,384	$	899,783	$	161,085

As part of the preliminary purchase price allocation of TDI, the Company allocated $3.4 million to a finite-lived customer list intangible asset with a useful life of sixteen years. As part of the purchase price allocation of RTD, the Company allocated $40.7 million to a finite-lived customer list intangible asset with a useful life of sixteen years, $1.9 million to a finite-lived tradename with a useful life of five years and $0.4 million to a finite-lived favorable leases intangible asset with a useful life of four years. As part of the purchase price allocation of TriCan, the Company allocated $44.6 million to a finite-lived customer list intangible asset with a useful life of sixteen years, $4.9 million to a finite-lived tradename with a useful life of seven years and $0.4 million to a finite-lived favorable leases intangible asset with a useful life of six years. In addition, the Company allocated $15.9 million to a finite-lived customer list intangible asset with a useful life of sixteen years as part of the purchase price allocation for CTO. See Note 4 for additional information.

Intangible asset amortization expense was $19.7 million and $16.7 million for the quarters ended September 28, 2013 and September 29, 2012 respectively. For the nine months ended September 28, 2013 and September 29, 2012, intangible asset amortization expense was $56.3 million and $48.9 million, respectively. Estimated amortization expense on existing intangible assets is expected to approximate $19.8 million for the remaining three months of 2013 and approximately $72.7 million in 2014, $62.4 million in 2015, $52.6 million in 2016 and $46.0 million in 2017.

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9. Long-term Debt:

The following table presents the Company’s long-term debt at September 28, 2013 and at December 29, 2012:

In thousands	September 28, 2013			December 29, 2012
U.S. ABL Facility	$	457,515		$	478,616
Canadian ABL Facility		53,062			10,976
FILO Facility		49,152			—
Senior Secured Notes		248,111			247,802
Senior Subordinated Notes		200,000			200,000
Capital lease obligations		12,277			12,469
Other		1,236			1,341
Total debt		1,021,353			951,204
Less - Current maturities		(533	)		(493	)
Long-term debt	$	1,020,820		$	950,711

The fair value of the Company’s long-term senior notes was $473.6 million at September 28, 2013 and $477.0 million at December 29, 2012. The fair value of the Senior Secured Notes is based upon quoted market values (Level 1). However, the Company uses quoted prices for similar liabilities (Level 2) in order to fair value the Senior Subordinated Notes.

ABL Facility

In connection with the acquisition of TriCan on November 30, 2012, the Company amended and restated its Fifth Amended and Restated Credit Agreement in order to provide for borrowings under the agreement by TriCan and make certain other amendments (as so amended and restated, the “Sixth Amended and Restated Credit Agreement”). The Sixth Amended and Restated Credit Agreement provides for (i) U.S. revolving credit commitments of $850.0 million (of which up to $50.0 million can be utilized in the form of commercial and standby letters of credit), subject to U.S. borrowing base availability (the “U.S. ABL Facility”) and (ii) Canadian revolving credit commitments of $60.0 million (of which up to $10.0 million can be utilized in the form of commercial and standby letters of credit), subject to Canadian borrowing base availability (the “Canadian ABL Facility” and, collectively with the U.S. ABL Facility, the “ABL Facility”). The U.S. ABL Facility provides for revolving loans available to ATDI, its 100% owned subsidiary Am-Pac Tire Dist. Inc. and any other U.S. subsidiary that the Company designates in the future in accordance with the terms of the agreement. The Canadian ABL Facility provides for revolving loans available to TriCan and any other Canadian subsidiaries that the Company designates in the future in accordance with the terms of the agreement. Provided that no default or event of default then exists or would arise therefrom, the Company has the option to request that the ABL Facility be increased by an amount not to exceed $200.0 million (up to $50.0 million of which may be allocated to the Canadian ABL Facility), subject to certain rights of the administrative agent, swingline lender and issuing banks with respect to the lenders providing commitments for such increase. The maturity date for the Sixth Amended and Restated Credit Agreement is November 16, 2017, provided that if on March 1, 2017, either (i) more than $50.0 million in aggregate principal amount of ATDI’s Senior Secured Notes remains outstanding or (ii) any principal amount of ATDI’s Senior Secured Notes remains outstanding with a scheduled maturity date which is earlier than 91 days after November 16, 2017 and excess availability under the ABL Facility is less than 12.5% of the aggregate revolving commitments, then the maturity date will be March 1, 2017.

In connection with the acquisition of RTD, on March 22, 2013, the Company entered into the First Amendment to Sixth Amended and Restated Credit Agreement, which provides for the Company’s ABL Facility and FILO Facility (the “First Amendment”). The First Amendment (1) provided the U.S. Borrowers under the agreement with a new first-in last-out facility (the “FILO Facility”) in an aggregate principal amount of up to $60.0 million, subject to a borrowing base specific thereto, and (2) increased the aggregate principal amount available under the Canadian ABL Facility from $60.0 million to $100.0 million, subject to the Canadian borrowing base. The additional borrowings provided for under the First Amendment were contingent upon, among other things, the closing of the RTD acquisition on or before May 31, 2013. The closing of the RTD acquisition occurred, and the borrowings under the FILO Facility became available, on April 30, 2013. The First Amendment also made certain other changes to the Sixth Amended and Restated Credit Agreement and added RTD as a party upon the closing of the acquisition. The maturity date for the FILO Facility is 18 months from April 30, 2013. The First Amendment did not change the maturity dates of the U.S. ABL Facility or the Canadian ABL Facility or the material terms under which either facility may be accelerated or the U.S. ABL Facility may be increased. Immediately following the closing of the RTD acquisition, $50.1 million was drawn on the FILO Facility.

As of September 28, 2013, the Company had $457.5 million outstanding under the U.S. ABL Facility. In addition, the Company had certain letters of credit outstanding in the aggregate amount of $8.2 million, leaving $158.9 million available for additional borrowings under the U.S. ABL Facility. The outstanding balance of the Canadian ABL Facility as of September 28, 2013 was $53.1 million, leaving $24.9 million available for additional borrowings. The outstanding balance of the FILO facility as of September 28, 2013 was $49.2 million.

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Borrowings under the U.S. ABL Facility bear interest at a rate per annum equal to, at the Company’s option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 2.0% as of September 28, 2013 or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its “prime rate” for commercial loans, (2) the federal funds effective rate plus  ¹⁄₂ of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of September 28, 2013. The applicable margins under the U.S. ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.

Borrowings under the Canadian ABL Facility bear interest at a rate per annum equal to either (a) a Canadian base rate determined by reference to the highest of (1) the base rate as published by Bank of America, N.A. (acting through its Canada branch) as its “base rate”, (2) the federal funds rate effective plus  ¹⁄₂ of 1% per annum and (3) the one month-LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of September 28, 2013 or (b) a Canadian prime rate determined by reference to the highest of (1) the prime rate as published by Bank of America, N.A. (acting through its Canada branch) as its “prime rate”, (2) the sum of  ¹⁄₂ of 1% plus the Canadian overnight rate and (3) the sum of 1% plus the rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers’ acceptances as published by Reuters Monitor Money Rates Service for a 30 day interest period, plus an applicable margin of 1.0% as of September 28, 2013. The applicable margins under the Canadian ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.

Borrowings under the FILO Facility bear interest at a rate per annum equal to, at the Company’s option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 3.5% as of September 28, 2013 or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its “prime rate” for commercial loans, (2) the federal funds effective rate plus  ¹⁄₂ of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 2.5% as of September 28, 2013. The applicable margins under the FILO Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.

The U.S. and Canadian borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:

• 85% of eligible accounts receivable of the U.S. or Canadian loan parties, as applicable; plus

• The lesser of (a) 70% of the lesser of cost or market value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable and (b) 85% of the net orderly liquidation value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable; plus

• The lesser of (a) 50% of the lower of cost or market value of eligible non-tire inventory of the U.S. or Canadian loan parties, as applicable and (b) 85% of the net orderly liquidation value of eligible non-tire inventory of the U.S. or Canadian loan parties, as applicable.

The FILO borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:

• 5% of eligible accounts receivable of the U.S. loan parties, as applicable; plus

• 7.5% of the net orderly liquidation value of the eligible tire and non-tire inventory of the U.S. loan parties, as applicable.

All obligations under the U.S. ABL Facility and the FILO Facility are unconditionally guaranteed by Holdings and substantially all of ATDI’s existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp and TDI. The Canadian ABL Facility is unconditionally guaranteed by the U.S. loan parties, TriCan, RTD and any future, direct and indirect, wholly-owned, material restricted Canadian subsidiaries. Obligations under the U.S. ABL Facility and the FILO Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties, subject to certain exceptions. Obligations under the Canadian ABL Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties and the Canadian loan parties, subject to certain exceptions.

The ABL Facility and FILO Facility contain customary covenants, including covenants that restricts the Company’s ability to incur additional debt, grant liens, enter into guarantees, enter into certain mergers, make certain loans and investments, dispose of assets, prepay certain debt, declare dividends, modify certain material agreements, enter into transactions with affiliates or change the Company’s fiscal year. If the amount available for additional borrowings under the ABL Facility is less than the greater of (a) 10.0% of the lesser of (x) the aggregate commitments under the ABL Facility and (y) the aggregate borrowing base and (b) $25.0 million, then the Company would be subject to an additional covenant requiring them to meet a fixed charge coverage ratio of 1.0 to 1.0. As of September 28, 2013, the Company’s additional borrowing availability under the ABL Facility was above the required amount and the Company was therefore not subject to the additional covenants.

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Senior Secured Notes

On May 28, 2010, ATDI issued Senior Secured Notes (“Senior Secured Notes”) due June 1, 2017 in an aggregate principal amount at maturity of $250.0 million. The Senior Secured Notes were issued at a discount from their principal amount at maturity and generated net proceeds of approximately $240.7 million after debt issuance costs (which represents a non-cash financing activity of $9.3 million). The Senior Secured Notes will accrete based on an effective interest rate of 10% to an aggregate accreted value of $250.0 million, the full principal amount at maturity. The Senior Secured Notes bear interest at a fixed rate of 9.75% per annum. Interest on the Senior Secured Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010. The Senior Secured Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days notice at a redemption price of 107.313% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 104.875% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015, 102.438% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016 and 100.0% of the principal amount if the redemption date occurs between June 1, 2016 and May 31, 2017.

The Senior Secured Notes are unconditionally guaranteed by Holdings and substantially all of ATDI’s existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp and TDI, subject to certain exceptions. The Senior Secured Notes are also collateralized by a second-priority lien on accounts receivable and related assets and a first-priority lien on substantially all other assets (other than inventory), in each case of Holdings, ATDI and the guarantor subsidiaries, subject to certain exceptions.

The indenture governing the Senior Secured Notes contains covenants that, among other things, limits ATDI’s ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDI’s or repurchase or redeem ATDI’s capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDI’s subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens; consolidate, merge or sell all or substantially all of ATDI’s assets; enter into certain transactions with ATDI’s affiliates; and designate ATDI’s subsidiaries as unrestricted subsidiaries.

Senior Subordinated Notes

On May 28, 2010, ATDI issued Senior Subordinated Notes due June 1, 2018 (“Senior Subordinated Notes”) in an aggregate principal amount of $200.0 million. The Senior Subordinated Notes bear interest at a fixed rate of 11.50% per annum. Interest on the Senior Subordinated Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010. The Senior Subordinated Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days notice at a redemption price of 104.0% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 102.0% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015 and 100.0% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016.

The Senior Subordinated Notes are unconditionally guaranteed by Holdings and substantially all of ATDI’s existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp and TDI, subject to certain exceptions.

The indenture governing the Senior Subordinated Notes contains covenants that, among other things, limits ATDI’s ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDI’s or repurchase or redeem ATDI’s capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDI’s subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens without securing the Senior Subordinated Notes; consolidate, merge or sell all or substantially all of ATDI’s assets; enter into certain transactions with ATDI’s affiliates; and designate ATDI’s subsidiaries as unrestricted subsidiaries.

Capital Lease Obligations

At December 31, 2011, the Company had a capital lease obligation of $14.1 million which related to the 2002 sale and subsequent leaseback of three of its owned facilities. Due to continuing involvement with the properties, the Company accounted for the transaction as a direct financing lease and recorded the cash received as a financing obligation. The transaction had an initial lease term of 20 years, followed by two 10 year renewal options. No gain or loss was recognized as a result of the initial sales transaction.

On February 1, 2012, the Company reacquired one of the three facilities included in the 2002 sale-leaseback transaction for $1.5 million. Accordingly, the original lease was amended to extend the lease term on the two remaining facilities by 5 years as

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well as to adjust the future lease payments over the remaining 15 years. Per ASC 470 - Debt, the change in the debt terms was not considered substantial. As a result, the Company treated the amendment as a debt modification for accounting purposes and therefore, reduced the financing obligation by the purchase price. Cash payments to the lessor are allocated between interest expense and amortization of the financing obligation. At the end of the lease term, the Company will recognize the sale of the remaining facilities; however, no gain or loss will be recognized as the financing obligation will equal the expected carrying value of the facilities. At September 28, 2013, the outstanding balance of the financing obligation was $12.3 million.

10. Derivative Instruments:

In the normal course of business, the Company is exposed to the risk associated with exposure to fluctuations in interest rates on our variable rate debt. These fluctuations can increase the cost of financing, investing and operating the business. The Company has used derivative financial instruments to help manage this risk and reduce the impacts of these exposures and not for trading or other speculative purposes. All derivatives are recognized on the condensed consolidated balance sheet at their fair value as either assets or liabilities. Changes in the fair value of contracts that qualify for hedge accounting treatment are recorded in accumulated other comprehensive income (loss), net of taxes, and are recognized in the statement of comprehensive income (loss) at the time earnings are affected by the hedged transaction. For other derivatives, changes in the fair value of the contract are recognized immediately in the statement of comprehensive income (loss).

On September 4, 2013, the Company entered into a spot interest rate swap and two forward-starting interest rate swaps (collectively the “3Q 2013 Swaps”) each of which are used to hedge a portion of the Company’s exposure to changes in its variable interest rate debt. The spot interest rate swap in place covers a notional amount of $100.0 million at a fixed interest rate of 1.145% and expires in September 2016. The forward-starting interest rate swaps in place cover an aggregate notional amount of $100.0 million, of which $50.0 million becomes effective in September 2014 at a fixed interest rate of 1.464% and will expire in September 2016 and $50.0 million becomes effective in September 2015 at a fixed interest rate of 1.942% and will expire in September 2016. The counterparty to each swap is a major financial institution. The 3Q 2013 Swaps do not meet the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract is recognized in the condensed consolidated statement of comprehensive income (loss).

On August 1, 2012, the Company entered into two interest rate swap agreements (“3Q 2012 Swaps”) used to hedge a portion of the Company’s exposure to changes in its variable interest rate debt. The swaps in place cover an aggregate notional amount of $100.0 million, with each $50.0 million contract having a fixed rate of 0.655% and expiring in June 2016. The counterparty to each swap is a major financial institution. The 3Q 2012 Swaps do not meet the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract is recognized in the condensed consolidated statement of comprehensive income (loss).

On September 23, 2011, the Company entered into two interest rate swap agreements (“3Q 2011 Swaps”) used to hedge a portion of the Company’s exposure to changes in its variable interest rate debt. The swaps in place cover an aggregate notional amount of $100.0 million, of which $50.0 million is at a fixed rate of 0.74% and will expire in September 2014 and $50.0 million is at a fixed rate of 1.0% and will expire in September 2015. The counterparty to each swap is a major financial institution. The 3Q 2011 Swaps do not meet the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract is recognized in the condensed consolidated statement of comprehensive income (loss).

On February 24, 2011, the Company entered into two interest rate swap agreements (“1Q 2011 Swaps”) used to hedge a portion of the Company’s exposure to changes in its variable interest rate debt. The swaps in place covered an aggregate notional amount of $75.0 million, of which $25.0 million was at a fixed interest rate of 0.585% and expired in February 2012. The remaining swap covered an aggregate notional amount of $50.0 million at a fixed interest rate of 1.105% and expired in February 2013. The counterparty to each swap was a major financial institution. Neither swap met the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract were recognized in the condensed consolidated statement of comprehensive income (loss).

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The following tables present the fair values of the Company’s derivative instruments included within the condensed consolidated balance sheets as of September 28, 2013 and December 29, 2012:

		Liability Derivatives
In thousands	Balance Sheet Location	September 28, 2013		December 29, 2012
Derivatives not designated as hedges:
1Q 2011 swap - $50 million notional	Accrued expenses	$	—	$	149
3Q 2011 swaps - $100 million notional	Accrued expenses		903		1,314
3Q 2012 swaps - $100 million notional	Accrued expenses		265		750
3Q 2013 swaps - $200 million notional	Accrued expenses		1,787		—
Total		$	2,955	$	2,213

The pre-tax effect of the Company’s derivative instruments on the condensed consolidated statement of comprehensive income (loss) was as follows:

		(Gain) Loss Recognized
In thousands	Location of (Gain) Loss Recognized	Quarter Ended September 28, 2013			Quarter Ended September 29, 2012			Nine Months Ended September 28, 2013			Nine Months Ended September 29, 2012
Derivatives not designated as hedges:
1Q 2011 swap - $50 million notional	Interest Expense	$	—		$	(34	)	$	(149	)	$	(78	)
1Q 2011 swap - $25 million notional	Interest Expense		—			—			—			(12	)
3Q 2011 swaps - $100 million notional	Interest Expense		(10	)		266			(412	)		912
3Q 2012 swaps - $100 million notional	Interest Expense		316			810			(484	)		810
3Q 2013 swaps - $200 million notional	Interest Expense		1,787			—			1,787			—
Total		$	2,093		$	1,042		$	742		$	1,632

11. Fair Value of Financial Instruments:

The accounting standard for fair value measurements establishes a framework for measuring fair value that is based on the inputs market participants use to determine the fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The fair value hierarchy is comprised of three levels that are described below:

• Level 1 Inputs - Inputs based on quoted prices in active markets for identical assets or liabilities.

• Level 2 Inputs - Inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

• Level 3 Inputs - Unobservable inputs based on little or no market activity and that are significant to the fair value of the assets and liabilities, therefore requiring an entity to develop its own assumptions.

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability based on the best information available under the circumstances. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

19

The following table presents the fair value and hierarchy levels for the Company’s assets and liabilities, which are measured at fair value on a recurring basis as of September 28, 2013:

	Fair Value Measurements
In thousands	Total		Level 1		Level 2		Level 3
Assets:
Benefit trust assets	$	3,135	$	3,135	$	—	$	—
Total	$	3,135	$	3,135	$	—	$	—
Liabilities:
Derivative instruments	$	2,955	$	—	$	2,955	$	—
Total	$	2,955	$	—	$	2,955	$	—

ASC 820 – Fair Value Measurements and Disclosures defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company determines fair value of its financial assets and liabilities using the following methodologies:

• Benefit trust assets - These assets include money market and mutual funds that are the underlying for deferred compensation plan assets, held in a rabbi trust. The fair value of the assets is based on observable market prices quoted in readily accessible and observable markets.

• Derivative instruments - These instruments consist of interest rate swaps. The fair value is based upon quoted prices for similar instruments from a financial institution that is counterparty to the transaction.

The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values due to the short-term nature of these instruments. The methodologies used by the Company to determine the fair value of its financial assets and liabilities at September 28, 2013 are the same as those used at December 29, 2012. As a result, there have been no transfers between Level 1 and Level 2 categories.

As discussed in Note 6, the Company determined that the carrying of the facility reacquired in 2012, and which is classified as held for sale at September 28, 2013, exceeded its fair value due to current market conditions. As a result, the Company recorded a $0.3 million adjustment during the third quarter of 2013 related to the fair value of this facility. As of September 28, 2013, the fair value of the facility was $1.5 million and was based upon an agreement for the sale of the facility (Level 1). See Note 15 for additional information.

12. Stock-Based Compensation:

The Company accounts for stock-based compensation awards in accordance with ASC 718 - Compensation, which requires a fair-value based method for measuring the value of stock-based compensation. Fair value is measured once at the date of grant and is not adjusted for subsequent changes. The Company’s stock-based compensation plans include programs for stock options and restricted stock units.

Stock Options

In August 2010, the Company’s indirect parent company adopted a Management Equity Incentive Plan (the “2010 Plan”), pursuant to which the indirect parent company will grant options to selected employees and directors of the Company. The 2010 Plan, which includes both time-based and performance-based awards, was amended on February 15, 2013 by the board of directors of the Company’s indirect parent, Accelerate Parent Corp., to increase the maximum number of shares of common stock for which stock options may be granted under the 2010 Plan, from 48.6 million to 52.1 million. In addition to the increase in the maximum number of shares, on February 15, 2013 the board of directors of Accelerate Parent Corp. approved the issuance of stock options to certain members of management. The approved options are for the purchase of up to 3.5 million shares of common stock, have an exercise price of $1.20 per share, and vest over a three to five-year vesting period. As of September 28, 2013, the Company has 1.9 million shares available for future incentive awards.

20

Changes in options outstanding under the 2010 Plan are as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding - December 29, 2012		46,681,600		$	1.01
Granted		3,500,002			1.20
Exercised		—			—
Cancelled		(66,666	)		1.00
Outstanding - September 28, 2013		50,114,936		$	1.02
Exercisable - September 28, 2013		27,998,413		$	1.01

Options granted under the 2010 Plan expire no later than 10 years from the date of grant and vest based on the passage of time and/or the achievement of certain performance targets in equal installments over three or five years. The weighted-average remaining contractual term for options outstanding and exercisable at September 28, 2013 was 7.2 years and 7.1 years, respectively. The fair value of each of the Company’s time-based stock option awards is expensed on a straight-line basis over the requisite service period, which is generally the three or five-year vesting period of the options. However, for options granted with performance target requirements, compensation expense is recognized when it is probable that both the performance target will be achieved and the requisite service period is satisfied. At September 28, 2013, unrecognized compensation expense related to non-vested options granted under the 2010 Plan totaled $8.2 million and the weighted-average period over which this expense will be recognized is 1.6 years.

The weighted average fair value of stock options granted during the nine months ended September 28, 2013 and September 29, 2012 was $0.54 and $0.50, respectively, using the Black-Scholes option pricing model. The following weighted average assumptions were used:

	Nine Months Ended September 28, 2013			Nine Months Ended September 29, 2012
Risk-free interest rate		1.38	%		1.48	%
Dividend yield		—			—
Expected life		6.0 years			6.5 years
Volatility		45.39	%		42.81	%

As the Company does not have sufficient historical volatility data for the Company’s own common stock, the stock price volatility utilized in the fair value calculation is based on the Company’s peer group in the industry in which it does business. The risk-free interest rate is based on the yield-curve of a zero-coupon U.S. Treasury bond on the date the award is granted with a maturity equal to the expected term of the award. Because the Company does not have relevant data available regarding the expected life of the award, the expected life is derived from the Simplified Method as allowed under SAB Topic 14.

Restricted Stock Units (RSUs)

In October 2010, the Company’s indirect parent company adopted the Non-Employee Director Restricted Stock Plan (the “2010 RSU Plan”), pursuant to which the indirect parent company will grant restricted stock units to non-employee directors of the Company. Upon vesting, these awards entitle the holder to receive one share of common stock for each restricted stock unit granted. The 2010 RSU Plan provides that a maximum of 0.8 million shares of common stock of the indirect parent may be granted to non-employee directors of the Company, of which 0.3 million remain available at September 28, 2013 for future incentive awards.

21

The following table summarizes RSU activity under the 2010 RSU Plan for the nine months ended September 28, 2013:

	Number of Shares			Weighted Average Exercise Price
Outstanding and unvested at December 29, 2012		269,298		$	1.11
Granted		—			—
Vested		(159,649	)		1.10
Cancelled		(21,930	)		1.14
Outstanding and unvested at September 28, 2013		87,719		$	1.14

The fair value of each of the RSU awards is measured as the grant-date price of the common stock and is expensed on a straight-line basis over the requisite service period, which is generally the two-year vesting period. At September 28, 2013 unrecognized compensation expense related to non-vested RSUs granted under the 2010 RSU Plan totaled $0.1 million and the weighted-average period over which this expense will be recognized is 0.3 years.

Compensation Expense

Stock-based compensation expense is included in selling, general and administrative expenses within the condensed consolidated statement of comprehensive income (loss). The amount of compensation expense recognized during a period is based on the portion of the granted awards that are expected to vest. Ultimately, the total expense recognized over the vesting period will equal the fair value of the awards as of the grant date that actually vest. The following table summarizes the compensation expense recognized:

In thousands	Quarter Ended September 28, 2013		Quarter Ended September 29, 2012		Nine Months Ended September 28, 2013		Nine Months Ended September 29, 2012
Stock Options	$	584	$	1,534	$	1,962	$	2,584
Restricted Stock Units		12		73		85		177
Total	$	596	$	1,607	$	2,047	$	2,761

13. Income Taxes:

The tax provision for the nine months ended September 28, 2013, was calculated on a national jurisdiction basis. The Company accounts for its provision for income taxes in accordance with ASC 740 – Income Taxes, which requires an estimate of the annual effective tax rate for the full year to be applied to the respective interim period. However, the authoritative guidance allows the use of the discrete method when, in certain situations, the actual interim period effective tax rate provides a better estimate of the income tax provision. For the nine months ended September 28, 2013, the discrete method was used to calculate the Company’s U.S. and Canadian interim tax expense as management determined that it provided a more reliable estimate of year-to-date income tax expense.

Based on the reported loss before income taxes for the nine months ended September 28, 2013, the Company had an income tax benefit of $8.9 million, consisting of a $7.2 million U.S. tax benefit and a $1.7 million foreign tax benefit, and an effective tax benefit rate under the discrete method of 29.8%. For the nine months ended September 29, 2012, the Company had an income tax benefit of $5.8 million which was based on a pre-tax loss of $18.3 million and an effective tax rate of 31.4%. The effective rate of the year-to-date tax benefit is lower than the statutory income tax rate primarily due to earnings in a foreign jurisdiction taxed at rates lower than the statutory U.S. federal rate and the impact of several non-deductible tax items as well as the Company’s state effective tax rate, a result based on the Company’s legal entity tax structure and individual state tax filing requirements.

At September 28, 2013, the Company has a net deferred tax liability of $262.0 million, of which, $16.0 million was recorded as a current deferred tax asset and $278.0 million was recorded as a non-current deferred tax liability. The net deferred tax liability primarily relates to the expected future tax liability associated with the non-deductible, identified, intangible assets that were recorded during the Merger, assuming an effective tax rate of 39.6%. It is the Company’s intention to indefinitely reinvest all undistributed earnings of non-U.S. subsidiaries. As these earnings are considered permanently reinvested, no provisions for U.S. federal or state income taxes are required under ASC 740-30. Determination of the amount of unrecognized U.S. federal and state deferred tax liabilities on these unremitted earnings is not practicable.

22

At September 28, 2013, the Company had unrecognized tax benefits of $2.1 million, of which $0.9 million is included within accrued expenses and $1.2 million is included within other liabilities within the accompanying condensed consolidated balance sheet. The total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is $1.2 million as of September 28, 2013. In addition, $0.9 million related to temporary timing differences. During the next 12 months, management does not believe that it is reasonably possible that any of the unrecognized tax benefits will be recognized.

While the Company believes that it has adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than the Company’s accrued position. Accordingly, additional provisions of federal and state-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved. The Company files federal income tax returns, as well as multiple state jurisdiction tax returns. The tax years 2010 – 2012 remain open to examination by the Internal Revenue Service. The tax years 2009 – 2012 remain open to examination by other major taxing jurisdictions to which the Company is subject (primarily Canada and other state and local jurisdictions).

In September 2013, the Internal Revenue Service released final Tangible Property Regulations (the “Final Regulations”). The Final Regulations provide guidance on applying Section 263(a) of the Code to amounts paid to acquire, produce or improve tangible property, as well as rules for materials and supplies (Code Section 162). These regulations contain certain changes from the temporary and proposed tangible property regulations that were issued on December 27, 2011. The Final Regulations are generally effective for taxable years beginning on or after January 1, 2014. In addition, taxpayers are permitted to early adopt the Final Regulations for taxable years beginning on or after January 1, 2012. The Company does not expect the Final Regulations to have a material effect on its results of operations. The Company is currently evaluating the impact on its financial condition.

14. Commitments and Contingencies:

The Company is involved from time to time in various lawsuits, including class action lawsuits as well as various audits and reviews regarding its federal, state and local tax filings, arising out of the ordinary conduct of its business. Management does not expect that any of these matters will have a material adverse effect on the Company’s business or financial condition. As to tax filings, the Company believes that the various tax filings have been made in a timely fashion and in accordance with applicable federal, state and local tax code requirements. Additionally, the Company believes that it has adequately provided for any reasonably foreseeable resolution of any tax disputes, but will adjust its reserves if events so dictate in accordance with FASB authoritative guidance. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in accordance with the accounting standards for income taxes.

Guaranteed Lease Obligations

The Company remains liable as a guarantor on certain leases related to the Winston Tire Company, which was sold in 2001. As of September 28, 2013, the Company’s total obligations are $2.2 million extending over six years. However, the Company has secured assignments or sublease agreements for the vast majority of these commitments with contractual assigned or subleased rentals of $2.0 million. A provision has been made for the net present value of the estimated shortfall.

15. Subsequent Event:

On October 11, 2013, the Company completed the sale of a facility that was classified as held for sale. The Company received cash proceeds of $1.5 million which approximated the carrying value of the facility.

16. Subsidiary Guarantor Financial Information:

ATDI is the issuer of $250.0 million in aggregate principal amount of Senior Secured Notes and $200.0 million in aggregate principal amount of Senior Subordinated Notes. The Senior Secured Notes and the Senior Subordinated Notes (collectively, the “Notes”) are fully and unconditionally guaranteed, jointly and severally, by Holdings, Am-Pac and Tire Wholesalers, Inc. (“Tire Wholesalers”). ATDI is a direct 100% owned subsidiary of Holdings and Am-Pac and Tire Wholesalers are indirect 100% owned subsidiaries of Holdings. None of the Company’s other subsidiaries guarantees the Notes. The guarantees provided by Holdings, Am-Pac and Tire Wholesalers can be released in certain customary circumstances.

In accordance with Rule 3-10 of Regulation S-X, the following presents condensed consolidating financial information for:

• Holdings, under the column heading “Parent Company”;

• ATDI, under the column heading “Subsidiary Issuer”;

• Am-Pac and Tire Wholesalers, on a combined basis, under the column heading “Guarantor Subsidiaries”; and

• The Company’s other subsidiaries, on a combined basis, under the column heading “Non-Guarantor Subsidiaries”;

• Consolidating entries and eliminations, under the column heading “Eliminations”; and

• Holdings, ATDI and their subsidiaries on a consolidated basis, under the column heading “Consolidated.”

23

At the beginning of 2013, the Company merged a subsidiary that previously guaranteed the Notes, Firestone of Denham Springs, Inc. d/b/a Consolidated Tire & Oil, into ATDI.

24

The condensed consolidating financial information for the Company is as follows:

	As of September 28, 2013
In thousands	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	19,874		$	—		$	7,447		$	—		$	27,321
Accounts receivable, net		—			290,277			—			33,970			(370	)		323,877
Inventories		—			657,172			—			102,469			8			759,649
Assets held for sale		—			3,369			—			—			—			3,369
Income tax receivable		—			369			—			—			—			369
Intercompany receivables		36,322			—			60,169			32,027			(128,518	)		—
Other current assets		—			23,359			4,899			4,493			—			32,751
Total current assets		36,322			994,420			65,068			180,406			(128,880	)		1,147,336
Property and equipment, net		—			137,664			367			5,211			—			143,242
Goodwill and other intangible assets, net		418,592			678,448			1,496			136,807			—			1,235,343
Investment in subsidiaries		219,099			201,569			—			—			(420,668	)		—
Other assets		8,729			42,485			308			710			—			52,232
Total assets	$	682,742		$	2,054,586		$	67,239		$	323,134		$	(549,548	)	$	2,578,153
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	—		$	467,779		$	2,255		$	44,378		$	(370	)	$	514,042
Accrued expenses		—			55,095			53			9,523			—			64,671
Current maturities of long-term debt		—			527			6			—			—			533
Intercompany payables		—			77,436			1,155			49,927			(128,518	)		—
Total current liabilities		—			600,837			3,469			103,828			(128,888	)		579,246
Long-term debt		—			967,754			4			53,062			—			1,020,820
Deferred income taxes		—			253,648			587			23,752			—			277,987
Other liabilities		—			13,256			28			4,074			—			17,358
Stockholders’ equity:
Intercompany investment		—			280,622			64,935			165,503			(511,060	)		—
Common stock		—			—			—			—			—			—
Additional paid-in capital		758,385			14,120			—			—			(14,120	)		758,385
Accumulated earnings (deficit)		(71,445	)		(71,453	)		(1,784	)		(22,501	)		95,738			(71,445	)
Accumulated other comprehensive income (loss)		(4,198	)		(4,198	)		—			(4,584	)		8,782			(4,198	)
Total stockholders’ equity		682,742			219,091			63,151			138,418			(420,660	)		682,742
Total liabilities and stockholders’ equity	$	682,742		$	2,054,586		$	67,239		$	323,134		$	(549,548	)	$	2,578,153

25

	As of December 29, 2012
In thousands	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	12,346		$	—		$	13,605		$	—		$	25,951
Accounts receivable, net		—			278,557			38			22,708			—			301,303
Inventories		—			682,159			—			39,513			—			721,672
Assets held for sale		—			7,151			—			—			—			7,151
Income tax receivable		—			369			—			—			—			369
Intercompany receivables		36,323			—			60,616			—			(96,939	)		—
Other current assets		—			28,299			4,899			3,955			—			37,153
Total current assets		36,323			1,008,881			65,553			79,781			(96,939	)		1,093,599
Property and equipment, net		—			128,259			455			1,168			—			129,882
Goodwill and other intangible assets, net		418,592			724,681			1,636			76,932			—			1,221,841
Investment in subsidiaries		242,010			146,615			—			—			(388,625	)		—
Other assets		8,729			48,430			317			1,204			—			58,680
Total assets	$	705,654		$	2,056,866		$	67,961		$	159,085		$	(485,564	)	$	2,504,002
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	—		$	469,717		$	2,255		$	30,249		$	—		$	502,221
Accrued expenses		—			38,524			126			6,266			—			44,916
Current maturities of long-term debt		—			487			6			—			—			493
Intercompany payables		—			82,420			1,290			13,229			(96,939	)		—
Total current liabilities		—			591,148			3,677			49,744			(96,939	)		547,630
Long-term debt		—			939,719			9			10,983			—			950,711
Deferred income taxes		—			269,857			587			14,901			—			285,345
Other liabilities		—			14,132			46			484			—			14,662
Stockholders’ equity:
Intercompany investment		—			280,622			64,935			97,454			(443,011	)		—
Common stock		—			—			—			—			—			—
Additional paid-in capital		756,338			12,072			—			—			(12,072	)		756,338
Accumulated earnings (deficit)		(50,541	)		(50,541	)		(1,293	)		(14,137	)		65,971			(50,541	)
Accumulated other comprehensive income (loss)		(143	)		(143	)		—			(344	)		487			(143	)
Total stockholders’ equity		705,654			242,010			63,642			82,973			(388,625	)		705,654
Total liabilities and stockholders’ equity	$	705,654		$	2,056,866		$	67,961		$	159,085		$	(485,564	)	$	2,504,002

26

Condensed consolidating statements of comprehensive income (loss) for the quarters ended September 28, 2013 and September 29, 2012 are as follows:

	For the Quarter Ended September 28, 2013
In thousands	Parent Company		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—	$	900,737		$	—		$	87,441		$	(284	)	$	987,894
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below		—		747,953			—			69,883			(292	)		817,544
Selling, general and administrative expenses		—		128,907			76			17,370			—			146,353
Transaction expenses		—		980			—			35			—			1,015
Operating income (loss)		—		22,897			(76	)		153			8			22,982
Other (expense) income:
Interest expense		—		(20,092	)		—			(533	)		—			(20,625	)
Other, net		—		(849	)		—			201			—			(648	)
Equity earnings of subsidiaries		1,224		(157	)		—			—			(1,067	)		—
Income (loss) from operations before income taxes		1,224		1,799			(76	)		(179	)		(1,059	)		1,709
Income tax provision (benefit)		—		583			(21	)		(77	)		—			485
Net income (loss)	$	1,224	$	1,216		$	(55	)	$	(102	)	$	(1,059	)	$	1,224
Comprehensive income (loss)	$	4,292	$	4,284		$	(55	)	$	2,898		$	(7,127	)	$	4,292

	For the Quarter Ended September 29, 2012
In thousands	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net sales	$	—		$	915,663		$	—		$	(323	)	$	—	$	915,340
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below		—			765,728			—			40			—		765,768
Selling, general and administrative expenses		—			126,937			162			2,060			—		129,159
Transaction expenses		—			799			—			—			—		799
Operating income (loss)		—			22,199			(162	)		(2,423	)		—		19,614
Other (expense) income:
Interest expense		—			(18,744	)		—			—			—		(18,744	)
Other, net		—			(1,420	)		4			(2	)		—		(1,418	)
Equity earnings of subsidiaries		(10,602	)		(6,037	)		—			—			16,639		—
Income (loss) from operations before income taxes		(10,602	)		(4,002	)		(158	)		(2,425	)		16,639		(548	)
Income tax provision (benefit)		—			6,600			299			3,155			—		10,054
Net income (loss)	$	(10,602	)	$	(10,602	)	$	(457	)	$	(5,580	)	$	16,639	$	(10,602	)
Comprehensive income (loss)	$	(10,544	)	$	(10,544	)	$	(457	)	$	(5,580	)	$	16,581	$	(10,544	)

27

Condensed consolidating statements of comprehensive income (loss) for the nine months ended September 28, 2013 and September 29, 2012 are as follows:

	For the Nine Months Ended September 28, 2013
In thousands	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	2,597,488		$	3		$	185,740		$	(284	)	$	2,782,947
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below		—			2,172,886			—			155,598			(292	)		2,328,192
Selling, general and administrative expenses		—			381,305			678			39,441			—			421,424
Transaction expenses		—			3,821			—			483			—			4,304
Operating income (loss)		—			39,476			(675	)		(9,782	)		8			29,027
Other (expense) income:
Interest expense		—			(54,077	)		(33	)		(1,142	)		—			(55,252	)
Other, net		—			(2,873	)		2			(685	)		—			(3,556	)
Equity earnings of subsidiaries		(20,904	)		(8,855	)		—			—			29,759			—
Income (loss) from operations before income taxes		(20,904	)		(26,329	)		(706	)		(11,609	)		29,767			(29,781	)
Income tax provision (benefit)		—			(5,417	)		(215	)		(3,245	)		—			(8,877	)
Net income (loss)	$	(20,904	)	$	(20,912	)	$	(491	)	$	(8,364	)	$	29,767		$	(20,904	)
Comprehensive income (loss)	$	(24,959	)	$	(24,967	)	$	(491	)	$	(12,606	)	$	38,064		$	(24,959	)

	For the Nine Months Ended September 29, 2012
In thousands	Parent Company			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Net sales	$	—		$	2,585,097		$	—		$	(1,260	)	$	—	$	2,583,837
Cost of goods sold, excluding depreciation included in selling, general and administrative expenses below		—			2,166,770			—			95			—		2,166,865
Selling, general and administrative expenses		—			369,175			779			7,985			—		377,939
Transaction expenses		—			2,060			—			—			—		2,060
Operating income (loss)		—			47,092			(779	)		(9,340	)		—		36,973
Other (expense) income:
Interest expense		—			(52,475	)		—			—			—		(52,475	)
Other, net		—			(2,806	)		6			(2	)		—		(2,802	)
Equity earnings of subsidiaries		(12,550	)		(6,863	)		—			—			19,413		—
Income (loss) from operations before income taxes		(12,550	)		(15,052	)		(773	)		(9,342	)		19,413		(18,304	)
Income tax provision (benefit)		—			(2,502	)		(249	)		(3,003	)		—		(5,754	)
Net income (loss)	$	(12,550	)	$	(12,550	)	$	(524	)	$	(6,339	)	$	19,413	$	(12,550	)
Comprehensive income (loss)	$	(12,437	)	$	(12,437	)	$	(524	)	$	(6,339	)	$	19,300	$	(12,437	)

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Condensed consolidating statements of cash flows for the nine months ended September 28, 2013 and September 29, 2012 are as follows:

In thousands	For the Nine Months Ended September 28, 2013
	Parent Company		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operations	$	—	$	13,852		$	5		$	25,290		$	—	$	39,147
Cash flows from investing activities:
Acquisitions, net of cash acquired		—		(1,866	)		—			(68,700	)		—		(70,566	)
Purchase of property and equipment		—		(31,577	)		—			(3,347	)		—		(34,924	)
Purchase of assets held for sale		—		(1,924	)		—			—			—		(1,924	)
Proceeds from sale of property and equipment		—		70			—			18			—		88
Proceeds from disposal of assets held for sale		—		5,389			—			—			—		5,389
Net cash provided by (used in) investing activities		—		(29,908	)		—			(72,029	)		—		(101,937	)
Cash flows from financing activities:
Borrowings from revolving credit facility		—		2,146,992			—			92,566			—		2,239,558
Repayments of revolving credit facility		—		(2,118,942	)		—			(49,895	)		—		(2,168,837	)
Outstanding checks		—		(3,582	)		—			—			—		(3,582	)
Payments of other long-term debt		—		(287	)		(5	)		—			—		(292	)
Payments of deferred financing costs		—		(597	)		—			(509	)		—		(1,106	)
Net cash provided by (used in) financing activities		—		23,584			(5	)		42,162			—		65,741
Effect of exchange rate changes on cash		—		—			—			(1,581	)				(1,581	)
Net increase (decrease) in cash and cash equivalents		—		7,528			—			(6,158	)		—		1,370
Cash and cash equivalents - beginning of period		—		12,346			—			13,605			—		25,951
Cash and cash equivalents - end of period	$	—	$	19,874		$	—		$	7,447		$	—	$	27,321

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In thousands	For the Nine Months Ended September 29, 2012
	Parent Company		Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operations	$	—	$	(25,498	)	$	14		$	(43	)	$	—	$	(25,527	)
Cash flows from investing activities:
Acquisitions, net of cash acquired		—		(19,224	)		—			—			—		(19,224	)
Purchase of property and equipment		—		(42,177	)		—			—			—		(42,177	)
Purchase of assets held for sale		—		(3,281	)		—			—			—		(3,281	)
Proceeds from sale of property and equipment		—		84			—			—			—		84
Proceeds from disposal of assets held for sale		—		3,078			—			—			—		3,078
Net cash provided by (used in) investing activities		—		(61,520	)		—			—			—		(61,520	)
Cash flows from financing activities:
Borrowings from revolving credit facility		—		2,513,600			—			—			—		2,513,600
Repayments of revolving credit facility		—		(2,423,995	)		—			—			—		(2,423,995	)
Outstanding checks		—		(928	)		—			—			—		(928	)
Payments of other long-term debt		—		(1,793	)		(14	)		—			—		(1,807	)
Net cash provided by (used in) financing activities		—		86,884			(14	)		—			—		86,870
Net increase (decrease) in cash and cash equivalents		—		(134	)		—			(43	)		—		(177	)
Cash and cash equivalents - beginning of period		—		14,118			—			861			—		14,979
Cash and cash equivalents - end of period	$	—	$	13,984		$	—		$	818		$	—	$	14,802

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

Unless the context otherwise requires, the terms “American Tire Distributors,” “ATD,” “the Company,” “we,” “us,” “our” and similar terms in this report refer to American Tire Distributors Holdings, Inc. and its consolidated subsidiaries, the term “Holdings” refers only to American Tire Distributors Holdings, Inc., a Delaware Corporation, and the term “ATDI” refers only to American Tire Distributors, Inc., a Delaware corporation. The terms “TPG” and “Sponsor” relate to TPG Capital, L.P. and/or certain funds affiliated with TPG Capital, L.P.

The following discussion and analysis of our consolidated results of operations, financial condition and liquidity should be read in conjunction with our consolidated financial statements and the related notes included in Item 1 of this report. The following discussion contains forward-looking statements that reflect our current expectations, estimates, forecasts and projections. These forward-looking statements are not guarantees of future performance, and actual outcomes and results may differ materially from those expressed in these forward-looking statements. See “Cautionary Statements on Forward-Looking Information.”

Company Overview

We are the leading replacement tire distributor in North America, providing a critical range of services to enable tire retailers to effectively service and grow sales to consumers. Through our network of 131 distribution centers in the United States (U.S.) and Canada, we offer access to an extensive breadth and depth of inventory, representing approximately 40,000 stock-keeping units (SKUs) to approximately 72,000 customers (approximately 62,000 in the U.S. and 10,000 in Canada). The critical range of services we provide includes frequent and timely delivery of inventory as well as business support services such as credit, training, access to consumer market data and the administration of tire manufacturer affiliate programs. In addition, our U.S. customers have access to a leading online ordering and reporting system as well as a website that enables our tire retailer customers to participate in the Internet marketing of tires to consumers. We estimate that our share of the replacement passenger and light truck tire market in the U.S. is approximately 10%, up from approximately 1% in 1996, with our largest customer and top ten customers accounting for less than 3.0% and 11.3%, respectively, of our net sales in fiscal 2012. Our estimated share of the replacement passenger and light truck tire market in Canada is approximately 9%.

We believe we distribute the broadest product offering in our industry, supplying our customers with the top ten leading passenger and light truck tire brands. We carry the flagship brands from each of the four largest tire manufacturers —Bridgestone, Continental, Goodyear and Michelin — as well as the Hankook, Kumho, Nexen, Nitto and Pirelli brands. We also sell lower price point associate and proprietary brands of these and many other tire manufacturers. In addition, we sell custom wheels and accessories and related tire supplies and tools. Our revenues are primarily generated from sales of passenger car and light truck tires, which represent 80.1% of our net sales for the quarter ended September 28, 2013. The remainder of net sales is derived from other tire sales (17.4%), custom wheels (1.8%) and tire supplies, tools and other products (0.7%). We believe our large, diverse product offering allows us to better penetrate the replacement tire market across a broad range of price points.

Industry Overview

The U.S. and Canadian replacement tire markets have historically experienced stable growth and favorable pricing dynamics. However, these markets are subject to changes in consumer confidence and the economic conditions that impact its customers. As a result, our customers may opt to defer replacement tire purchases or purchase less costly brand tires during challenging economic periods where macro-economic factors such as unemployment, persistently high fuel costs and weakness in the housing market impact their financial health.

From 1955 through 2012, U.S. replacement tire unit shipments increased by an average of approximately 2.6% per year. The impact of the recent recession led to negative growth during 2008 and 2009. The economic environment showed signs of stabilization during 2010 and 2011, although slow economic growth, persistently high fuel cost and a decrease in miles driven continued to impact the market. Despite an increase in miles driven during 2012, the U.S. and Canadian replacement tire markets continued the negative growth trend as replacement tire unit shipments were down 1.8% and 5.5%, respectively, as compared to 2011. Our outlook for 2013 reflects little or no market improvement, however, we expect to continue to follow our historic trend and outperform expectations of the market.

Despite these recent market declines, we believe that, going forward, growth in the U.S. and Canadian replacement tire markets will continue to be driven by favorable underlying dynamics, including:

• increases in the number and average age of passenger cars and light trucks;

• increases in the number of miles driven;

• increases in the number of licensed drivers as the U.S. population continues to grow;

• increases in the number of replacement tire SKUs;

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• growth of the high performance tire segment; and

• shortening tire replacement cycles due to changes in product mix that increasingly favor high performance tires, which have shorter average lives.

Despite the current market environment, we have a solid infrastructure, an extensive and efficient distribution network and a broad product offering. Our growth strategy, coupled with our access to capital and our scalable platform, enables us to continue to expand in existing markets as well as in new geographic areas. In addition, we are investing in technology and new sales channels which will help fuel our future growth. As a result, we believe that we are well positioned to continue to achieve above market results in both contracting and expanding market demand cycles.

Recent Developments

As part of our ongoing business strategy, we intend to expand in existing markets as well as enter into previously underserved markets and new geographic areas. From the second half of 2010 through December 2012, we opened new distribution centers in 17 locations throughout the contiguous United States. During the first nine months of 2013, we continued to execute our plan of expansion by opening new distribution centers in Chattanooga, TN, Manchester, NH, Missouri City, TX and Albany, NY.

On September 4, 2013, we entered into a spot interest rate swap and two forward-starting interest rate swaps (collectively the “3Q 2013 Swaps”), each of which are used to hedge a portion of our exposure to changes in our variable interest rate debt. The spot interest rate swap covers a notional amount of $100.0 million at a fixed interest rate of 1.145% and expires in September 2016. The forward-starting interest rate swaps cover an aggregate notional amount of $100.0 million, of which $50.0 million becomes effective in September 2014 at a fixed interest rate of 1.464% and will expire in September 2016 and $50.0 million becomes effective in September 2015 at a fixed interest rate of 1.942% and will expire in September 2016. The 3Q 2013 Swaps do not meet the criteria to qualify for hedge accounting treatment; therefore, changes in the fair value of each contract is recognized in the condensed consolidated statement of comprehensive income (loss).

On August 30, 2013, we completed the purchase of 100% of the outstanding capital stock of Tire Distributors, Inc. (“TDI”). TDI owned and operated one distribution center serving over 1,700 customers. The acquisition was funded through our ABL Facility. The acquisition of TDI expanded our market position in Maryland and northeastern Virginia.

On April 30, 2013, we completed the acquisition of Regional Tire Holdings, Inc. (“Holdco”) pursuant to a Share Purchase Agreement dated as of March 22, 2013, among TriCan Tire Distributors, ATDI, Holdco and Regional Tire Distributors Inc., a 100% owned subsidiary of Holdco (“RTD”). Holdco has no significant assets or operations other than its ownership of RTD. The operations of RTD constitute the operations of Holdco. RTD is a wholesale distributor of tires, tire parts, tire accessories and related equipment in the Ontario and Atlantic provinces of Canada. The acquisition of RTD was funded by borrowings under our ABL Facility and FILO Facility, as more fully described below.

In connection with the acquisition of RTD, on March 22, 2013, Holdings entered into the First Amendment to the Sixth Amended and Restated Credit Agreement, which provides for our ABL Facility and our FILO Facility (“First Amendment”). The First Amendment (1) provided the U.S. Borrowers under the agreement with a new first-in last-out facility (the “FILO Facility”) in an aggregate principal amount of up to $60.0 million to be used to fund the acquisition and, to the extent not so used, for general corporate purposes, subject to a borrowing base specific thereto, and (2) increased the aggregate principal amount available under the Canadian ABL Facility from $60.0 million to $100.0 million, subject to the Canadian borrowing base. The First Amendment became effective, on April 30, 2013. The First Amendment also made certain other changes to the Sixth Amended and Restated Credit Agreement and added RTD as a party upon the closing of the acquisition. The maturity date for the FILO Facility is 18 months from April 30, 2013. The First Amendment did not change the maturity dates of the U.S. ABL Facility or the Canadian ABL Facility. Immediately following the closing of the acquisition of RTD, $50.1 million was drawn on the FILO Facility.

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Results of Operations

Our fiscal year is based on either a 52- or 53-week period ending on the Saturday closest to each December 31. Therefore, the financial results of 53-week fiscal years, and the associated 14-week quarter, will not be comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13 weeks. The quarters ended September 28, 2013 and September 29, 2012 each contain operating results for 13 weeks. The nine months ended September 28, 2013 and September 29, 2012 each contain operating results for 39 weeks. It should be noted that our year-end and quarter-end reporting dates are different from our recently acquired subsidiaries, TriCan and RTD. Both TriCan and RTD have a calendar year-end and quarterly reporting date. The impact from this difference on the consolidated financial statements is not material.

Quarter Ended September 28, 2013 Compared to the Quarter Ended September 29, 2012

The following table sets forth the period change for each category of the statements of operations, as well as each category as a percentage of net sales:

	Quarter Ended			Quarter Ended			Period Over Period Change			Period Over Period % Change			Percentage of Net Sales For the Respective Period Ended
In thousands	September 28, 2013			September 29, 2012			Favorable (unfavorable)			Favorable (unfavorable)			September 28, 2013			September 29, 2012
Net sales	$	987,894		$	915,340		$	72,554			7.9	%		100.0	%		100.0	%
Cost of goods sold		817,544			765,768			(51,776	)		(6.8	%)		82.8	%		83.7	%
Selling, general and administrative expenses		146,353			129,159			(17,194	)		(13.3	%)		14.8	%		14.1	%
Transaction expenses		1,015			799			(216	)		(27.0	%)		0.1	%		0.1	%
Operating income (loss)		22,982			19,614			3,368			17.2	%		2.3	%		2.1	%
Other income (expense):
Interest expense		(20,625	)		(18,744	)		(1,881	)		(10.0	%)		(2.1	%)		(2.0	%)
Other, net		(648	)		(1,418	)		770			54.3	%		(0.1	%)		(0.2	%)
Income (loss) from operations before income taxes		1,709			(548	)		2,257			411.9	%		0.2	%		(0.1	%)
Provision (benefit) for income taxes		485			10,054			9,569			95.2	%		0.0	%		1.1	%
Net income (loss)	$	1,224		$	(10,602	)	$	11,826			111.5	%		0.1	%		(1.2	%)

Net Sales

Net sales for the quarter ended September 28, 2013 were $987.9 million, a $72.6 million, or 7.9%, increase, as compared with the quarter ended September 29, 2012. The increase in net sales was primarily driven by the combined results of new distribution centers as well as the acquisition of TriCan, RTD and TDI. These growth initiatives added $108.8 million of incremental sales in the third quarter of 2013. However, this increase was partially offset by lower net tire pricing of $27.9 million, primarily driven by manufacturer price repositioning and an overall softer sales unit environment.

Cost of Goods Sold

Cost of goods sold for the quarter ended September 28, 2013 were $817.5 million, a $51.8 million, or 6.8%, increase, as compared with the quarter ended September 29, 2012. The increase in cost of goods sold was primarily driven by the combined results of new distribution centers as well as the acquisition of TriCan, RTD and TDI. These growth initiatives added $87.6 million of incremental costs in the third quarter of 2013. Cost of goods sold for the quarter ended September 28, 2013 also includes $0.1 million related to the non-cash amortization of the inventory step-up recorded in connection with the acquisition of TDI. These increases were partially offset by lower net tire pricing and an overall softer sales unit environment.

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Cost of goods sold as a percentage of net sales was 82.8% for the quarter ended September 28, 2013, a decrease compared with 83.7% during the quarter ended September 29, 2012. The decrease in cost of goods sold as a percentage of net sales was primarily driven by a higher level of manufacturer price repositioning in the prior year as compared to the current period, as well as, a higher level of manufacturer program benefits in the current period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the quarter ended September 28, 2013 were $146.4 million, a $17.2 million, or 13.3%, increase as compared with the quarter ended September 29, 2012. The increase in selling, general and administrative expenses was primarily related to incremental costs associated with our new distribution centers as well as the acquisition of TriCan, RTD and TDI. Combined, these factors added $18.7 million of incremental costs to the third quarter of 2013. In addition, we also experienced a $1.4 million increase to depreciation expense as we increased our capital expenditure costs primarily for information system technologies. These increases were partially offset by a decrease in salaries and wage expense of $2.8 million, which related to improved operating efficiencies and headcount leverage in most of our distribution centers.

Selling, general and administrative expenses as a percentage of net sales was 14.8% for the quarter ended September 28, 2013; an increase compared with 14.1% during the quarter ended September 29, 2012. The increase in selling, general and administrative expenses as a percentage of net sales were primarily driven by an increase in costs associated with our growth expansion of recently opened and acquired distribution centers as well as an increase in non-cash depreciation expense.

Transaction Expenses

Transaction expenses for the quarter ended September 28, 2013 were $1.0 million and were primarily related to costs associated with our acquisitions of TDI and RTD, as well as with expenses related to potential future acquisitions and other corporate initiatives. During the quarter ended September 29, 2012, transaction expenses of $0.8 million primarily related to costs associated with our acquisition of CTO in May 2012 as well as with expenses related to potential future acquisitions and other corporate initiatives.

Interest Expense

Interest expense for the quarter ended September 28, 2013 was $20.6 million, a $1.9 million or 10.0%, increase, compared with the quarter ended September 29, 2012. This increase was due to higher debt levels associated with our ABL Facility and FILO Facility, which were driven by our acquisitions of TriCan, RTD and TDI. Included in interest expense for the quarter ended September 28, 2013 was a $2.1 million loss associated with the fair value changes of our interest rate swaps, compared to a $1.0 million loss for the quarter ended September 29, 2012.

Provision (Benefit) for Income Taxes

Our income tax provision for the quarter ended September 28, 2013 was $0.5 million, based on pre-tax income of $1.7 million; our effective tax rate under the discrete method was 28.4%. For the quarter ended September 29, 2012, our income tax provision was $10.1 million, a result based on the change in interim methodology from the effective tax rate method to the discrete method. The combination of our income tax provision and our recorded loss from operations before income taxes of $0.5 million resulted in a negative effective tax rate for the quarter ended September 29, 2012. The effective rate of the year-to-date tax provision is lower than the statutory income tax rate primarily due to earnings in a foreign jurisdiction taxed at rates lower from the statutory U.S. federal rate and the impact of several non-deductable tax items as well as our state effective tax rate, a result based on our legal entity tax structure and individual state tax filing requirements.

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Nine Months Ended September 28, 2013 Compared to the Nine Months Ended September 29, 2012

The following table sets forth the period change for each category of the statements of operations, as well as each category as a percentage of net sales:

	Nine Months Ended			Nine Months Ended			Period Over Period Change			Period Over Period % Change			Percentage of Net Sales For the Respective Period Ended
In thousands	September 28, 2013			September 29, 2012			Favorable (unfavorable)			Favorable (unfavorable)			September 28, 2013			September 29, 2012
Net sales	$	2,782,947		$	2,583,837		$	199,110			7.7	%		100.0	%		100.0	%
Cost of goods sold		2,328,192			2,166,865			(161,327	)		(7.4	%)		83.7	%		83.9	%
Selling, general and administrative expenses		421,424			377,939			(43,485	)		(11.5	%)		15.1	%		14.6	%
Transaction expenses		4,304			2,060			(2,244	)		(108.9	%)		0.2	%		0.1	%
Operating income (loss)		29,027			36,973			(7,946	)		(21.5	%)		1.0	%		1.4	%
Other income (expense):
Interest expense		(55,252	)		(52,475	)		(2,777	)		(5.3	%)		-2.0	%		-2.0	%
Other, net		(3,556	)		(2,802	)		(754	)		(26.9	%)		-0.1	%		-0.1	%
Income (loss) from operations before income taxes		(29,781	)		(18,304	)		(11,477	)		(62.7	%)		-1.1	%		-0.7	%
Provision (benefit) for income taxes		(8,877	)		(5,754	)		3,123			54.3	%		-0.3	%		-0.2	%
Net income (loss)	$	(20,904	)	$	(12,550	)	$	(8,354	)		(66.6	%)		-0.8	%		-0.5	%

Net Sales

Net sales for the nine months ended September 28, 2013 were $2,782.9 million, a $199.1 million, or 7.7%, increase, as compared with the nine months ended September 29, 2012. The increase in net sales was primarily driven by the combined results of new distribution centers as well as the acquisition of CTO, TriCan, RTD and TDI. These growth initiatives added $287.2 million of incremental sales during the nine months ended September 28, 2013. However, this increase was partially offset by lower net tire pricing of $62.4 million, primarily driven by manufacturer price repositioning, one less selling day in 2013 as compared to 2012, and an overall softer sales unit environment.

Cost of Goods Sold

Cost of goods sold for the nine months ended September 28, 2013 were $2,328.2 million, a $161.3 million, or 7.4%, increase, as compared with the nine months ended September 29, 2012. The increase in cost of goods sold was primarily driven by the combined results of new distribution centers as well as the acquisition of CTO, TriCan, RTD and TDI. These growth initiatives added $235.2 million of incremental costs during the nine months ended September 28, 2013. Cost of goods sold for the nine months ended September 28, 2013 also includes $5.0 million related to the non-cash amortization of the inventory step-up recorded in connection with the acquisitions of TriCan, RTD and TDI. These increases were partially offset by lower net tire pricing, one less selling day in 2013 as compared to 2012, and an overall softer sales unit environment.

Cost of goods sold as a percentage of net sales was 83.7% for the nine months ended September 28, 2013, a slight decrease compared with 83.9% during the nine months ended September 29, 2012. The decrease in cost of goods sold as a percentage of net sales was primarily driven by a higher level of manufacturer program benefits in the current year. This decrease was partially offset by the impact of the non-cash amortization of the inventory step-up recorded in connection with the acquisitions of TriCan, RTD and TDI, which increased cost of goods sold as a percentage of net sales by 20 basis points.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended September 28, 2013 were $421.4 million, a $43.5 million, or 11.5%, increase as compared with the nine months ended September 29, 2012. The increase in selling, general and administrative expenses was primarily related to incremental costs associated with our new distribution centers as well as the acquisition of CTO, TriCan, RTD and TDI. Combined, these factors added $46.3 million of incremental costs to the nine months ended September 28, 2013. In addition, we also experienced a $5.0 million increase to vehicle and occupancy expenses due to a higher overall consumption of fuel and other vehicle related expenses as well as increases in occupancy costs as we expanded

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several of our distribution centers to better service our existing customers. Depreciation and amortization expense added an additional $2.6 million of costs to the nine months ended September 28, 2013 as we increased our capital expenditure costs for information system technologies. These increases were partially offset by a decrease in salaries and wage expense of $8.8 million, which related to lower incentive and commission compensation, as well as, improved operating efficiencies and headcount leverage in most of our distribution centers.

Selling, general and administrative expenses as a percentage of net sales was 15.1% for the nine months ended September 28, 2013; an increase compared with 14.6% during the nine months ended September 29, 2012. The increase in selling, general and administrative expenses as a percentage of net sales were primarily driven by an increase in costs associated with our growth expansion of recently opened and acquired distribution centers as well as an increase in non-cash depreciation and amortization expense.

Transaction Expenses

Transaction expenses for the nine months ended September 28, 2013 were $4.3 million and were primarily related to costs associated with our acquisitions of TDI, RTD and TriCan, as well as with expenses related to potential future acquisitions and other corporate initiatives. During the nine months ended September 29, 2012, transaction expenses of $2.1 million primarily related to acquisition costs associated with our acquisition of CTO in May 2012 as well as with expenses related to potential future acquisitions and other corporate initiatives.

Interest Expense

Interest expense for the nine months ended September 28, 2013 was $55.3 million, a $2.8 million, or 5.3%, increase, compared with the nine months ended September 29, 2012. This increase was due to higher debt levels associated with our ABL Facility and FILO Facility, which were driven by our acquisitions of CTO, TriCan, RTD and TDI. Included in interest expense for the nine months ended September 28, 2013 was a $0.7 million loss associated with the fair value changes of our interest rate swaps, compared to a $1.6 million loss for the nine months ended September 29, 2012.

Provision (Benefit) for Income Taxes

Our income tax benefit for the nine months ended September 28, 2013 was $8.9 million, based on a pre-tax loss of $29.8 million; our effective tax rate under the discrete method was 29.8%. For the nine months ended September 29, 2012, our income tax benefit was $5.8 million which was based on a pre-tax loss of $18.3 million; our effective tax rate was 31.4% a result based on the change in interim methodology from the effective tax rate method to the discrete method. The effective rate of the year-to-date tax benefit is lower than the statutory income tax rate primarily due to earnings in a foreign jurisdiction taxed at rates lower from the statutory U.S. federal rate and the impact of several non-deductable tax items as well as our state effective tax rate, a result based on our legal entity tax structure and individual state tax filing requirements.

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Liquidity and Capital Resources

Overview

The following table contains several key measures to gauge our financial condition and liquidity:

In thousands	September 28, 2013			December 29, 2012
Cash and cash equivalents	$	27,321		$	25,951
Working capital		568,090			545,969
Total debt		1,021,353			951,204
Total stockholders’ equity		682,742			705,654
Debt-to-capital ratio		59.9	%		57.4	%

Debt-to-capital ratio = total debt / (total debt plus total stockholders’ equity)

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and income tax rates. Our cash requirements consist primarily of the following:

• Debt service requirements

• Funding of working capital

• Funding of capital expenditures

Our primary sources of liquidity include cash flows from operations and our availability under our ABL Facility. We currently do not intend nor foresee a need to repatriate funds from our Canadian subsidiaries to the U.S., and no provision for U.S. income taxes has been made with respect to such earnings. We expect our cash flow from U.S. operations, combined with availability under our U.S. ABL Facility, to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending in the U.S. during the next twelve month period. In addition, we expect our cash flow from U.S. operations and our availability under our U.S. ABL Facility to continue to provide sufficient liquidity to fund our ongoing obligations, projected working capital requirements, restructuring obligations and capital spending in the U.S. during the foreseeable future. We expect cash flows from our Canadian operations, combined with availability under our Canadian ABL Facility, to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending in Canada during the next twelve month period and thereafter for the foreseeable future.

We are significantly leveraged. Accordingly, our liquidity requirements are significant, primarily due to our debt service requirements. As of September 28, 2013, our total indebtedness is $1,021.4 million with a debt-to-capital ratio of 59.9%. Cash interest payments for the nine months ended September 28, 2013 and September 29, 2012 amounted to $38.5 million and $34.9 million, respectively. As of September 28, 2013, we have an additional $158.9 million of availability under our U.S. ABL Facility and an additional $24.9 million of availability under our Canadian ABL Facility. The availability under our U.S. and Canadian ABL Facilities is determined in accordance with a borrowing base which can decline due to various factors. Therefore, amounts under our ABL Facilities may not be available when we need them.

Our liquidity and our ability to fund our capital requirements is dependent on our future financial performance, which is subject to general economic, financial and other factors that are beyond our control, many of which are described under “Item 1A—Risk Factors” in our most recently filed Annual Report on Form 10-K. If those factors significantly change or other unexpected factors adversely affect us, our business may not generate sufficient cash flow from operations or we may not be able to obtain future financings to meet our liquidity needs. We anticipate that, to the extent additional liquidity is necessary to fund our operations, it would be funded through borrowings under our ABL Facility, the incurrence of other indebtedness, additional equity financings or a combination of these potential sources of liquidity. We may not be able to obtain this additional liquidity on terms acceptable to us or at all.

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Cash Flows

The following table sets forth the major categories of cash flows:

In thousands	Nine Months Ended September 28, 2013			Nine Months Ended September 29, 2012
Cash provided by (used in) operating activities	$	39,147		$	(25,527	)
Cash provided by (used in) investing activities		(101,937	)		(61,520	)
Cash provided by (used in) financing activities		65,741			86,870
Effect of exchange rate changes on cash		(1,581	)		—
Net increase (decrease) in cash and cash equivalents		1,370			(177	)
Cash and cash equivalents - beginning of period		25,951			14,979
Cash and cash equivalents - end of period	$	27,321		$	14,802
Cash payments for interest	$	38,535		$	34,913
Cash payments (receipts) for taxes, net	$	12,876		$	6,197
Capital expenditures financed by debt	$	—		$	515

Operating Activities

Net cash provided by operating activities for the nine months ended September 28, 2013 was $39.1 million compared with cash used in operating activities of $25.5 million during the nine months ended September 29, 2012. During the current period, working capital requirements resulted in a cash outflow of $14.9 million, primarily driven by an increase in customer accounts receivable and an increase in inventory levels as a result of stocking new distribution centers opened during the year, seasonal changes in inventory stocking levels (including the Canadian winter business), and our recent acquisitions. These amounts were partially offset by changes in accounts payable and accrued expenses associated with the timing of vendor payments and accrued interest on our senior notes. This cash outflow is being more than offset by cash earnings during the current period.

Net cash used in operating activities for the nine months ended September 29, 2012 was $25.5 million, of which $77.4 million related to working capital requirements. Inventory increased $53.8 million as a result of seasonal build in our inventory as well as the need to stock four new distribution centers that we opened during the year. In addition, higher sales volume led to a $28.8 million increase in accounts receivable. However, these amounts were partially offset by a $9.6 million increase in accounts payable and accrued expenses primarily associated with the timing of vendor purchases and accrued interest on our senior notes.

Investing Activities

Net cash used in investing activities for the nine months ended September 28, 2013 was $101.9 million, compared with $61.5 million during the nine months ended September 29, 2012. The change was primarily associated with cash paid for acquisitions, which resulted in a $51.3 million increase in the current period. In addition, we invested $34.9 million and $42.2 million in property and equipment purchases during the nine months ended September 28, 2013 and September 29, 2012, respectively, which included information technology upgrades, information technology application development and warehouse racking.

Financing Activities

Net cash provided by financing activities for the nine months ended September 28, 2013 was $65.7 million, compared with $86.9 million during the nine months ended September 29, 2012. The change was primarily related to lower net borrowings from our ABL Facility, specifically our U.S. ABL facility, due to the reduction in cash outflow for working capital requirements between periods and favorable cash earnings partially offset by cash paid for acquisitions.

Supplemental Disclosures of Cash Flow Information

Cash payments for interest during the nine months ended September 28, 2013 were $38.5 million, compared with $34.9 million paid during the nine months ended September 29, 2012. The increase is primarily related to higher average debt levels and slightly higher average interest rates on the outstanding debt during the nine months ended September 28, 2013. In addition, we paid an additional $0.3 million during the nine months ended September 28, 2013 related to our interest rate swaps.

Net cash payments for taxes during the nine months ended September 28, 2013 were $12.9 million, compared with $6.2 million during the nine months ended September 29, 2012. The difference between the periods primarily relates to the balance and timing of income tax extension payments and income tax payments due with returns.

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Indebtedness

The following table summarizes our outstanding debt at September 28, 2013:

In thousands	Matures	Interest Rate (1)	Outstanding Balance
U.S. ABL Facility	2017	3.3%	$	457,515
Canadian ABL Facility	2017	4.0		53,062
FILO Facility	2014	5.8		49,152
Senior Secured Notes	2017	9.75		248,111
Senior Subordinated Notes	2018	11.50		200,000
Capital lease obligations	2013 - 2027	7.1 - 12.3		12,277
Other	2014 - 2021	8.0 - 10.6		1,236
Total debt				1,021,353
Less - Current maturities				(533	)
Long-term debt			$	1,020,820

(1) Interest rates for each of the U.S. ABL Facility and the Canadian ABL Facility are the weighted average interest rates at September 28, 2013.

ABL Facility

In connection with the acquisition of TriCan on November 30, 2012, we amended and restated our Fifth Amended and Restated Credit Agreement in order to provide for borrowings under the agreement by TriCan and make certain other amendments (as so amended and restated, the “Sixth Amended and Restated Credit Agreement”). The Sixth Amended and Restated Credit Agreement provides for (i) U.S. revolving credit commitments of $850.0 million (of which up to $50.0 million can be utilized in the form of commercial and standby letters of credit), subject to U.S. borrowing base availability (the “U.S. ABL Facility”) and (ii) Canadian revolving credit commitments of $60.0 million (of which up to $10.0 million can be utilized in the form of commercial and standby letters of credit), subject to Canadian borrowing base availability (the “Canadian ABL Facility” and, collectively with the U.S. ABL Facility, the “ABL Facility”). The U.S. ABL Facility provides for revolving loans available to ATDI, its 100% owned subsidiary Am-Pac Tire Dist. Inc. and any other U.S. subsidiary that we designate in the future in accordance with the terms of the agreement. The Canadian ABL Facility provides for revolving loans available to TriCan and any other Canadian subsidiaries that we designate in the future in accordance with the terms of the agreement. Provided that no default or event of default then exists or would arise therefrom, we have the option to request that the ABL Facility be increased by an amount not to exceed $200.0 million (up to $50.0 million of which may be allocated to the Canadian ABL Facility), subject to certain rights of the administrative agent, swingline lender and issuing banks with respect to the lenders providing commitments for such increase. The maturity date for the Sixth Amended and Restated Credit Agreement is November 16, 2017, provided that if on March 1, 2017, either (i) more than $50.0 million in aggregate principal amount of ATDI’s Senior Secured Notes remains outstanding or (ii) any principal amount of ATDI’s Senior Secured Notes remains outstanding with a scheduled maturity date which is earlier than 91 days after November 16, 2017 and excess availability under the ABL Facility is less than 12.5% of the aggregate revolving commitments, then the maturity date will be March 1, 2017.

In connection with the acquisition of RTD, on March 22, 2013, we entered into the First Amendment to Sixth Amended and Restated Credit Agreement (the “First Amendment”). The First Amendment (1) provides the U.S. Borrowers under the agreement with a new first-in last-out facility (the “FILO Facility”) in an aggregate principal amount of up to $60.0 million, subject to a borrowing base specific thereto, and (2) increases the aggregate principal amount available under the Canadian ABL Facility from $60.0 million to $100.0 million, subject to the Canadian borrowing base. The additional borrowings provided for under the First Amendment were contingent upon, among other things, the closing of the RTD acquisition on or before May 31, 2013. The closing of the RTD acquisition occurred, and the borrowings under the FILO Facility became available, on April 30, 2013. The First Amendment also made certain other changes to the Sixth Amended and Restated Credit Agreement and added RTD as a party upon the closing of the acquisition. The maturity date for the FILO Facility is 18 months from April 30, 2013. The First Amendment did not change the maturity dates of the U.S. ABL Facility or the Canadian ABL Facility or the material terms under which either facility may be accelerated or the U.S. ABL Facility may be increased. Immediately following the closing of the RTD acquisition, $50.1 million was drawn on the FILO Facility.

As of September 28, 2013, we had $457.5 million outstanding under the U.S. ABL Facility. In addition, we had certain letters of credit outstanding in the aggregate amount of $8.2 million, leaving $158.9 million available for additional borrowings under the U.S. ABL Facility. The outstanding balance of the Canadian ABL Facility at September 28, 2013 was $53.1 million, leaving $24.9 million available for additional borrowings. The outstanding balance of the FILO Facility as of September 28, 2013 was $49.2 million.

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Borrowings under the U.S. ABL Facility bear interest at a rate per annum equal to, at our option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 2.0% as of September 28, 2013 or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its “prime rate” for commercial loans, (2) the federal funds effective rate plus  ¹⁄₂ of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of September 28, 2013. The applicable margins under the U.S. ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.

Borrowings under the Canadian ABL Facility bear interest at a rate per annum equal to either (a) a Canadian base rate determined by reference to the highest of (1) the base rate as published by Bank of America, N.A. (acting through its Canada branch) as its “base rate”, (2) the federal funds rate effective plus  ¹⁄₂ of 1% per annum and (3) the one month-LIBOR rate plus 1.0% per annum, plus an applicable margin of 1.0% as of September 28, 2013 or (b) a Canadian prime rate determined by reference to the highest of (1) the prime rate as published by Bank of America, N.A. (acting through its Canada branch) as its “prime rate”, (2) the sum of  ¹⁄₂ of 1% plus the Canadian overnight rate and (3) the sum of 1% plus the rate of interest per annum equal to the average rate applicable to Canadian Dollar bankers’ acceptances as published by Reuters Monitor Money Rates Service for a 30 day interest period, plus an applicable margin of 1.0% as of September 28, 2013. The applicable margins under the Canadian ABL Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.

Borrowings under the FILO Facility bear interest at a rate per annum equal to, at our option, either (a) an Adjusted LIBOR rate determined by reference to LIBOR, adjusted for statutory reserve requirements, plus an applicable margin of 3.5% as of September 28, 2013 or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by the Bank of America, N.A. as its “prime rate” for commercial loans, (2) the federal funds effective rate plus  ¹⁄₂ of 1% and (3) the one month-Adjusted LIBOR rate plus 1.0% per annum, plus an applicable margin of 2.5% as of September 28, 2013. The applicable margins under the FILO Facility are subject to step ups and step downs based on average excess borrowing availability under the ABL Facility.

The U.S. and Canadian borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:

• 85% of eligible accounts receivable of the U.S. or Canadian loan parties, as applicable; plus

• The lesser of (a) 70% of the lesser of cost or market value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable, and (b) 85% of the net orderly liquidation value of eligible tire inventory of the U.S. or Canadian loan parties, as applicable; plus

• The lesser of (a) 50% of the lower of cost or market value of eligible non-tire inventory of the U.S. or Canadian loan parties, as applicable, and (b) 85% of the net orderly liquidation value of eligible non-tire inventory of the U.S. or Canadian loan parties, applicable.

The FILO borrowing base at any time equals the sum (subject to certain reserves and other adjustments) of:

• 5% of eligible accounts receivable of the U.S. loan parties, as applicable; plus

• 7.5% of the net orderly liquidation value of the eligible tire and non-tire inventory of the U.S. loan parties, as applicable.

All obligations under the U.S. ABL Facility and the FILO Facility are unconditionally guaranteed by Holdings and substantially all of ATDI’s existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp and TDI. The Canadian ABL Facility is unconditionally guaranteed by the U.S. loan parties, TriCan, RTD and any future, direct and indirect, wholly-owned, material restricted Canadian subsidiaries. Obligations under the U.S. ABL Facility and the FILO Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties, subject to certain exceptions. Obligations under the Canadian ABL Facility are secured by a first-priority lien on inventory, accounts receivable and related assets and a second-priority lien on substantially all other assets of the U.S. loan parties and the Canadian loan parties, subject to certain exceptions.

The ABL Facility and the FILO Facility contain customary covenants, including covenants that restrict our ability to incur additional debt, grant liens, enter into guarantees, enter into certain mergers, make certain loans and investments, dispose of assets, prepay certain debt, declare dividends, modify certain material agreements, enter into transactions with affiliates or change our fiscal year. If the amount available for additional borrowings under the ABL Facility is less than the greater of (a) 10.0% of the lesser of (x) the aggregate commitments under the ABL Facility and (y) the aggregate borrowing base and (b) $25.0 million, then we would be subject to an additional covenant requiring us to meet a fixed charge coverage ratio of 1.0 to 1.0. As of September 28, 2013, our additional borrowing availability under the ABL Facility was above the required amount and we were therefore not subject to the additional covenants.

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Senior Secured Notes

On May 28, 2010, ATDI issued Senior Secured Notes (“Senior Secured Notes”) due June 1, 2017 in an aggregate principal amount at maturity of $250.0 million. The Senior Secured Notes were issued at a discount from their principal amount at maturity and generated net proceeds of approximately $240.7 million after debt issuance costs (which represents a non-cash financing activity of $9.3 million). The Senior Secured Notes will accrete based on an effective interest rate of 10% to an aggregate accreted value of $250.0 million, the full principal amount at maturity. The Senior Secured Notes bear interest at a fixed rate of 9.75%. Interest on the Senior Secured Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010. The Senior Secured Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days notice at a redemption price of 107.313% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 104.875% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015, 102.438% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016 and 100.0% of the principal amount if the redemption date occurs between June 1, 2016 and May 31, 2017.

The Senior Secured Notes are unconditionally guaranteed by Holdings and substantially all of ATDI’s existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp and TDI, subject to certain exceptions. The Senior Secured Notes are also collateralized by a second-priority lien on accounts receivable and related assets and a first-priority lien on substantially all other assets (other than inventory), in each case of Holdings, ATDI and the guarantor subsidiaries, subject to certain exceptions.

The indenture governing the Senior Secured Notes contains covenants that, among other things, limits ATDI’s ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDI’s or repurchase or redeem ATDI’s capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDI’s subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens; consolidate, merge or sell all or substantially all of ATDI’s assets; enter into certain transactions with ATDI’s affiliates; and designate ATDI’s subsidiaries as unrestricted subsidiaries.

Senior Subordinated Notes

On May 28, 2010, ATDI issued $200.0 million in aggregate principal amount of its 11.50% Senior Subordinated Notes due June 1, 2018, which we refer to as the Senior Subordinated Notes. Interest on the Senior Subordinated Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2010. The Senior Subordinated Notes may be redeemed at any time at the option of ATDI, in whole or in part, upon not less than 30 nor more than 60 days’ notice at a redemption price of 104.0% of the principal amount if the redemption date occurs between June 1, 2013 and May 31, 2014, 102.0% of the principal amount if the redemption date occurs between June 1, 2014 and May 31, 2015 and 100.0% of the principal amount if the redemption date occurs between June 1, 2015 and May 31, 2016.

The Senior Subordinated Notes are unconditionally guaranteed by Holdings and substantially all of ATDI’s existing and future, direct and indirect, wholly-owned domestic material restricted subsidiaries, other than Tire Pros Francorp and TDI, subject to certain exceptions.

The indenture governing the Senior Subordinated Notes contains covenants that, among other things, limits ATDI’s ability and the ability of its restricted subsidiaries to incur additional debt or issue preferred stock; pay certain dividends or make certain distributions in respect of ATDI’s or repurchase or redeem ATDI’s capital stock; make certain loans, investments or other restricted payments; place restrictions on the ability of ATDI’s subsidiaries to pay dividends or make other payments to ATDI; engage in transactions with stockholders or affiliates; transfer or sell certain assets; guarantee indebtedness or incur other contingent obligations; incur certain liens without securing the Senior Subordinated Notes; consolidate, merge or sell all or substantially all of ATDI’s assets; enter into certain transactions with ATDI’s affiliates; and designate ATDI’s subsidiaries as unrestricted subsidiaries.

Adjusted EBITDA

We report our financial results in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). In addition, we present Adjusted EBITDA as a supplemental financial measure in order to provide a more complete understanding of the factors and trends affecting our business. Adjusted EBITDA is a non-GAAP financial measure that should be considered supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. It has limitations in that it does not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. In addition, this measure may not be comparable to non-GAAP financial measures reported by other companies. We believe that Adjusted EBITDA provides important supplemental information to both management and investors regarding financial and

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business trends used in assessing our financial condition. As a result, one should not consider Adjusted EBITDA in isolation or as a substitute for our results reported under GAAP. We compensate for these limitations by analyzing results on a GAAP basis as well as on a non-GAAP basis, predominantly disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results.

The following table shows a reconciliation of Adjusted EBITDA from the most directly comparable GAAP measure, net income (loss) in order to show the differences in these measures of operating performance:

In thousands	Quarter Ended September 28, 2013		Quarter Ended September 29, 2012			Nine Months Ended September 28, 2013			Nine Months Ended September 29, 2012
Net income (loss)	$	1,224	$	(10,602	)	$	(20,904	)	$	(12,550	)
Depreciation and amortization		27,316		22,416			78,456			65,656
Interest expense		20,625		18,744			55,252			52,475
Income tax provision (benefit)		485		10,054			(8,877	)		(5,754	)
Management fee		1,587		1,299			3,833			3,599
Stock-based compensation		596		1,607			2,047			2,761
Transaction fees		1,015		799			4,304			2,060
Inventory step up		100		—			5,007			—
Other		1,391		685			3,378			1,677
Adjusted EBITDA	$	54,339	$	45,002		$	122,496		$	109,924

Off-Balance Sheet Arrangements

We have no significant off balance sheet arrangements, other than liabilities related to leases of Winston Tire Company (“Winston Tire”) that we guaranteed when we sold Winston Tire in 2001. As of September 28, 2013, our total obligations as guarantor on these leases are approximately $2.2 million extending over six years. However, we have secured assignments or sublease agreements for the vast majority of these commitments with contractually assigned or subleased rentals of approximately $2.0 million as of September 28, 2013. A provision has been made for the net present value of the estimated shortfall. The accrual for lease liabilities could be materially affected by factors such as the credit worthiness of lessors, assignees and sublessees and our success at negotiating early termination agreements with lessors. These factors are significantly dependent on general economic conditions. While we believe that our current estimates of these liabilities are adequate, it is possible that future events could require significant adjustments to those estimates.

Critical Accounting Polices and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with those accounting principles requires management to use judgments in making estimates and assumptions based on the relevant information available at the end of each period. These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain. Actual results may differ from estimates.

Management believes there have been no significant changes during the nine months ended September 28, 2013, to the items that we disclosed as our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

Recent Accounting Pronouncements

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment” which amended the guidance on the annual impairment testing of indefinite-lived intangible assets other than goodwill. The amended guidance will allow a company the option to first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, based on the qualitative assessment, it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if a company concludes otherwise, quantitative impairment testing is not required. This new guidance will be effective for fiscal years beginning after September 15, 2012, with early adoption permitted. We adopted this guidance on December 30, 2012 the first day of our 2013 fiscal year; we perform our annual impairment test in the fourth quarter and does not expect the impact of adopting this standard to have a material effect on the consolidated financial statements.

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In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” which amended the guidance for reporting reclassifications out of accumulated other comprehensive income. The amended guidance will require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is entirely reclassified to net income, as required by U.S. GAAP. For other amounts, that are not required by U.S. GAAP to be entirely reclassified to net income, an entity is required to cross-reference other disclosures that will provide additional detail concerning these amounts. The amendments are effective for reporting periods beginning after December 15, 2012. We adopted this guidance on December 30, 2012 and its adoption did not impact our consolidated financial statements.

In July 2013, the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 clarifies guidance and eliminates diversity in practice on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance is effective for annual reporting periods beginning on or after December 15, 2013 and subsequent interim periods. We are currently assessing the impact, if any, on the condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our U.S. ABL Facility, Canadian ABL Facility and FILO Facility are exposed to fluctuations in interest rates which could impact our results of operations and financial condition. Interest on the U.S. ABL Facility and the FILO Facility are tied to Base Rate, as defined, or LIBOR. Interest on the Canadian ABL Facility is tied to Base Rate, as defined, or Prime Rate, as defined. At September 28, 2013, the total amount outstanding under our U.S. ABL Facility, Canadian ABL Facility and FILO facility that was subject to interest rate changes was $559.7 million.

To manage this exposure, we use interest rate swap agreements in order to hedge the changes in our variable interest rate debt. Interest rate swap agreements utilized by us in our hedging programs are viewed as risk management tools, involve little complexity and are not used for trading or speculative purposes. To minimize the risk of counterparty non-performance, interest rate swap agreements are made only through major financial institutions with significant experience in such instruments.

At September 28, 2013, $159.7 million of the total outstanding balance of our U.S. and Canadian ABL Facilities and our FILO Facility is not hedged by an interest rate swap agreement and thus subject to interest rate changes. Based on this amount, a hypothetical increase of 1% in such interest rate percentages would result in an increase to our annual interest expense by $1.6 million.

The financial position and results of operations for TriCan, our 100% owned subsidiary acquired during 2012, and RTD, our 100% owned subsidiary acquired on April 30, 2013, are impacted by movements in the exchange rates between the Canadian dollar and the U.S. dollar. As of September 28, 2013, we did not have any foreign currency derivatives in place.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

(a) We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including the Chief Executive Officer and the Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

(b) As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at a reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 28, 2013, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We are, however, currently implementing a conversion of our legacy computer system to Oracle. We believe we are maintaining and monitoring appropriate internal controls during the implementation period.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are involved from time to time in various lawsuits, including alleged class action lawsuits arising out of the ordinary conduct of our business. Although no assurances can be given, we do not expect that any of these matters will have a material adverse effect on our business or financial condition. We are also involved in various litigation proceedings incidental to the ordinary course of our business. We believe, based on consultation with legal counsel, that none of these will have a material adverse effect on our financial condition or results of operations.

Item 1A. Risk Factors.

There have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

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	Certifications of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 8, 2013	AMERICAN TIRE DISTRIBUTORS HOLDINGS, INC.
	By:	/s/ JASON T. YAUDES
		Jason T. Yaudes
		Executive Vice President and
		Chief Financial Officer
		(On behalf of the registrant and as Principal Financial Officer)

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