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August 14, 2002 02:00 AM

American Tire Distributors sales down 8 percent in 2nd quarter

Tire Business Staff
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    HUNTERSVILLE, N.C.(Aug. 14, 2002) — American Tire Distributors Inc. suffered a slight drop in operating earnings for the second quarter as sales fell 8 percent to $277.6 million. American Tire — formerly Heafner Tire Group Inc. — said the sales decline reflects both lower overall industry shipments and reduced sales to its former Winston Tire Co. subsidiary.

    For the six months ended June 29, American Tire reported a tripling of operating income, to $13.1 million, on 7.1-percent lower sales of $529.1 million. The boost in income came primarily from reduced overhead costs related to the consolidation of all management operations at the company's new headquarters in Huntersville, American Tire said in its second quarter 10-Q filing with the Securities and Exchange Commission.

    The company was in the black on a net basis for both periods — $1.9 million for the quarter and $31.1 million for the half.

    American Tire did not make a forecast for the remainder of 2002, but did caution that “margin decreases are primarily attributable to an increase in competitive activity as the company's primary competitors fight to hold market share in a declining market.”

    Separately, American Tire disclosed it provided Winston Tire — which filed for Chapter 11 bankruptcy protection in January — with $2 million in credit toward continued purchases of merchandise from American Tire. As of June 29, the 10-Q filing reveals, Performance Management Inc. still owes American Tire $2.8 million of the $10 million purchase price for Winston Tire.

    In addition, American Tire moved recently to secure assignments or sublease agreements on a “substantial amount” of leases of Winston stores for which it still remains liable as a guarantor. The filing put the value of these obligations at $17 million, and cautioned that “due to the inherent uncertainties of the bankruptcy process, (American Tire) may be exposed to additional liabilities, which are currently not known or quantifiable.

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