UNITED STATES SECURITIES AND EXCHANGE COMMISSION Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

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

For the quarterly period ended ~~July~~October 135, 2002

¨o 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 333-56013

ADVANCE STORES COMPANY, INCORPORATED

ADVANCE STORES COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)



Virginia		54-0118110
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5673 Airport Road
Roanoke, Virginia		24012
(Address of Principal Executive Offices)		(Zip Code)

(540) 362-4911
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report).

Indicate by check mark whether the registrant: (~~Exact~~1) has ~~name~~ 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 aswas ~~specified~~required into ~~its~~file ~~charter~~such reports), and (2) has been subject to such filing requirements for the past 90 days.

Virginia		54-0118110
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
5673 Airport Road Roanoke, Virginia		24012 (Zip Code)
(Address of Principal Executive Offices)

Yes

As of November 13, 2002, the registrant had outstanding 539 shares of Class A Common Stock, par value $100 per share (~~540~~the only class of common stock of the registrant outstanding). The ~~362-4911~~registrant’s Class A Common Stock is not traded in a public market.

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 ¨

As of August 9, 2002, the registrant had outstanding 539 shares of Class A Common Stock, par value $100 per share (the only class of common stock of the registrant outstanding). The registrant’s Class A Common Stock is not traded in a public market.

ADVANCE STORES COMPANY, INCORPORATED AND SUBSIDIARIES

Twelve and ~~Twenty-Eight~~Forty Week Periods Ended ~~July~~October 135, 2002

TABLE OF CONTENTS

			Page		~~Page~~
PART I.	FINANCIAL INFORMATION	~~FINANCIAL INFORMATION~~
	Item 1.	~~Item~~Condensed 1.Consolidated Financial Statements of Advance Stores Company, Incorporated and Subsidiaries:		~~Condensed Consolidated Financial Statements of Advance Stores Company, Incorporated and Subsidiaries:~~
				Condensed Consolidated Balance Sheets as of July 13, 2002 and December 29, 2001	1
		Condensed Consolidated Balance Sheets as of October 5, 2002 and December 29, 2001	1
				Condensed Consolidated Statements of Operations for the Twelve and Twenty-Eight Week Periods Ended July 13, 2002 and July 14, 2001	2
		Condensed Consolidated Statements of Operations for the Twelve and Forty Week Periods Ended October 5, 2002 and October 6, 2001	2
				Condensed Consolidated Statements of Cash Flows for the Twenty-Eight Week Periods Ended July 13, 2002 and July 14, 2001	3
		Condensed Consolidated Statements of Cash Flows for the Forty Week Periods Ended October 5, 2002 and October 6, 2001	3
		Notes to the Condensed Consolidated Financial Statements	5	~~Notes to the Condensed Consolidated Financial Statements~~	5
	Item 2.	~~Item~~Management’s 2.Discussion and Analysis of Financial Condition and Results of Operations	20	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	19
	Item 3.	~~Item~~Quantitative 3.and Qualitative Disclosures About Market Risks	30	~~Quantitative and Qualitative Disclosures About Market Risks~~	28
PART II.		OTHER INFORMATION
	Item 4.	Controls and Procedures	30
		Item 1.		Legal Proceedings	29
PART II.	OTHER INFORMATION
		Item 6.		Exhibits and Reports on Form 8-K	29
	Item 1.	Legal Proceedings	31
				(a) Exhibits	29
	Item 6.	Exhibits and Reports on Form 8-K	31
				(b) Current Reports on Form 8-K	29
		(a) Exhibits	31
SIGNATURE					S-1
		(b) Current Reports on Form 8-K	31
SIGNATURE			S-1

PART I. FINANCIAL INFORMATION

~~Item~~ ITEM 1. ~~Condensed~~ ~~Consolidated~~CONDENSED ~~Financial~~CONSOLIDATED ~~Statements~~FINANCIAL ofSTATEMENTS ~~Advance~~OF ~~Stores~~ADVANCE ~~Company~~STORES COMPANY, ~~Incorporated~~ ~~and~~INCORPORATED ~~Subsidiaries~~AND SUBSIDIARIES

~~ADVANCE~~Advance ~~STORES~~Stores ~~COMPANY~~Company, ~~INCORPORATED~~Incorporated ~~AND~~and ~~SUBSIDIARIES~~Subsidiaries Condensed Consolidated Balance Sheets October 5, 2002 and December 29, 2001 (in thousands, except per share data)

CONDENSED CONSOLIDATED BALANCE SHEETS

			October 5, 2002			December 29, 2001

			*(unaudited)*
Assets
Current assets:
	Cash and cash equivalents		$	56,254		$	18,117
	Receivables, net			131,892			93,531
	Inventories, net			1,078,388			982,000
	Other current assets			32,065			42,027

		Total current assets		1,298,599			1,135,675
Property and equipment, net of accumulated depreciation of $292,517 and $239,204				718,352			711,282
Assets held for sale				38,569			60,512
Other assets, net				25,702			29,274

			$	2,081,222		$	1,936,743

Liabilities and Stockholder’s Equity
Current liabilities:
	Bank overdrafts		$	—		$	35,123
	Current portion of long-term debt			11,542			23,715
	Accounts payable			554,609			429,041
	Accrued expenses			223,670			176,194
	Other current liabilities			37,933			31,129

		Total current liabilities		827,754			695,202

Long-term debt				671,726			836,648

Other long-term liabilities				53,807			36,273

Commitments and contingencies
Stockholder’s equity:
	Common stock, Class A, voting, $100 par value; 5,000 shares authorized; 539 and 538 issued and outstanding			54			54
	Additional paid-in capital			491,535			396,503
	Other comprehensive income (loss)			(289	)		—
	Retained earnings (accumulated deficit)			36,635			(27,937	)

		Total stockholder’s equity		527,935			368,620

			$	2,081,222		$	1,936,743

~~July~~The ~~13,~~accompanying ~~2002~~notes ~~and~~to ~~December~~the ~~29,~~condensed ~~2001~~consolidated financial statements are an integral part of these balance sheets.

(in thousands, except per store data)

	July 13, 2002		December 29, 2001
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	38,955	$	18,117
Receivables, net		118,047		93,531
Inventories		1,074,653		982,000
Other current assets		49,237		42,027
Total current assets		1,280,892		1,135,675
Property and equipment, net of accumulated depreciation of $285,305 and $239,204		715,697		711,282
Assets held for sale		46,200		60,512
Other assets, net		26,227		29,274
	$	2,069,016	$	1,936,743
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Bank overdrafts	$	—	$	35,123
Current portion of long-term debt		11,549		23,715
Accounts payable		585,119		429,041
Accrued expenses		209,165		176,194
Other current liabilities		39,469		31,129
Total current liabilities		845,302		695,202
Long-term debt		675,263		836,648
Other long-term liabilities		51,219		36,273
Commitments and contingenciesStockholder’s equity:
Common stock, Class A, voting, $100 par value; 5,000 shares authorized;539 and 538 issued and outstanding		54		54
Additional paid-in capital		491,490		396,503
Retained earnings (accumulated deficit)		5,688		(27,937	)
Total stockholder’s equity		497,232		368,620
	$	2,069,016	$	1,936,743

The accompanying notes to the condensed consolidated financial statements

are an integral part of these balance sheets.

~~ADVANCE~~Advance ~~STORES~~Stores ~~COMPANY~~Company, ~~INCORPORATED~~Incorporated ~~AND~~and ~~SUBSIDIARIES~~Subsidiaries Condensed Consolidated Statements of Operations For the Twelve and Forty Week Periods Ended October 5, 2002 and October 6, 2001 (in thousands) (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

			Twelve Week Periods Ended						Forty Week Periods Ended

			October 5, 2002			October 6, 2001			October 5, 2002			October 6, 2001

Net sales			$	788,662		$	598,793		$	2,585,466		$	1,935,630
Cost of sales, including purchasing and warehousing costs				439,000			342,059			1,450,282			1,110,218

		Gross profit		349,662			256,734			1,135,184			825,412
Selling, general and administrative expenses				278,834			219,603			940,477			726,011
Expenses associated with merger and integration				8,174			—			25,917			—
Expenses associated with merger related restructuring				74			—			525			—

		Operating income		62,580			37,131			168,265			99,401

Other, net:
	Interest expense			(13,476	)		(9,503	)		(53,592	)		(36,567	)
	Other income, net			277			265			867			732

		Total other, net		(13,199	)		(9,238	)		(52,725	)		(35,835	)

Income before provision for income taxes and extraordinary item				49,381			27,893			115,540			63,566
Provision for income taxes				18,139			10,958			43,430			24,724

Income before extraordinary item				31,242			16,935			72,110			38,842
Extraordinary item, loss on debt extinguishment, net of $187 and $4,779 income taxes, respectively				(295	)		—			(7,538	)		—

Net income			$	30,947		$	16,935		$	64,572		$	38,842

~~For~~The accompanying notes to the ~~Twelve~~condensed ~~and~~consolidated ~~Twenty-Eight~~financial ~~Week~~statements ~~Periods~~are ~~Ended~~an integral part of these statements.

July 13, 2002 and July 14, 2001

(in thousands)

(unaudited)

	Twelve Week Periods Ended						Twenty-Eight Week Perids Ended
	July 13, 2002			July 14, 2001			July 13, 2002			July 14, 2001
Net sales	$	792,717		$	607,478		$	1,796,804		$	1,336,837
Cost of sales, including purchasing and warehousing costs		443,703			350,250			1,011,282			768,159
Gross profit		349,014			257,228			785,522			568,678
Selling, general and administrative expenses		284,102			220,849			661,643			506,408
Expenses associated with merger and integration		7,520			—			17,743			—
Expenses associated with merger related restructuring		109			—			451			—
Operating income		57,283			36,379			105,685			62,270
Other, net:
Interest expense		(16,291	)		(10,825	)		(40,116	)		(27,064	)
Other income, net		353			355			590			467
Total other, net		(15,938	)		(10,470	)		(39,526	)		(26,597	)
Income before provision for income taxes and extraordinary item		41,345			25,909			66,159			35,673
Provision for income taxes		15,848			10,079			25,291			13,766
Income before extraordinary item		25,497			15,830			40,868			21,907
Extraordinary item, loss on debt extinguishment, net of $4,101 and $4,592 income taxes, respectively		(6,468	)		—			(7,243	)		—
Net income	$	19,029		$	15,830		$	33,625		$	21,907

The accompanying notes to the condensed consolidated financial statements

are an integral part of these statements.

~~ADVANCE~~Advance ~~STORES~~Stores ~~COMPANY~~Company, ~~INCORPORATED~~Incorporated ~~AND~~and ~~SUBSIDIARIES~~Subsidiaries Condensed Consolidated Statements of Cash Flows For the Forty Week Periods Ended October 5, 2002 and October 6, 2001 (in thousands) (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

					Forty Week Periods Ended

					October 5, 2002			October 6, 2001

Cash flows from operating activities:
	Net income				$	64,572		$	38,842
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				71,455			53,629
		Amortization of stock option compensation				—			2,862
		Amortization of deferred debt issuance costs				2,697			2,269
		Amortization of bond discount				1,165			—
		Compensation for stock issued under the Parent’s employee stock purchase plan				667			—
		(Gain) loss on disposal of property and equipment, net				(891	)		1,336
		Impairment of assets held for sale				—			1,600
		Provision for deferred income taxes				41,489			15,710
		Tax benefit related to exercise of stock options				5,010			—
		Extraordinary loss on extinguishment of debt, net of tax				7,538			—
		Net increase in:
			Receivables, net			(35,418	)		(1,691	)
			Inventories, net			(110,030	)		(625	)
			Other assets			(16,178	)		(10,552	)
		Net increase (decrease) in:
			Accounts payable			126,960			15,816
			Accrued expenses			53,463			16,809
			Other liabilities			5,509			(10,410	)

				Net cash provided by operating activities		218,008			125,595

Cash flows from investing activities:
	Purchases of property and equipment					(68,524	)		(49,550	)
	Acquisition, net of cash acquired					(3,411	)		(21,472	)
	Proceeds from sales of property and equipment					19,989			2,317

				Net cash used in investing activities		(51,946	)		(68,705	)

Cash flows from financing activities:
	Decrease in bank overdrafts					(35,123	)		(2,856	)
	Payment of note payable					—			(784	)
	Early extinguishment of debt					(418,261	)		—
	Borrowings under credit facilities					286,700			171,400
	Payments on credit facilities					(46,700	)		(233,601	)
	Payment of debt related costs					(7,333	)		—
	Proceeds from issuance of common stock to Advance Auto Parts, Inc.					90,022			—
	Increase in borrowings secured by trade receivables					2,770			2,860

				Net cash used in financing activities		(127,925	)		(62,981	)

Net increase (decrease) in cash and cash equivalents						38,137			(6,091	)
Cash and cash equivalents , beginning of period						18,117			18,009

Cash and cash equivalents , end of period					$	56,254		$	11,918

~~For~~The accompanying notes to the ~~Twenty-Eight~~condensed ~~Week~~consolidated ~~Periods~~financial ~~Ended~~statements are an integral part of these statements.

July 13, 2002 and July 14, 2001

(in thousands)

(unaudited)

	Twenty-Eight Week Periods Ended
	July 13, 2002			July 14, 2001
Cash flows from operating activities:
Net income	$	33,625		$	21,907
Adjustments reconcile net income to net cash provided by operating activities:
Depreciation and amortization		48,983			37,069
Amortization of stock option compensation		—			1,342
Amortization of deferred debt issuance costs		2,067			1,588
Amortization of bond discount		820			—
Loss on disposal of property and equipment, net		1,310			806
Impairment of assets held for sale		—			1,600
Provision for deferred income taxes		25,221			8,177
Tax benefit related to exercise of stock options		4,965			—
Extraordinary loss on extinguishment of debt, net of tax		7,243			—
Net (increase) decrease in:
Receivables, net		(24,516	)		(1,870	)
Inventories		(101,427	)		15,207
Other assets		(18,243	)		(8,952	)
Net increase (decrease) in:
Accounts payable		156,078			13,187
Accrued expenses		40,585			17,147
Other liabilities		3,586			(5,442	)
Net cash provided by operating activities		180,297			101,766
Cash flows from investing activities:
Purchases of property and equipment		(46,638	)		(31,048	)
Acquisition, net of cash acquired		—			(21,472	)
Proceeds from sales of property and equipment		9,410			1,381
Net cash used in investing activities		(37,228	)		(51,139	)
Cash flows from financing activities:
Decrease in bank overdrafts		(35,123	)		(13,778	)
Payment of note payable		—			(784	)
Early extinguishment of debt		(414,372	)		—
Borrowings under credit facilities		286,700			171,400
Payments on credit facilities		(46,700	)		(208,601	)
Payment of debt related costs		(6,209	)		—
Proceeds from issuance of common stock to Advance Auto Parts, Inc.		90,022			—
Other		3,451			2,508
Net cash used in financing activities		(122,231	)		(49,255	)
Net increase in cash and cash equivalents		20,838			1,372
Cash and cash equivalents, beginning of period		18,117			18,009
Cash and cash equivalents, end of period	$	38,955		$	19,381

The accompanying notes to the condensed consolidated financial statements

are an integral part of these statements.

~~ADVANCE~~Advance ~~STORES~~Stores ~~COMPANY~~Company, ~~INCORPORATED~~Incorporated ~~AND~~and ~~SUBSIDIARIES~~Subsidiaries Condensed Consolidated Statements of Cash Flows – (continued) For the Forty Week Periods Ended October 5, 2002 and October 6, 2001(in thousands) (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

		Forty Week Periods Ended

		October 5, 2002			October 6, 2001

Supplemental cash flow information:
	Interest paid	$	37,810		$	27,872
	Income tax payments, net		285			4,600
Non-cash transactions:
	Accrued purchases of property and equipment		10,147			8,527
	Short-term note received on sale of fixed asset		1,000			—
	Other comprehensive income (loss)		(289	)		—

~~For~~The accompanying notes to the condensed consolidated financial statements are an ~~Twenty-Eight~~integral ~~Week~~part ~~Periods~~of ~~Ended~~these statements.

July 13, 2002 and July 14, 2001

(in thousands)

(unaudited)

	Twenty-Eight Week Periods Ended
	July 13, 2002		July 14, 2001
Supplemental cash flow information:
Interest paid	$	35,025	$	23,271
Income tax payments, net		133		1,241
Non-cash transactions:
Accrued purchases of property and equipment		7,816		4,717
Accrued equity issuance costs		42		—

The accompanying notes to the condensed consolidated financial statements

are an integral part of these statements.

~~ADVANCE~~Advance ~~STORES~~Stores ~~COMPANY~~Company, ~~INCORPORATED~~Incorporated ~~AND~~and ~~SUBSIDIARIES~~Subsidiaries Notes to the Condensed Consolidated Financial Statements For the Twelve and Forty Week Periods Ended October 5, 2002 and October 6, 2001 (in thousands, except per store data)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Twelve and Twenty-Eight Weight Week Periods Ended July 13, 2002 and July 14, 2001

(in thousands, except per store data)

1. Basis of Presentation:

Advance Stores Company, Incorporated is a wholly owned subsidiary of Advance Auto Parts, Inc., or Advance. The accompanying condensed consolidated financial statements include the accounts of Advance Stores Company, Incorporated and its wholly owned subsidiaries, or the Company. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of ~~July~~October 135, 2002, the condensed consolidated statements of operations for the twelve and ~~twenty-eight~~forty week periods ended ~~July~~October 135, 2002 and ~~July~~October 146, 2001 and the condensed consolidated statements of cash flows for the ~~twenty-eight~~forty week periods ended ~~July 13~~October 5, 2002 and ~~July~~October 146, 2001, have been prepared by the Company and have not been audited. In the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial position of the Company, the results of its operations and cash flows have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s consolidated financial statements for the fiscal year ended December 29, 2001.

The results of operations for the ~~twenty-eight~~twelve and forty week periods are not necessarily indicative of the operating results to be expected for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Change in Accounting Method

Effective December 31, 2000, the Company changed its method of accounting for unrestricted cooperative advertising funds received from certain vendors to recognize these payments as a reduction to the cost of inventory acquired from these vendors. Previously, these funds were accounted for as a reduction to selling, general and administrative expenses as advertising expense was incurred. The new method was adopted to better align the reporting of these payments with the Company’s and the vendors’ use of these payments as reductions to the price of inventory acquired from the vendors. The effect of the change for the twelve and ~~twenty-eight~~forty weeks ended ~~July~~October 146, 2001 was to decrease income from continuing operations by $~~2,329~~273 and $3,~~407~~680, respectively.

~~Recent Accounting Pronouncements~~ Hedge Activities

In On ~~August~~September ~~2001~~25, 2002, the ~~Financial~~Company ~~Accounting~~entered ~~Standards~~into ~~Board~~a ~~(FASB)~~hedge ~~issued~~agreement ~~Statement~~in the form of ~~Financial~~a ~~Accounting~~zero-cost ~~Standards~~collar, ~~(SFAS)~~which ~~No.~~will ~~143,~~protect the ~~“Accounting~~Company ~~for~~from ~~Asset~~interest ~~Retirement~~rate ~~Obligations”.~~fluctuations ~~SFAS~~in ~~No.~~the ~~143~~LIBOR ~~establishes~~rate ~~accounting~~on ~~standards~~$150 ~~for~~million ~~recognition~~of ~~and~~the ~~measurement~~Company’s variable rate debt under its credit facility. The collar consists of an ~~asset~~interest ~~retirement~~rate ~~obligation~~ceiling at 4.5% and an ~~associated~~interest ~~asset~~rate ~~retirement~~floor ~~cost~~of ~~and~~1.56% isfor ~~effective~~a term of twenty-four months. Under this hedge, the Company will continue to pay interest at prevailing rates plus any spread, as defined by the credit facility, but will be reimbursed for ~~fiscal~~any ~~years beginning~~amounts ~~after~~paid ~~June~~on 15the LIBOR rate, ~~2002~~in excess of the ceiling. Conversely, ~~The~~the Company ~~does~~will ~~not~~be ~~expect~~required ~~SFAS~~to ~~No.~~pay ~~143~~the tooriginator ~~have~~if athe ~~material~~LIBOR ~~impact~~rate onis ~~its~~less ~~financial~~than ~~statements.~~the floor.

In August 2001, the FASB also issued SFAS No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets”. This statement replaces both SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” and Accounting Principles Board (APB) Opinion No. 30,

~~NOTES~~ In TOaccordance ~~THE~~with ~~CONDENSED~~SFAS ~~CONSOLIDATED~~133, “Accounting ~~FINANCIAL~~for ~~STATEMENTS—~~Derivative Instruments and Hedging Activities,” the fair value of the hedge arrangement is recorded as an asset or liability in the accompanying condensed consolidated balance sheet at October 5, 2002. The Company has assumed no ineffectiveness in this hedge and plans to use the “matched terms” accounting method as provided by Derivative Implementation Group (~~Continued~~“DIG”) Issue No. G20, “Assessing and Measuring the Effectiveness of a Purchased Option Used in a Cash Flow Hedge”. Under this method the Company will include all adjustments to fair value in other comprehensive income (loss) caption of stockholders’ equity on the condensed consolidated balance sheet. Any amounts received or paid under this hedge will be recorded in the statement of operations as earned or incurred.

~~“Reporting~~ Recent ~~the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”.~~Accounting SFAS No. 144 retains the basic provisions from both SFAS No. 121 and APB No. 30 but includes changes to improve financial reporting and comparability among entities. The provisions of SFAS No. 144 are effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 during the first quarter of fiscal 2002 with no material impact on its financial position or the results of its operations. Pronouncements

In ~~April~~June ~~2002~~2001, the ~~FASB~~Financial ~~issued~~Accounting ~~SFAS~~Standards ~~No. 145~~Board, ~~“Rescission~~or of FASB ~~Statements No. 4~~, 44issued ~~and~~Statement ~~64, Amendment~~ of ~~FASB~~Financial ~~Statement~~Accounting ~~No.~~Standards, ~~13 and Technical Corrections”. As a~~or ~~result~~SFAS, ~~of rescinding FASB Statement~~ No. 4143, “~~Reporting~~Accounting ~~Gains~~for ~~Losses~~Asset ~~from~~Retirement ~~Extinguishment of Debt~~Obligations”,. SFAS ~~gains~~No. ~~and~~143 ~~losses~~establishes ~~from~~accounting ~~extinguishment~~standards offor ~~debt~~recognition ~~should~~and bemeasurement ~~classified~~of asan ~~extraordinary~~asset ~~items~~retirement ~~only~~obligation ifand ~~they~~an ~~meet~~associated ~~the~~asset ~~criteria~~retirement ~~in APB No~~cost. ~~30.~~ This statement ~~also~~applies ~~amends~~to ~~FASB~~all ~~Statement~~entities ~~No.~~that ~~13,~~have ~~“Accounting~~legal ~~for~~obligations ~~Leases”,~~associated towith ~~eliminate an inconsistency between~~ the ~~required~~retirement ~~accounting~~of ~~for sale~~long-~~leaseback~~lived ~~transactions~~assets ~~and the required accounting for certain lease modifications~~ that ~~have economic~~result ~~effects~~from ~~that~~the ~~are~~acquisition, ~~similar to sale-leaseback transactions. Additional amendments include changes to other existing authoritative pronouncements to make various technical corrections~~construction, ~~clarify~~development ~~meanings~~ or ~~describe~~normal ~~their~~use ~~applicability~~of ~~under changed conditions. The Company will adopt~~ the ~~provisions~~assets ofand ~~SFAS~~is ~~No.~~effective ~~145~~for ~~during the first quarter of~~ fiscal ~~2003.~~years ~~For~~beginning after ~~the twelve and twenty-eight week periods ended~~ June 1315, 2002,. The ~~the~~ Company ~~recorded~~does ~~extraordinary~~not ~~losses~~expect onSFAS ~~the extinguishment of debt, net of tax, of $6,468 and $7,243, respectively~~No. ~~Accordingly,~~143 ~~reclassifications of these losses~~ to ~~income~~have ~~from~~a ~~continuing~~material ~~operations~~impact ~~will~~on beits ~~made~~financial ~~throughout~~position ~~fiscal~~or ~~2003~~the toresults ~~maintain~~of ~~comparability~~its ~~for the reported periods~~operations.

In ~~June~~August ~~2002~~2001, the FASB also issued SFAS No. ~~146~~144, “Accounting for ~~Cost~~the ~~Associated~~Impairment ~~with~~and ~~Exit~~Disposal orof ~~Disposal~~Long-Lived ~~Activities”~~Assets. ” This statement ~~nullifies~~replaces ~~Emerging~~both SFAS ~~Issues Task Force Issue~~ No. ~~94-3~~121, “~~Liability~~Accounting ~~Recognition~~ for ~~Certain~~the ~~Employee~~Impairment ~~Termination~~of ~~Benefits~~Long-lived Assets and ~~Other~~for ~~Costs~~Long-lived Assets to ~~Exit~~be anDisposed ~~Activity~~Of” ~~(including~~and ~~Certain~~Accounting ~~Costs~~Principles ~~Incurred~~Board in(APB) aOpinion ~~Restructuring)”~~No. ~~This~~30, ~~statement~~“Reporting the Results of Operations – Reporting the Effects of ~~requires~~Disposal ~~that~~of a ~~liability~~Segment ~~for~~of ~~costs~~a ~~associated~~Business, ~~with~~and anExtraordinary, ~~exit~~Unusual orand ~~disposal~~Infrequently ~~activity~~Occurring beEvents ~~recognized~~and ~~when~~Transactions.” SFAS No. 144 retains the ~~liability~~basic isprovisions ~~incurred~~from ~~instead~~both ofSFAS atNo. ~~the~~121 ~~date~~and anAPB ~~entity~~No. ~~commits~~30, but includes changes to animprove financial ~~exit~~reporting ~~plan.~~and comparability among entities. The ~~statement~~provisions isof ~~effective~~SFAS ~~for~~No. ~~exit~~144 ~~and~~are ~~disposal~~effective ~~activities entered~~for ~~into~~fiscal years beginning after December 3115, ~~2002~~2001. The Company ~~does~~adopted ~~not~~SFAS ~~expect~~No. ~~adopting~~144 ~~this~~during ~~statement~~the ~~will~~first ~~have~~quarter aof fiscal 2002 with no material impact on its financial position or the results of its operations.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” As a result of rescinding FASB Statement No. 4, “Reporting Gains Losses from Extinguishment of Debt,” gains and losses from extinguishment of debt should be classified as extraordinary items only if they meet the criteria in APB No. 30. This statement also amends FASB Statement No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Additional amendments include changes to other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions. The Company will adopt the provisions of SFAS No. 145 during the first quarter of fiscal 2003. For the twelve and forty week periods ended October 5, 2002, the Company recorded extraordinary losses on the extinguishment of debt, net of tax, of $295 and $7,538, respectively. Accordingly, reclassifications of these losses to income from continuing operations will be made throughout fiscal 2003 to maintain comparability for the reported periods.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Cost Associated with Exit or Disposal Activities.” This statement nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” This statement requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred instead of at the date an entity commits to an exit plan. The statement is effective for exit and disposal activities entered into after December 31, 2002. The Company does not expect

Advance Stores Company, Incorporated and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
For the Twelve and Forty Week Periods Ended October 5, 2002 and October 6, 2001
(in thousands, except per store data)

adopting this statement will have a material impact on its financial position or the results of its operations.

Reclassifications

Certain 2001 amounts have been reclassified to conform with their 2002 presentation.

2. Discount Acquisition:

On November 28, 2001, Advance acquired 100% of the outstanding common stock of Discount Auto Parts, Inc., or Discount. Discount’s shareholders received $7.50 per share in cash plus 0.2577 shares of Advance’s common stock for each share of Discount common stock. Advance issued 4,310 shares of common stock to the former Discount shareholders, which represented 13.2% of Advance’s total shares outstanding immediately following the acquisition.

In accordance with SFAS No. 141, the acquisition has been accounted for under the purchase method of accounting and was effective for accounting purposes on December 2, 2001. The purchase price has been allocated to the assets acquired and liabilities assumed based upon their respective fair values. The initial purchase price allocation resulted in excess fair value over the purchase price of $75,724, and was allocated proportionately as a reduction to certain noncurrent assets, primarily property and equipment. During the ~~first~~forty ~~and~~weeks ~~second~~ended ~~quarters~~October of5, 2002, the Company reduced the excess fair value by $1618,~~614~~709 due to purchase accounting adjustments made to primarily to adjust the fair market value of certain inventory and property and equipment and the related deferred income tax effects.

Total acquisition costs related to the transaction were approximately $9,~~350~~451. During the ~~first~~forty ~~and~~weeks ~~second~~ended ~~quarters~~October of5, ~~fiscal~~ 2002, the Company also incurred $1726,~~743~~442 of merger and integration expenses. These expenses represent non-recurring costs associated with integrating the Discount operations.

6 The following unaudited pro forma information presents the results of operations of the Company as if the acquisition had taken place December 31, 2000:

	Twelve Weeks Ended October 6, 2001		Forty Weeks Ended October 6, 2001

Net sales	$	757,400	$	2,475,541
Income before extraordinary item		17,080		49,243

~~ADVANCE~~ The ~~STORES~~pro ~~COMPANY~~forma amounts give effect to certain adjustments, ~~INCORPORATED~~including ~~AND~~changes ~~SUBSIDIARIES~~in interest expense, depreciation and amortization and related income tax effects. These amounts are based on certain assumptions and estimates and do not reflect any benefit from efficiencies that might be achieved from combined operations. The pro forma results of operations have been prepared for comparative purposes only.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

represent non-recurring costs associated with integrating the Discount operations.

The following unaudited pro forma information presents the results of operations of the Company as if the acquisition had taken place at December 31, 2000:

	Twelve Weeks Ended July 14, 2001		Twenty-Eight Weeks Ended July 14, 2001
Net sales	$	765,970	$	1,718,141
Income before extraordinary item		21,720		32,163

The proforma amounts give effect to certain adjustments, including changes in interest expense, depreciation and amortization and related income tax effects. These amounts are based on certain assumptions and estimates and do not reflect any benefit from efficiencies, which might be achieved from combined operations. The proforma results of operations have been prepared for comparative purposes only.

3. Restructuring and Closed Store Liabilities:

The Company’s restructuring activities relate to the ongoing analysis of the profitability of store locations and the settlement of restructuring activities undertaken as a result of mergers and acquisitions, including the fiscal 1998 merger with Western Auto Supply Company, or Western and the fiscal 2001 acquisitions of Carport Auto Parts, Inc., or Carport and Discount. The Company recognizes a provision for future obligations at the time a decision is made to close a facility, primarily store locations. The provision for closed facilities includes the present value of the remaining lease obligations, reduced by the present value of estimated revenues from subleases, and management’s estimate of future costs of insurance, property tax and common area maintenance. The Company uses discount rates ranging from 6.5 % to 7.7 %. Expenses associated with the ongoing restructuring program are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. From time to time these estimates require revisions that affect the amount of the recorded liability. The effect of these changes in estimates is netted with new provisions and included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Closed Store

During the first and second quarters of fiscal 2002, the Company closed or relocated seven of the 12 stores included in the fiscal 2001 restructuring activities and made the decision to close or relocate 34 additional stores not meeting profitability objectives, of which 19 have been closed or relocated as of July 13, 2002. In addition to its ongoing restructuring activities, the Company has closed substantially all of the Advance Auto Parts stores that were identified in overlapping markets with certain Discount Auto Parts stores at December 29, 2001.

~~NOTES~~1998 TOmerger ~~THE~~with ~~CONDENSED~~Western ~~CONSOLIDATED~~Auto ~~FINANCIAL~~Supply ~~STATEMENTS—(Continued)~~Company, or Western, and the fiscal 2001 acquisitions of Carport Auto Parts, Inc., or Carport, and Discount. The Company recognizes a provision for future obligations at the time a decision is made to close a facility, primarily store locations. The provision for closed facilities includes the present value of the remaining lease obligations, reduced by the present value of estimated revenues from subleases, and management’s estimate of future costs of insurance, property tax and common area maintenance. The Company uses discount rates ranging from 6.5% to 7.7%. Expenses associated with the ongoing restructuring program are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. From time to time these estimates require revisions that affect the amount of the recorded liability. The effect of these changes in estimates is netted with new provisions and included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

In Closed ~~connection~~Store with the Western merger and the Discount acquisition, the Company assumed the restructuring reserves related to the acquired operations. As of July 13, 2002, these restructuring reserves relate primarily to ongoing lease obligations for closed store locations. Liabilities

During the forty weeks ended October 5, 2002, the Company closed or relocated nine of the 12 stores identified in 2001 as not meeting profitability objectives and decided to close or relocate 49 additional stores that did not meet profitability objectives, 28 of which closed or relocated at October 5, 2002. As part of the integration of Discount, the Company has closed substantially all of the Advance Auto Parts stores that were identified in overlapping markets with certain Discount Auto Parts stores at December 29,2001.

In connection with the Western merger and the Discount acquisition, the Company assumed the restructuring reserves related to the acquired operations. As of October 5, 2002, these restructuring reserves relate primarily to ongoing lease obligations for closed store locations.

A reconciliation of activity with respect to these restructuring accruals is as follows:

	Other Exit Costs
	Other ExitCosts
Balance, December 29, 2001	$	9,643
New provisions		23,~~078~~212
Change in estimates		~~127~~386
Reserves utilized		(34,~~213~~479	)
Balance, July 13, 2002 (unaudited)	$	8,635
Balance, October 5, 2002 (unaudited)	$	8,762

As of ~~July~~October 135, 2002, this liability represents the current value required for certain facility exit costs, which will be settled over the remaining terms of the underlying lease agreements. This liability, along with those associated with mergers and acquisitions, is recorded in accrued expenses (current portion) and other long-term liabilities (long-term portion) in the accompanying condensed consolidated balance sheets.

Restructuring Associated with Mergers and Acquisitions

As a result of the Western merger, the Company established restructuring reserves in connection with the decision to close certain retail stores, to relocate certain Western administrative functions, to exit certain facility leases and to terminate certain team members of Western. Additionally, the Carport acquisition resulted in restructuring reserves for closing 21certain acquired stores not expected to meet long-term profitability objectives and the termination of certain administrative team members. At ~~July~~October 135, 2002, the remaining liabilities associated with these activities primarily relate to the settlement of facility exit costs.

As of the date of the Discount acquisition, management formalized a plan to close certain Discount Auto Parts stores in overlapping markets or stores not meeting the Company’s profitability objectives, to relocate certain Discount administrative functions to the Company’s headquarters and to terminate certain management, administrative and support team members of Discount. As of July 13, 2002, 105 stores have been closed, 103 of which were closed during the first and second quarters of fiscal 2002. The Company expects to finalize its plan for termination of team members and closure of Discount Auto Parts stores within one year from the date of the Discount acquisition and to complete the terminations and closures by the end of fiscal 2002. Additionally, changes to the established liabilities for severance, relocation, store and other facility exit costs, primarily including lease settlements, may result in an adjustment to the purchase price.

A reconciliation of activity with respect to these restructuring accruals is as follows:

	Severance			Relocation			Other Exit Costs			Total
Balance, December 29, 2001	$	8,455		$	611		$	4,903		$	13,969
Purchase accounting adjustments		—			—			(1,106	)		(1,106	)
Reserves utilized		(2,873	)		(174	)		(904	)		(3,951	)
Balance, July 13, 2002 (unaudited)	$	5,582		$	437		$	2,893		$	8,912

~~NOTES~~Parts TOstores ~~THE~~in ~~CONDENSED~~overlapping ~~CONSOLIDATED~~markets ~~FINANCIAL~~or ~~STATEMENTS—(Continued)~~stores not meeting the Company’s profitability objectives, to relocate certain Discount administrative functions to the Company’s headquarters and to terminate certain management, administrative and support team members of Discount. During the forty weeks ended October 5, 2002, the Company reduced its purchase price liabilities for severance and relocation costs by $2,715, primarily for voluntary terminations and certain Discount team members that accepted positions with the Company. Additionally, the Company reduced its liabilities for store and other exit costs, previously recorded in purchase accounting, by $1,042 as a result of executing lease buyouts or subleases. At October 5, 2002, 107 Discount stores were closed, 105 of which were closed during the first, second and third quarters of fiscal 2002. The Company has substantially completed the closure of Discount Auto Parts stores in overlapping markets. Additionally, the Company has finalized its plan for termination of Discount team members and expects to terminate the last team members in 2003. Additionally, changes in the established liabilities for severance, relocation, store and other facility exit costs, primarily including lease settlements, may result in an adjustment to the purchase price.

~~Severance~~ A ~~and~~reconciliation ~~relocation liabilities will be settled through the end~~ of ~~fiscal~~activity ~~2002.~~with ~~Other~~respect ~~exit~~to ~~cost~~these ~~liabilities~~restructuring ~~will~~accruals ~~primarily~~is beas ~~settled over the remaining terms of the underlying lease agreements.~~ follows:

4. Receivables:

	Severance			Relocation			Other Exit Costs			Total

Balance, December 29, 2001	$	8,455		$	611		$	4,903		$	13,969
Purchase accounting adjustments		(2,496	)		(219	)		(1,042	)		(3,757	)
Reserves utilized		(3,422	)		(281	)		(1,187	)		(4,890	)

Balance, October 5, 2002 (unaudited)	$	2,537		$	111		$	2,674		$	5,322

~~Receivables~~ Severance ~~consist~~and relocation liabilities will be settled in fiscal 2003. Other exit cost liabilities will primarily be settled over the remaining terms of the ~~following:~~underlying lease agreements.

	July 13, 2002			December 29, 2001
		(unaudited)
Trade:
Wholesale	$	11,424		$	8,965
Retail		22,389			19,857
Vendor		75,824			55,179
Installment		16,282			15,430
Related parties		896			812
Employees		581			510
Other		1,623			2,668
Total receivables		129,019			103,421
Less—Allowance for doubtful accounts		(10,972	)		(9,890	)
Receivables, net	$	118,047		$	93,531

4. Trak Auto Acquisition:

5 On July 23, 2002, the Company announced that it had received bankruptcy court approval to acquire certain assets of Trak Auto Corporation, or Trak, including the leases on 55 stores in Virginia, Washington, D. ~~Inventories~~C. and Maryland. The closing of the acquisition occurred July 26, ~~net:~~2002, although the legal transfer and conversion of these stores will take place over time through the end of November 2002. On September 20, 2002, the Company agreed to acquire two additional Trak stores. Under this agreement, the Company will pay up to $16,000 to purchase inventory and fixtures for all the acquired stores. The acquisition will be accounted for under the purchase method of accounting and, accordingly, each store’s results of operations will be included in the Company’s financial records from the date transferred to the Company. As of October 5, 2002, the Company had taken ownership and converted 22 of the 57 stores for $2,764 and assumed the respective lease obligations.

Inventories are stated at the lower of cost or market. Inventory quantities are tracked through a perpetual inventory system. The Company uses a cycle counting program to ensure the accuracy of the perpetual inventory quantities and establishes reserves for estimated shrink based on historical accuracy of the cycle counting program. Cost is determined using the last-in, first-out, or LIFO, method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected fiscal year-end inventory levels and costs. The Company capitalizes certain purchasing and warehousing costs into inventory. Purchasing and warehousing costs included in inventory at July 13, 2002 and December 29, 2001 were $67,037 and $69,398, respectively. The nature of the Company’s inventory is such that the risk of obsolescence is minimal. In addition, the Company has historically been able to return excess items to the vendor for credit. The Company provides reserves where less than full credit will be received for such returns and where the Company anticipates that items will be sold at retail for prices that are less than recorded cost. Inventories consist of the following:

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~ 5. Receivables:

	July 13, 2002		December 29, 2001
		(unaudited)
Inventories at FIFO	$	1,018,887	$	935,181
Adjustments to state inventories at LIFO		55,766		46,819
Inventories at LIFO	$	1,074,653	$	982,000

Receivables consist of the following:

6. Assets Held for Sale:

		October 5, 2002			December 29, 2001

		*(unaudited)*
Trade:
	Wholesale	$	9,015		$	8,965
	Retail		21,688			19,857
Vendor			93,981			55,179
Installment			16,031			15,430
Related parties			931			812
Employees			552			510
Other			847			2,668

Total receivables			143,045			103,421
Less - Allowance for doubtful accounts			(11,153	)		(9,890	)

Receivables, net		$	131,892		$	93,531

~~The Company applies SFAS No~~6. ~~144~~ Inventories, “Accounting for the Impairment and Disposal of Long-Lived Assets,” which requires that long-lived assets and certain identifiable intangible assets to be disposed of be reported at the lower of the carrying amount or the fair market value less selling costs. At July 13, 2002 and December 29, 2001, the Company’s assets held for sale were $46,200 and $60,512, respectively, primarily consisting of real property acquired in the Western merger and Discount acquisition. net:

7 Inventories are stated at the lower of cost or market. ~~Debt:~~ Inventory quantities are tracked through a perpetual inventory system. The Company uses a cycle counting program to ensure the accuracy of the perpetual inventory quantities and establishes reserves for estimated shrink based on historical accuracy of the cycle counting program. Cost is determined using the last-in, first-out, or LIFO, method. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected fiscal year-end inventory levels and costs. The Company capitalizes certain purchasing and warehousing costs into inventory. Purchasing and warehousing costs included in inventory at October 5, 2002 and December 29, 2001 were $67,192 and $69,398, respectively. The nature of the Company’s inventory is such that the risk of obsolescence is minimal. In addition, the Company has historically been able to return excess items to the vendor for credit. The Company provides reserves where less than full credit will be received for such returns and where the Company anticipates that items will be sold at retail for prices that are less than recorded cost. Inventories consist of the following:

Long-term debt consists of the following:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	October 5, 2002		December 29, 2001

	*(unaudited)*
Inventories at FIFO	$	1,021,405	$	935,181
Adjustments to state inventories at LIFO		56,983		46,819

Inventories at LIFO	$	1,078,388	$	982,000

	July 13, 2002			December 29, 2001
Senior Debt:
Tranche A, Senior Secured Term Loan at variable interest rates (5.38% at July 13, 2002), due November 2006	$	90,014		$	180,000
Tranche B, Senior Secured Term Loan at variable interest rates (7.00% at December 29, 2001), repaid		—			305,000
Tranche C, Senior Secured Term Loan at variable interest rates (4.38% at July 13, 2002), due November 2007		250,000			—
Revolving facility at variable interest rates (5.38% at July 13, 2002), due November 2006		—			10,000
McDuffie County Authority taxable industrial development revenue bonds, issued December 31,1997, interest due monthly at an adjustable rate established by the Remarketing Agent (2.00% at July 13, 2002), principal due on November 1, 2002		10,000			10,000
Subordinated Debt:
Subordinated notes payable, interest due semi-annually at 10.25%, due April 2008		167,450			169,450
Subordinated notes payable, interest due semi-annually at 10.25%, due April 2008, face amount of $200,000 less unamortized discount of $12,022 and $14,087 at July 13, 2002 and December 29, 2001, respectively		169,348			185,913
		686,812			860,363
Less: Current portion of long-term debt		(11,549	)		(23,715	)
Long-term debt, excluding current portion	$	675,263		$	836,648

Replacement cost approximated FIFO cost at October 5, 2002 and December 29, 2001.

~~During the second quarter of fiscal 2002, the Company repaid a portion of its Tranche A and B term loans and refinanced the remaining Tranche B term loan under the existing credit facility~~7. Assets ~~The~~Held Company also repurchased and retired a portion of the subordinated notes at prices approximating 107 percent on the total face value purchased of $20,630. In conjunction with the extinguishments of this debt, the Company wrote-off deferred financing costs in accordance with Emerging Issues Task Force Issue No. 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments”. The write-off of these costs and the premiums paid are classified as an extraordinary loss of $6,468, net of $4,101 income taxes, in the accompanying condensed consolidated statements of operations. Sale:

~~Through~~ The ~~the~~Company ~~refinancing~~applies ~~the~~SFAS ~~Company~~No. ~~also~~144, ~~amended~~“Accounting ~~its~~for ~~bank~~the ~~credit~~Impairment ~~facility,~~and orDisposal ~~the~~of ~~Credit~~Long-Lived ~~Facility~~Assets, ~~and~~” ~~closed~~which onrequires athat ~~new~~long-lived ~~$250~~assets ~~million~~and ~~Tranche~~certain identifiable Cintangible ~~term~~assets ~~loan.~~to ~~The~~be ~~proceeds~~disposed ~~from~~of be reported at the ~~Tranche~~lower Cof ~~were~~the ~~used~~carrying toamount ~~refinance~~or the ~~Tranche~~fair Bmarket ~~term~~value ~~loan~~less selling costs. At ~~The~~October ~~Tranche~~5, B2002 ~~term~~and ~~loan~~December ~~was~~29, ~~initially~~2001, ~~issued~~the ~~for~~Company’s ~~$305~~assets ~~million~~held infor ~~fiscal~~sale ~~2001~~were $38,569 and $60,512, ~~had~~respectively, aprimarily ~~balance~~consisting of ~~$265~~real ~~million prior~~property toacquired in the ~~refinancing.~~Western merger and Discount acquisition.

~~Under the amended credit facility, the Tranche C term loan requires scheduled repayments of $2~~8.~~1 million semi~~ Long-~~annually beginning November 30, 2003 through maturity on November 30, 2007. The amended Tranche A~~ term ~~loan amortization schedule reflects required repayments of $1.5 million on May 31, 2003, $7.8 million on November~~ ~~30, 2003, $12.4 million in May and November 2004 and $14.0 million each May and November during 2005 and 2006 through maturity on November 30, 2006.~~ Debt:

~~Interest on the Tranche C~~ Long-term ~~loan~~debt isconsists ~~based,~~of at the Company's option, on either an adjusted LIBOR rate plus 2.5% per annum, or an alternative base rate plus 1.5% per annum. These initial margins can step down to 2.25% and 1.25% per annum, respectively, if the Company’s leverage ratio is less than 2.00 to 1.00. The amended credit facility carried forward the prepayment provisions, covenant requirements and guarantees from the previous credit agreement entered into in following:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

					October 5, 2002			December 29, 2001

					*(unaudited)*
Senior Debt:
				Tranche A, Senior Secured Term Loan at variable interest rates (4.56% at October 5, 2002), due November 2006	$	89,611		$	180,000
				Tranche B, Senior Secured Term Loan at variable interest rates (7.00% at December 29, 2001), repaid June 2002		—			305,000
			Tranche C, Senior Secured Term Loan at variable interest rates (4.38% at October 5, 2002), due November 2007			249,873			—
			Revolving facility at variable interest rates (4.56% at October 5, 2002), due November 2006			—			10,000
		McDuffie County Authority taxable industrial development revenue bonds, issued December 31,1997, interest due monthly at an adjustable rate established by the Remarketing Agent (1.92% at October 5, 2002),principal due on November 1, 2002 (repaid subsequent to October 5, 2002)				10,000			10,000
Subordinated Debt:
		Senior subordinated notes payable, interest due semi-annually at 10.25%, due April 2008				166,200			169,450
	Senior subordinated notes payable, interest due semiannually at 10.25%, due April 2008, face amount of $179,115 less unamortized discount of $11,531 and $14,087 at October 5, 2002 and December 29, 2001, respectively					167,584			185,913

						683,268			860,363
Less: Current portion of long-term debt						(11,542	)		(23,715	)

Long-term debt, excluding current portion					$	671,726		$	836,648

During the second quarter of fiscal 2002, the Company repaid a portion of its Tranche A and Tranche B term loans and ~~November~~refinanced the remaining portion of its Tranche B term loan under its credit facility by amending and restating the credit facility to add a new $250,000 Tranche C term loan facility. The Tranche B term loan was initially issued for $305,000 in fiscal 2001 and had a balance of $265,000 prior to the refinancing. The Company also repurchased and retired a portion of its senior subordinated notes at prices approximating 107 percent on the total face value purchased of $20,630. Additionally, during the third quarter, the Company repaid a portion of its Tranche A and Tranche C term loans and repurchased and retired a portion of its senior subordinated notes. In conjunction with the extinguishment of this debt, the Company wrote-off deferred financing costs in accordance with Emerging Issues Task Force Issue No. 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt Instruments”. The write-off of these costs and the premiums paid are classified as an extraordinary loss of $7,538, net of $4,779 income taxes, in the accompanying condensed consolidated statements of operations.

8 The amended Tranche A term loan facility amortization schedule currently reflects required repayments of $1,549 on May 31, 2003, $7,804 on November 30, 2003, $12,418 million in May and November 2004 and $13,956 each May and November in 2005 and 2006 through maturity on November 30, 2006. ~~Other~~ ~~Related~~The Tranche C term loan facility requires scheduled repayments of $2,083 semi-~~party~~annually ~~Transactions:~~beginning November 30, 2003 through May 31, 2007, at which time the Company will be required to pay the remaining balance at maturity on November 30, 2007.

In September 2001, the Company loaned a member of the Board of Directors $1,300. This loan was evidenced by a full recourse promissory note secured by a stock pledge agreement that granted the Company a security interest in all of Advance’s shares owned by the board member. In June 2002, the board member repaid the loan in full.

The following table presents the related party transactions with Sears, Roebuck and Co., or Sears, included in the condensed consolidated statements of operations for the twelve and twenty-eight week periods ended July 13, 2002 and July 14, 2001 and the condensed consolidated balance sheets as of July 13, 2002 and December 29, 2001:

	Twelve Week Periods Ended					Twenty-Eight Week Periods Ended
		July 13, 2002		July 14, 2001			July 13, 2002		July 14, 2001
		(unaudited)					(unaudited)
Net sales to Sears		$	1,676	$	1,856		$	3,693	$	3,879
Credit card fees expense			61		93			138		194
							July 13, 2002		December 29, 2001
							(unaudited)
Receivables from Sears							$	896	$	812
Payables to Sears								1,322		1,220

9. Segment and Related Information:

The Company has the following operating segments: Retail and Wholesale. Retail consists of the retail operations of the Company, operating under the trade names “Advance Auto Parts”, “Discount Auto Parts” and “Western Auto” in the United States and “Western Auto” in Puerto Rico and the Virgin Islands. Wholesale consists of the wholesale operations, including distribution services to independent dealers and franchisees primarily operating under the “Western Auto” trade name.

~~NOTES~~ The TOinterest ~~THE~~rate ~~CONDENSED~~on ~~CONSOLIDATED~~the ~~FINANCIAL~~Tranche ~~STATEMENTS—~~C term loan facility is based, at the Company's option, on either an adjusted LIBOR rate, plus a margin, or an alternate base rate, plus a margin. The interest rate under the Tranche C term loan facility is subject to adjustment according to a pricing grid based upon the Company's leverage ratio (~~Continued~~as defined in our credit facility). The initial margins for the Tranche C term loan facility are 2.5% and 1.5% per annum for the adjusted LIBOR rate and alternative base rate borrowings, respectively, and can step down to 2.25% and 1.25% per annum, respectively, if the Company's leverage ratio is less than 2.00 to 1.00. The initial margins can step up to a maximum of 3.00% and 2.00% per annum, respectively, if the Company's leverage ratio is greater than 3.50 to 1.00. Subsequent to October 5, 2002, the Company applied for a reduction in these rates based on its leverage ratio being 1.95 to 1.00 at October 5, 2002. The amended credit facility contains the prepayment provisions, covenant requirements and guarantees from the previous credit agreement entered into November in 2001.

	Twelve Week Periods Ended
	July 13, 2002 (unaudited)
	Retail		Wholesale			Eliminations			Totals
Net sales	$	774,906	$	17,811		$	—		$	792,717
Income before provision for income taxes and extraordinary item		41,108		237			—			41,345
Segment assets (a)		2,042,480		35,058			(8,522	)		2,069,016
	July 14, 2001 (unaudited)
	Retail		Wholesale			Eliminations			Totals
Net sales	$	586,796	$	20,682		$	—		$	607,478
Income before provision for income taxes		25,723		186			—			25,909
Segment assets (a)		1,320,627		44,721			(7,935	)		1,357,413
	Twenty-Eight Week Periods Ended
	July 13, 2002 (unaudited)
	Retail		Wholesale			Eliminations			Totals
Net sales	$	1,742,222	$	54,582		$	—		$	1,796,804
Income before provision for income taxes and extraordinary item		64,960		1,199			—			66,159
Segment assets (a)		2,042,480		35,058			(8,522	)		2,069,016
	July 14, 2001 (unaudited)
	Retail		Wholesale			Eliminations			Totals
Net sales	$	1,275,582	$	61,255		$	—		$	1,336,837
Income (loss) before (provision) benefit for income taxes		37,391		(1,718	)		—			35,673
Segment assets (a)		1,320,627		44,721			(7,935	)		1,357,413

9. Related Party Transactions:

~~(a)~~ The ~~Excludes~~following ~~investment~~table inpresents the related party transactions with Sears, Roebuck and ~~equity~~Co., or Sears, included in ~~net~~the ~~earnings~~condensed orconsolidated ~~losses~~statements of ~~subsidiaries.~~operations for the twelve and forty week periods ended October 5, 2002 and October 6, 2001 and the condensed consolidated balance sheets as of October 5, 2002 and December 29, 2001:

10. Subsequent Event:

	Twelve Week Periods Ended				Forty Week Periods Ended

	October 5, 2002		October 6, 2001		October 5, 2002		October 6, 2001

	*(unaudited)*		*(unaudited)*		*(unaudited)*		*(unaudited)*
Net sales to Sears	$	1,760	$	2,050	$	5,453	$	5,929
Credit card fees expense		57		77		195		271

					October 5, 2002		December 29, 2001

					*(unaudited)*
Receivables from Sears					$	931	$	812
Payables to Sears						1,322		1,220

~~On July~~ The ~~23, 2002, the~~ Company ~~announced~~also ~~that~~enters itinto intercompany ~~had~~transactions ~~received~~with ~~bankruptcy~~Advance ~~court~~in ~~approval~~the tonormal ~~acquire~~course ~~certain assets~~ of ~~Trak~~its ~~Auto~~business. These ~~Corporation,~~transactions orare ~~Trak,~~primarily ~~including~~related ~~the~~to ~~leases~~intercompany onloans ~~approximately~~and 55current ~~stores~~and indeferred ~~Virginia,~~income ~~Washington,~~tax ~~D.C.~~assets and ~~Maryland~~liabilities. As ~~The closing~~ of ~~the~~October ~~acquisition occurred July 26~~5, 2002, ~~although the transfer~~ and ~~conversion~~December 29, of2001, ~~these stores will take place over~~ the ~~next~~Company ~~three~~had ora ~~four~~net ~~months.~~payable ~~The~~to ~~acquisition~~Advance ~~will be accounted for under the purchase method~~ of ~~accounting~~$1,987 and, ~~accordingly~~$1,102, ~~the results of operations for Trak will be included in the Company’s financial records from the date each store is transferred~~respectively.

10. Segment and Related Information:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Twelve Week Periods Ended

October 5, 2002 (unaudited)		Retail		Wholesale			Eliminations			Totals

Net sales	$	772,723	$	15,939		$	—		$	788,662
Income before provision for income taxes and extraordinary item		47,361		2,020			—			49,381
Segment assets (a)		2,072,626		27,698			(19,102	)		2,081,222

October 6, 2001 (unaudited)	Retail		Wholesale			Eliminations			Totals

Net sales	$	580,105	$	18,688		$	—		$	598,793
Income (loss) before provision for income taxes		27,913		(20	)		—			27,893
Segment assets (a)		1,338,783		40,127			(8,050	)		1,370,860

	Forty Week Periods Ended

October 5, 2002 (unaudited)	Retail		Wholesale			Eliminations			Totals

Net sales	$	2,514,945	$	70,521		$	—		$	2,585,466
Income before provision for income taxes and extraordinary item		112,321		3,219			—			115,540
Segment assets (a)		2,072,626		27,698			(19,102	)		2,081,222

October 6, 2001 (unaudited)	Retail		Wholesale			Eliminations			Totals

Net sales	$	1,855,687	$	79,943		$	—		$	1,935,630
Income (loss) before (provision) benefit for income taxes		65,304		(1,738	)		—			63,566
Segment assets (a)		1,338,783		40,127			(8,050	)		1,370,860

~~11. Guarantor~~ (a) Excludes ~~Subsidiaries:~~investment in and equity in net earnings or losses of subsidiaries.

The Company has wholly owned subsidiaries, Advance Trucking Corporation, Discount and Western, or the Guarantor Subsidiaries, that are guarantors of the Company’s subordinated notes and senior credit facility11. Subsequent The guarantees are joint and several in addition to full and unconditional. Advance Trucking Corporation is a wholly owned subsidiary that holds substantially all of the Company’s inventory delivery vehicles. The Guarantor Subsidiaries comprise all direct and indirect subsidiaries. Combined condensed financial information for the guarantor subsidiaries is as followsEvents:

	July 13, 2002 (unaudited)
	Advance Stores Company		Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company
Current assets:
Cash and cash equivalents	$	41,749	$	5,234		$	(8,028	)	$	38,955
Receivables, net		86,976		31,071			—			118,047
Inventories		925,372		149,281			—			1,074,653
Other current assets		53,815		93,684			(98,262	)		49,237
Total current assets		1,107,912		279,270			(106,290	)		1,280,892
Investment in subsidiaries		262,923		—			(262,923	)		—
Property and equipment, net		410,705		304,992			—			715,697
Assets held for sale		30,682		15,518			—			46,200
Due from affiliates		71,876		—			(71,876	)		—
Other assets, net		21,784		28,899			(24,456	)		26,227
Total assets	$	1,905,882	$	628,679		$	(465,545	)	$	2,069,016
Current liabilities:
Bank overdrafts	$	—	$	8,028		$	(8,028	)	$	—
Current portion of long-term debt		11,549		11,549			(11,549	)		11,549
Accounts payable		482,434		102,685			—			585,119
Accrued expenses		161,328		252,467			(204,630	)		209,165
Other current liabilities		38,259		1,712			(502	)		39,469
Total current liabilities		693,570		376,441			(224,709	)		845,302
Long-term debt		675,263		665,263			(665,263	)		675,263
Due to affiliates		—		42,539			(42,539	)		—
Other long-term liabilities		40,964		21,893			(11,638	)		51,219
Stockholder’s equity (deficit)
Common stock		54		10			(10	)		54
Additional paid-in capital		490,343		(344,678	)		345,825			491,490
Retained earnings (accumulated deficit)		5,688		(132,789	)		132,789			5,688
Total stockholder’s equity (deficit)		496,085		(477,457	)		478,604			497,232
Total liabilities and stockholder’s equity	$	1,905,882	$	628,679			$(465,545)		$	2,069,016

On November 1, 2002, Advance filed a registration statement on Form S-3 with the United States Securities and Exchange Commission to register the sale of 9,442,331 shares of its common stock, of which 8,596,937 shares will be offered by certain selling stockholders and 858,394 shares will be offered by Advance and one of the selling stockholders to cover over-allotments of shares, if any. Neither Advance nor the Company will receive any of the proceeds from the shares sold in the offering by the selling stockholders. The Company intends to use the net proceeds it receives form the sale of Advance’s shares in the over-allotment option, if any, to repay outstanding indebtedness.

Additionally, on November 1, 2002, the Company purchased $10,000 of indebtedness under the McDuffie County Authority industrial revenue bonds, from which the proceeds were used to construct one of our distribution centers. The Company has leased this facility since its opening in 1999. Upon repayment of this indebtedness, the Company also exercised its option to purchase the distribution center for a nominal amount. Subsequent to the end of the third quarter, the Company also repurchased and retired $8,500 in face value of the 10.25% senior subordinated notes.

~~NOTES~~12. Guarantor ~~TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~ Subsidiaries:

	December 29, 2001
	Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company
Current assets:
Cash and cash equivalents	$	11,235		$	6,882		$	—		$	18,117
Receivables, net		52,366			41,165			—			93,531
Inventories		852,002			129,998			—			982,000
Other current assets		26,367			86,551			(70,891	)		42,027
Total current assets		941,970			264,596			(70,891	)		1,135,675
Investment in subsidiaries		350,789			—			(350,789	)		—
Property and equipment, net		422,319			288,963			—			711,282
Assets held for sale		41,872			18,640			—			60,512
Due from affiliates		8,342			19,692			(28,034	)		—
Other assets, net		8,452			44,675			(23,853	)		29,274
Total assets	$	1,773,744		$	636,566		$	(473,567	)	$	1,936,743
Current liabilities:
Bank overdrafts	$	19,698		$	15,425		$	—		$	35,123
Current portion of long-term debt		23,715			23,715			(23,715	)		23,715
Accounts payable		358,691			70,350			—			429,041
Accrued expenses		118,835			217,581			(160,222	)		176,194
Other current liabilities		31,055			—			74			31,129
Total current liabilities		551,994			327,071			(183,863	)		695,202
Long-term debt		836,648			826,648			(826,648	)		836,648
Other long-term liabilities		16,482			21,675			(1,884	)		36,273
Stockholder’s equity (deficit)
Common stock		54			10			(10	)		54
Additional paid-in capital		396,503			(534,645	)		534,645			396,503
(Accumulated deficit) retained earnings		(27,937	)		(4,193	)		4,193			(27,937	)
Total stockholder’s equity (deficit)		368,620			(538,828	)		538,828			368,620
Total liabilities and stockholder’s equity	$	1,773,744		$	636,566		$	(473,567	)	$	1,936,743

The Company has wholly owned subsidiaries senior, Advance Trucking Corporation, Discount and Western, or the Guarantor Subsidiaries, that are guarantors of the Company’s senior subordinated notes and senior credit facility. The guarantees are joint and several in addition to full and unconditional. Advance Trucking Corporation is a wholly owned subsidiary that holds substantially all of the Company’s inventory delivery vehicles. The Guarantor Subsidiaries comprise all direct and indirect subsidiaries. Combined condensed financial information for the guarantor subsidiaries is as follows:

October 5, 2002 (unaudited)			Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company

Current assets:
Cash and cash equivalents			$	55,250		$	4,541		$	(3,537	)	$	56,254
Receivables, net				102,651			29,241			—			131,892
Inventories				922,973			155,415			—			1,078,388
Other current assets				21,377			104,644			(93,956	)		32,065

	Total current assets			1,102,251			293,841			(97,493	)		1,298,599
Investment in subsidiaries				282,025			—			(282,025	)		—
Property and equipment, net				412,936			305,416			—			718,352
Assets held for sale				29,435			9,134			—			38,569
Due from affiliates				117,132			—			(117,132	)		—
Other assets, net				24,026			22,249			(20,573	)		25,702

	Total assets		$	1,967,805		$	630,640		$	(517,223	)	$	2,081,222

Current liabilities:
Bank overdrafts			$	—		$	3,537		$	(3,537	)	$	—
Current portion of long-term debt				11,542			11,542			(11,542	)		11,542
Accounts payable				500,113			54,496			—			554,609
Accrued expenses				178,083			252,413			(206,826	)		223,670
Other current liabilities				36,853			—			1,080			37,933

	Total current liabilities			726,591			321,988			(220,825	)		827,754
Long-term debt				671,726			661,726			(661,726	)		671,726
Due to affiliates				—			89,973			(89,973	)		—
Other long-term liabilities				42,719			19,519			(8,431	)		53,807
Stockholder’s equity (deficit)
Common stock				54			10			(10	)		54
Additional paid-in capital				490,369			(339,682	)		340,848			491,535
Other comprehensive income (loss)				(289	)		—			—			(289	)
Retained earnings (accumulated deficit)				36,635			(122,894	)		122,894			36,635

	Total stockholder’s equity (deficit)			526,769			(462,566	)		463,732			527,935

		Total liabilities and stockholder’s equity	$	1,967,805		$	630,640		$	(517,223	)	$	2,081,222

~~ADVANCE~~Advance ~~STORES~~Stores ~~COMPANY~~Company, ~~INCORPORATED~~Incorporated ~~AND~~and ~~SUBSIDIARIES~~SubsidiariesNotes to the Condensed Consolidated Financial Statements For the Twelve and Forty Week Periods Ended October 5, 2002 and October 6, 2001(in thousands, except per store data)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

December 29, 2001			Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company

Current assets:
Cash and cash equivalents			$	11,235		$	6,882		$	—		$	18,117
Receivables, net				52,366			41,165			—			93,531
Inventories				852,002			129,998			—			982,000
Other current assets				26,367			86,551			(70,891	)		42,027

		Total current assets		941,970			264,596			(70,891	)		1,135,675
Investment in subsidiaries				350,789			—			(350,789	)		—
Property and equipment, net				422,319			288,963			—			711,282
Assets held for sale				41,872			18,640			—			60,512
Due from affiliates				8,342			19,692			(28,034	)		—
Other assets, net				8,452			44,675			(23,853	)		29,274

		Total assets	$	1,773,744		$	636,566		$	(473,567	)	$	1,936,743

Current liabilities:
Bank overdrafts			$	19,698		$	15,425		$	—		$	35,123
Current portion of long-term debt				23,715			23,715			(23,715	)		23,715
Accounts payable				358,691			70,350			—			429,041
Accrued expenses				118,835			217,581			(160,222	)		176,194
Other current liabilities				31,055			—			74			31,129

	Total current liabilities			551,994			327,071			(183,863	)		695,202
Long-term debt				836,648			826,648			(826,648	)		836,648
Other long-term liabilities				16,482			21,675			(1,884	)		36,273
Stockholder’s equity (deficit)
Common stock				54			10			(10	)		54
Additional paid-in capital				396,503			(534,645	)		534,645			396,503
(Accumulated deficit) retained earnings				(27,937	)		(4,193	)		4,193			(27,937	)

	Total stockholder’s equity (deficit)			368,620			(538,828	)		538,828			368,620

		Total liabilities and stockholder’s equity	$	1,773,744		$	636,566		$	(473,567	)	$	1,936,743

	Twelve Week Period ended July 13, 2002 (unaudited)
	Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company
Net sales	$	612,531		$	183,632		$	(3,446	)	$	792,717
Cost of sales, including purchasing and warehousing costs		336,446			107,257			—			443,703
Gross profit		276,085			76,375			(3,446	)		349,014
Selling, general and administrative expenses		206,083			81,465			(3,446	)		284,102
Expenses associated with merger and integration		7,520			—			—			7,520
Expenses associated with merger related restructuring		109			—			—			109
Operating income (loss)		62,373			(5,090	)		—			57,283
Other, net:
Interest expense		(15,092	)		(16,333	)		15,134			(16,291	)
Equity in earnings of subsidiaries		19,075			—			(19,075	)		—
Other (expense) income, net		(35,836	)		36,189			—			353
Total other, net		(31,853	)		19,856			(3,941	)		(15,938	)
Income before provision for income taxes and extraordinary item		30,520			14,766			(3,941	)		41,345
Provision for income taxes		5,023			5,074			5,751			15,848
Income before extraordinary item		25,497			9,692			(9,692	)		25,497
Extraordinary item, loss on debt extinguishment, net of $4,101 income taxes		(6,468	)		(6,468	)		6,468			(6,468	)
Net income	$	19,029		$	3,224		$	(3,224	)	$	19,029
	Twelve Week Period ended July 14, 2001 (unaudited)
	Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company
Net sales	$	542,779		$	67,386		$	(2,687	)	$	607,478
Cost of sales, including purchasing and warehousing costs		304,164			46,086			—			350,250
Gross profit		238,615			21,300			(2,687	)		257,228
Selling, general and administrative expenses		212,452			11,084			(2,687	)		220,849
Operating income		26,163			10,216			—			36,379
Other, net:
Interest expense		(11,062	)		(10,895	)		11,132			(10,825	)
Equity in earnings of subsidiaries		6,950			—			(6,950	)		—
Other income, net		281			1,710			(1,636	)		355
Total other, net		(3,831	)		(9,185	)		2,546			(10,470	)
Income before provision (benefit) for income taxes		22,332			1,031			2,546			25,909
Provision (benefit) for income taxes		6,502			(127	)		3,704			10,079
Net income	$	15,830		$	1,158		$	(1,158	)	$	15,830

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Twelve Week Period ended October 5, 2002 (unaudited)			Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company

Net sales			$	607,532		$	184,541		$	(3,411	)	$	788,662
Cost of sales, including purchasing and warehousing costs				331,303			107,697			—			439,000

		Gross profit		276,229			76,844			(3,411	)		349,662
Selling, general and administrative expenses				202,798			79,447			(3,411	)		278,834
Expenses associated with merger and integration				8,174			—			—			8,174
Expenses associated with merger related restructuring				74			—			—			74

		Operating income (loss)		65,183			(2,603	)		—			62,580
Other, net:
	Interest expense			(12,731	)		(13,511	)		12,766			(13,476	)
	Equity in earnings of subsidiaries			18,104			—			(18,104	)		—
	Other (expense) income, net			(35,613	)		35,890			—			277

		Total other, net		(30,240	)		22,379			(5,338	)		(13,199	)
Income before provision for income taxes and extraordinary item				34,943			19,776			(5,338	)		49,381
Provision for income taxes				3,701			9,588			4,850			18,139

Income before extraordinary item				31,242			10,188			(10,188	)		31,242
Extraordinary item, loss on debt extinguishment, net of $187 income taxes				(295	)		(295	)		295			(295	)

Net income			$	30,947		$	9,893		$	(9,893	)	$	30,947


Twelve Week Period ended October 6, 2001 (unaudited)			Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company

Net sales			$	535,519		$	65,882		$	(2,608	)	$	598,793
Cost of sales, including purchasing and warehousing costs				296,385			45,674			—			342,059

		Gross profit		239,134			20,208			(2,608	)		256,734
Selling, general and administrative expenses				211,118			11,093			(2,608	)		219,603

		Operating income		28,016			9,115			—			37,131
Other, net:
	Interest expense			(9,945	)		(9,554	)		9,996			(9,503	)
	Equity in earnings of subsidiaries			(1,358	)		—			1,358			—
	Other income, net			195			1,648			(1,578	)		265

		Total other, net		(11,108	)		(7,906	)		9,776			(9,238	)
Income before (benefit) provision for income taxes				16,908			1,209			9,776			27,893
(Benefit) provision for income taxes				(27	)		7,702			3,283			10,958

Net income (loss)			$	16,935		$	(6,493	)	$	6,493		$	16,935

	Twenty-Eight Week Period ended July 13, 2002 (unaudited)
	Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company
Net sales	$	1,357,651		$	446,815		$	(7,662	)	$	1,796,804
Cost of sales, including purchasing and warehousing costs		745,679			265,603			—			1,011,282
Gross profit		611,972			181,212			(7,662	)		785,522
Selling, general and administrative expenses		478,762			190,543			(7,662	)		661,643
Expenses associated with merger and integration		17,743			—			—			17,743
Expenses associated with merger related restructuring		451			—			—			451
Operating income (loss)		115,016			(9,331	)		—			105,685
Other, net:
Interest expense		(36,985	)		(40,196	)		37,065			(40,116	)
Equity in earnings of subsidiaries		42,899			—			(42,899	)		—
Other (expense) income, net		(79,623	)		80,213			—			590
Total other, net		(73,709	)		40,017			(5,834	)		(39,526	)
Income before provision for income taxes and extraordinary item		41,307			30,686			(5,834	)		66,159
Provision for income taxes		439			10,767			14,085			25,291
Income before extraordinary item		40,868			19,919			(19,919	)		40,868
Extraordinary item, loss on debt extinguishment, net of $4,592 income taxes		(7,243	)		(7,243	)		7,243			(7,243	)
Net income	$	33,625		$	12,676		$	(12,676	)	$	33,625
	Twenty-Eight Week Period ended July 14, 2001 (unaudited)
	Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company
Net sales	$	1,173,430		$	169,837		$	(6,430	)	$	1,336,837
Cost of sales, including purchasing and warehousing costs		647,634			120,525			—			768,159
Gross profit		525,796			49,312			(6,430	)		568,678
Selling, general and administrative expenses		482,403			30,435			(6,430	)		506,408
Operating income		43,393			18,877			—			62,270
Other, net:
Interest expense		(27,174	)		(27,258	)		27,368			(27,064	)
Equity in earnings of subsidiaries		11,288			—			(11,288	)		—
Other income, net		295			4,215			(4,043	)		467
Total other, net		(15,591	)		(23,043	)		12,037			(26,597	)
Income (loss) before provision (benefit) for income taxes		27,802			(4,166	)		12,037			35,673
Provision (benefit) for income taxes		5,895			(1,226	)		9,097			13,766
Net income (loss)	$	21,907		$	(2,940	)	$	2,940		$	21,907

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Forty Week Period ended October 5, 2002 (unaudited)			Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company

Net sales			$	1,965,183		$	631,356		$	(11,073	)	$	2,585,466
Cost of sales, including purchasing and warehousing costs				1,076,982			373,300			—			1,450,282

		Gross profit		888,201			258,056			(11,073	)		1,135,184
Selling, general and administrative expenses				681,560			269,990			(11,073	)		940,477
Expenses associated with merger and integration				25,917			—			—			25,917
Expenses associated with merger related restructuring				525			—			—			525

		Operating income (loss)		180,199			(11,934	)		—			168,265
Other, net:
	Interest expense			(49,716	)		(53,707	)		49,831			(53,592	)
	Equity in earnings of subsidiaries			61,003			—			(61,003	)		—
	Other (expense) income, net			(115,236	)		116,103			—			867

		Total other, net		(103,949	)		62,396			(11,172	)		(52,725	)
Income before provision for income taxes and extraordinary item				76,250			50,462			(11,172	)		115,540
Provision for income taxes				4,140			20,355			18,935			43,430

Income before extraordinary item				72,110			30,107			(30,107	)		72,110
Extraordinary item, loss on debt extinguishment, net of $4,779 income taxes				(7,538	)		(7,538	)		7,538			(7,538	)

Net income			$	64,572		$	22,569		$	(22,569	)	$	64,572

		Twenty-Eight Week Period ended July 13, 2002(unaudited)
Forty Week Period ended October 6, 2001 (unaudited)				Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company
		Advance Stores Company				Guarantor Subsidiaries (a)				Eliminations				Consolidatd Advance Stores Company
Net sales				$	1,708,949		$	235,719		$	(9,038	)	$	1,935,630
Net cash provided by (used in) operating activities		$	167,739			$	(75,187	)		$	87,745			$	180,297
Cost of sales, including purchasing and warehousing costs					944,019			166,199			—			1,110,218
Cash flows from investing activities:
		Gross profit			764,930			69,520			(9,038	)		825,412
Purchases of property and equipment			(37,977	)			(8,661	)			—				(46,638	)
Selling, general and administrative expenses					693,521			41,528			(9,038	)		726,011
Proceeds from sales of property and equipment			7,558				1,852				—				9,410
		Operating income			71,409			27,992			—			99,401
Net cash used in investing activities			(30,419	)			(6,809	)			—				(37,228	)
Other, net:
Cash flows from financing activities:
	Interest expense				(37,119	)		(36,812	)		37,364			(36,567	)
Decrease in bank overdrafts			(19,698	)			(7,397	)			(8,028	)			(35,123	)
	Equity in earnings of subsidiaries				9,930			—			(9,930	)		—
Early extinguishment of debt			(414,372	)			(414,372	)			414,372				(414,372	)
	Other income, net				490			5,863			(5,621	)		732
Borrowings under credit facilities			286,700				286,700				(286,700	)			286,700
		Total other, net			(26,699	)		(30,949	)		21,813			(35,835	)
Payments on credit facilities			(46,700	)			(46,700	)			46,700				(46,700	)
Income (loss) before provision for income taxes					44,710			(2,957	)		21,813			63,566
Payment of debt issuance costs			(6,209	)			(6,209	)			6,209				(6,209	)
Provision for income taxes					5,868			6,476			12,380			24,724
Proceeds from issuance of common stock toAdvance Auto Parts, Inc.			90,022				90,022				(90,022	)			90,022
Net income (loss)				$	38,842		$	(9,433	)	$	9,433		$	38,842
Equity impact of debt pushdown			—				178,304				(178,304	)			—
Other			3,451				—				—				3,451
Net cash (used in) provided by financing activities			(106,806	)			80,348				(95,773	)			(122,231	)
Net increase (decrease) in cash and cash equivalents			30,514				(1,648	)			(8,028	)			20,838
Cash and cash equivalents, December 29, 2001			11,235				6,882				—				18,117
Cash and cash equivalents, July 13, 2002		$	41,749			$	5,234			$	(8,028	)		$	38,955
		Twenty-Eight Week Period ended July 14, 2001 (unaudited)
		Advance Stores Company				Guarantor Subsidiaries (a)				Eliminations				Consolidatd Advance Stores Company
Net cash provided by operating activities		$	101,655			$	1,671			$	(1,560	)		$	101,766
Cash flows from investing activities:
Purchases of property and equipment			(29,217	)			(1,831	)			—				(31,048	)
Acquisition, net of cash acquired			(21,472	)			—				—				(21,472	)
Proceeds from sales of property and equipment			749				632				—				1,381
Net cash used in investing activities			(49,940	)			(1,199	)			—				(51,139	)
Cash flows from financing activities:
Decrease in bank overdrafts			(12,907	)			(871	)			—				(13,778	)
Payment of note payable			(784	)			—				—				(784	)
Borrowings under credit facilities			171,400				171,400				(171,400	)			171,400
Payments on credit facilities			(208,601	)			(208,601	)			208,601				(208,601	)
Equity impact of debt pushdown			—				37,201				(37,201	)			—
Other			2,508				—				—				2,508
Net cash used in financing activities			(48,384	)			(871	)			—				(49,255	)
Net increase (decrease) in cash and cash equivalents			3,331				(399	)			(1,560	)			1,372
Cash and cash equivalents, December 30, 2000			14,258				3,751				—				18,009
Cash and cash equivalents, July 14, 2001		$	17,589			$	3,352			$	(1,560	)		$	19,381

(a) Reflects the push down of guaranteed debt, deferred debt issuance costs and related interest and amortization.

~~Item~~Advance ~~2. Management’s~~Stores ~~Discussion~~Company, Incorporated and ~~Analysis~~Subsidiaries ofNotes to the Condensed Consolidated Financial ~~Condition~~Statements For the Twelve and ~~Results~~Forty ofWeek ~~Operations~~Periods Ended October 5, 2002 and October 6, 2001(in thousands, except per store data)

Certain statements in this Form 10-Q are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are usually identified by the use of words such as “will,” “anticipates,” “believes,” “estimates,” “expects,” “projects,” “forecasts,” “plans,” “intends,” “should” or similar expressions. The Company intends those forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are included in this Form 10-Q for purposes of complying with these safe harbor provisions.

Forty Week Period ended October 5, 2002 (unaudited)			Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company

Net cash provided by (used in) operating activities			$	204,613		$	(73,028	)	$	86,423		$	218,008

Cash flows from investing activities:
	Purchases of property and equipment			(55,280	)		(13,244	)		—			(68,524	)
	Acquisition, net of cash acquired			(3,411	)		—			—			(3,411	)
	Proceeds from sales of property and equipment			10,882			9,107			—			19,989

		Net cash used in investing activities		(47,809	)		(4,137	)		—			(51,946	)

Cash flows from financing activities:
	Decrease in bank overdrafts			(19,698	)		(11,888	)		(3,537	)		(35,123	)
	Early extinguishment of debt			(418,261	)		(418,261	)		418,261			(418,261	)
	Borrowings under credit facilities			286,700			286,700			(286,700	)		286,700
	Payments on credit facilities			(46,700	)		(46,700	)		46,700			(46,700	)
	Payment of debt issuance costs			(7,333	)		(7,333	)		7,333			(7,333	)
	Proceeds from issuance of common stock to Advance Auto Parts, Inc.			90,022			90,022			(90,022	)		90,022
	Equity impact of debt pushdown			—			182,284			(182,284	)		—
	Other comprehensive income			(289	)		—			289			—
	Other			2,770			—			—			2,770

		Net cash (used in) provided by financing activities		(112,789	)		74,824			(89,960	)		(127,925	)

Net increase (decrease) in cash and cash equivalents				44,015			(2,341	)		(3,537	)		38,137
Cash and cash equivalents, December 29, 2001				11,235			6,882			—			18,117

Cash and cash equivalents, October 5, 2002			$	55,250		$	4,541		$	(3,537	)	$	56,254

These forward-looking statements reflect current views about the Company’s plans, strategies and prospects, which are based on the information currently available and on current assumptions.

Forty Week Period ended October 6, 2001 (unaudited)			Advance Stores Company			Guarantor Subsidiaries (a)			Eliminations			Consolidated Advance Stores Company

Net cash provided by operating activities			$	123,446		$	2,149		$	—		$	125,595

Cash flows from investing activities:
	Purchases of property and equipment			(45,711	)		(3,839	)		—			(49,550	)
	Acquisition, net of cash acquired			(21,472	)		—			—			(21,472	)
	Proceeds from sales of property and equipment			1,650			667			—			2,317

		Net cash used in investing activities		(65,533	)		(3,172	)		—			(68,705	)

Cash flows from financing activities:
	Decrease in bank overdrafts			(1,919	)		(871	)		(66	)		(2,856	)
	Payment of note payable			(784	)		—			—			(784	)
	Borrowings under credit facilities			171,400			171,400			(171,400	)		171,400
	Payments on credit facilities			(233,601	)		(233,601	)		233,601			(233,601	)
	Equity impact of debt pushdown			—			62,201			(62,201	)		—
	Other			2,860			—			—			2,860

		Net cash used in financing activities		(62,044	)		(871	)		(66	)		(62,981	)

Net decrease in cash and cash equivalents				(4,131	)		(1,894	)		(66	)		(6,091	)
Cash and cash equivalents, December 30, 2000				14,258			3,751			—			18,009

Cash and cash equivalents, October 6, 2001			$	10,127		$	1,857		$	(66	)	$	11,918

~~Although,~~(a) Reflects the ~~Company~~push ~~believes~~down ~~that~~of ~~its~~guaranteed ~~plans~~debt, ~~intentions~~deferred ~~and~~debt ~~expectations~~issuance ascosts ~~reflected in or suggested by those forward-looking statements are reasonable, the Company can give no assurance that the plans, intentions or expectations will be achieved. Listed below~~ and ~~discussed~~related ~~elsewhere~~interest ~~in the Company’s annual report on Form 10-K for the year ended December 29, 2001 are some important risks, uncertainties~~ and ~~contingencies which could cause the Company’s actual results, performances or achievements to be materially different from the forward-looking statements made in this Form 10-Q~~amortization. These risks, uncertainties and contingencies include, but are not limited to, the following: the Company’s ability to expand its business; the implementation of the Company’s business strategies and goals; integration of the Company’s previous and future acquisitions; a decrease in demand for products; competitive pricing and other competitive pressures; the Company’s relationships with its vendors; deterioration in general economic conditions; and the Company’s ability to meet debt obligations and adhere to the restrictions and covenants imposed under our debt instruments.

The Company assumes no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In evaluating forward-looking statements, you should consider these risks and uncertainties, together with the other risks described from time to time in Advance’s reports and documents filed with the Securities and Exchange Commission, and you should not place undue reliance on those statements.

Advance Stores Company, Incorporated and its subsidiaries, or the Company, is a wholly owned subsidiary of Advance Auto Parts, Inc., or Advance. The Company was formed in 1929 and operated as a retailer of general merchandise until the 1980’s. In the 1980’s, the Company sharpened its marketing focus to target sales of automotive parts and accessories to “do-it-yourself”, or DIY, customers and accelerated its growth strategy. From the 1980’s through the present, the Company has grown significantly through new store openings and strategic acquisitions. Additionally, in 1996, the Company began to aggressively expand its sales to “do-it-for-me”, or DIFM, customers by implementing a commercial delivery program that supplies parts and accessories to third party professional installers and repair providers.

At July 13, 2002, the Company had 2,367, of which 1,869 operated under the “Advance Auto Parts” trade name in 37 states in the Northeastern, Southeastern and Midwestern regions of the United States and 458 stores operating under the “Discount Auto Parts” trade name in the Southeastern region of the United States. In addition, the Company had 40 stores operating under the “Western Auto” trade name primarily located in Puerto Rico and the Virgin Islands. Advance Auto Parts is the second largest specialty retailer of automotive parts, accessories and maintenance items to DIY customers in the United States, based on store count and sales. The Company is currently the largest specialty retailer of automotive products in the majority of the states in which the Company operates, based on store count.

~~The~~ITEM ~~Company’s combined operations are conducted in two operating segments, retail and wholesale~~2. ~~The retail segment consists of the Company~~MANAGEMENT’sS ~~retail~~DISCUSSION ~~operations~~AND ~~operating~~ANALYSIS ~~under~~OF ~~the~~FINANCIAL ~~trade~~CONDITION ~~names~~AND ~~“Advance~~RESULTS ~~Auto~~OF Parts” and “Discount Auto Parts” in the United States and “Western Auto” in Puerto Rico, the Virgin Islands and one store in California. The Company’s wholesale segment includes a wholesale distribution network which includes distribution services of automotive parts and accessories to approximately 450 independently owned dealer stores in 44 states, the majority of which operate under the “Western Auto” trade name. OPERATIONS

~~On November~~ Certain ~~28,~~statements ~~2001, Advance acquired Discount Auto Parts, Inc., or Discount, for $7.50 per share~~ in ~~cash~~this ~~(or~~Form 10-Q ~~approximately~~are ~~$128.5~~“forward-looking ~~million~~statements” inwithin the ~~aggregate)~~meaning ~~plus~~of ~~0.2577~~Section 27A ~~shares~~ of ~~Advance’s~~the ~~common~~Securities ~~stock~~Act ~~for each share~~ of ~~Discount’s~~1933 ~~common~~and ~~stock.~~Section 21E ~~The~~of ~~acquisition has been accounted for under~~ the ~~purchase~~Securities ~~method~~Exchange Act of ~~accounting. Accordingly~~1934, ~~the~~which ~~purchase~~are ~~price~~usually ~~has~~identified ~~been~~by ~~allocated to~~ the ~~assets~~use ~~acquired~~of ~~and~~words ~~liabilities~~such ~~assumed~~as ~~based~~“will,” on“anticipates,” ~~their~~“believes,” ~~respective~~“estimates,” ~~fair~~“expects,” ~~values. The initial purchase~~“projects,” ~~price~~“forecasts,” ~~allocation~~“plans,” ~~resulted~~“intends,” in“should” ~~excess~~or ~~fair~~similar ~~value over the purchase price of $75~~expressions.7 We ~~million,~~intend ~~and~~those ~~was~~forward-looking ~~allocated~~statements ~~proportionately as a reduction~~ to ~~certain~~be ~~noncurrent~~covered ~~assets,~~by ~~primarily property and equipment. During~~ the ~~first~~safe ~~and~~harbor ~~second~~provisions ~~quarters~~for offorward-looking ~~2002, the~~statements ~~Company~~contained ~~reduced~~in the Private ~~excess~~Securities ~~fair~~Litigation ~~value~~Reform byAct ~~$16.6~~of ~~million~~1995 ~~due~~and toare ~~purchase~~included ~~accounting~~in ~~adjustments~~this ~~made~~Form 10-Q tofor ~~primarily~~purposes ~~adjust the fair market value~~ of ~~certain~~complying ~~inventory~~with ~~and~~these ~~property~~safe ~~and~~harbor ~~equipment and the related deferred income tax effects~~provisions.

~~During~~ These ~~the~~forward-looking ~~second~~statements ~~quarter~~reflect ofcurrent ~~fiscal~~views ~~2002,~~about ~~the~~our ~~Company~~plans, ~~recorded~~strategies aand ~~$6.5~~prospects, ~~million~~which ~~extraordinary~~are ~~loss~~based on ~~extinguishment~~ ~~of debt as a result of writing off deferred debt issuance costs associated with~~ the ~~Company’s~~information ~~partial~~currently ~~repayment~~available ~~of its Tranche A~~ and ~~B term loans and refinancing of its Tranche B term loan under its existing credit facility and~~on ~~repurchasing~~current ~~a portion of its outstanding bonds~~assumptions. ~~Additionally, the loss included bank fees associated with the establishment of a Tranche C term loan, which replaced the Tranche B term loan under the senior credit facility.~~

On Although, ~~July~~we ~~23,~~believe ~~2002~~that our plans, ~~the~~intentions ~~Company~~and ~~announced~~expectations ~~that~~as itreflected ~~had~~in ~~received~~or ~~bankruptcy~~suggested ~~court~~by ~~approval~~those toforward-looking statements ~~acquire~~are ~~certain~~reasonable, ~~assets~~we ofcan ~~Trak~~give ~~Auto~~no ~~Corporation~~assurance that the plans, intentions or ~~Trak,~~expectations ~~including~~will ~~the~~be ~~leases~~achieved. Listed onbelow ~~approximately~~and 55discussed ~~stores~~elsewhere in ~~Virginia~~our annual report on Form 10-K for the year ended December 29, ~~Washington~~2001 are some important risks, ~~D.C.~~uncertainties and ~~Maryland.~~contingencies ~~The~~which ~~closing~~could ofcause ~~the~~our ~~acquisition~~actual ~~occurred~~results, onperformances ~~July~~or ~~26,~~achievements ~~2002,~~to ~~although~~be materially different from the ~~transfer~~forward-looking ~~and~~statements ~~conversion~~made ofin ~~these~~this ~~stores~~Form 10-Q. These ~~will~~risks, ~~take~~uncertainties ~~place~~and contingencies ~~over~~include, ~~the~~but ~~next~~are ~~three or~~not ~~four~~limited ~~months.~~to, ~~The~~the ~~acquisition~~following: ~~will~~our beability ~~accounted~~to ~~for~~expand ~~under~~our business; the ~~purchase~~implementation ~~method~~of our business strategies and goals; integration of ~~accounting~~our previous and, ~~accordingly,~~future ~~the~~acquisitions; ~~results~~a ofdecrease ~~operations~~in demand for ~~Trak~~products; competitive ~~will~~pricing beand ~~included~~other competitive pressures; our relationships with our vendors; deterioration in ~~the~~general ~~Company’s~~economic ~~financial~~conditions; ~~results~~and ~~from~~our ability to meet debt obligations and adhere to the ~~date~~restrictions ~~each~~and ~~store~~covenants isimposed ~~transferred.~~under our debt instruments.

Because we are involved in litigation from time to time, and are subject to numerous governmental laws and regulations, we could incur substantial judgments, fines, legal fees and other costs.

We are sometimes the subject of complaints or litigation from customers, employees or other third parties for various actions. In particular, we are currently involved in litigation involving claims relating to, among other things, breach of contract, anti-competitive behavior, tortious conduct, employment discrimination, asbestos exposure and product defect. The damages sought against us in some of these litigation proceedings are substantial. Although we maintain liability insurance for some litigation claims, if one or more of the claims greatly exceeds our coverage limits or our insurance policies do not cover a claim, it could have a material adverse affect on our business and operating results.

Additionally, we are subject to numerous federal, state and local governmental laws and regulations relating to employment matters, environmental protection and building and zoning requirements. If we fail to comply with existing or future laws or regulations, we may be subject to governmental or judicial fines or sanctions. In addition, our capital expenses could increase due to remediation measures that may be required if we are found to be noncompliant with any of these or future laws or regulations.

We assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. In evaluating forward-looking statements, you should consider these risks and uncertainties, together with the other risks described from time to time in our reports and documents filed with the Securities and Exchange Commission, and you should not place undue reliance on those statements.

We are a wholly owned subsidiary of Advance Auto Parts, Inc., or Advance. We were formed in 1929 and operated as a retailer of general merchandise until the 1980’s. In the 1980’s, we sharpened our marketing focus to target sales of automotive parts and accessories to “do-it-yourself”, or DIY, customers and accelerated our growth strategy. From the 1980’s through the present, we have grown significantly through new store openings and strategic acquisitions. Additionally, in 1996, we began to aggressively expand our sales to “do-it-for-me”, or DIFM, customers by implementing a commercial delivery program that supplies parts and accessories to third party professional installers and repair providers.

At October 5, 2002, we had 2,393, of which 1,936 operated under the “Advance Auto Parts” trade name in 37 states in the Northeastern, Southeastern and Midwestern regions of the United States and the District of Columbia and 419 stores operating under the “Discount Auto Parts” trade name primarily in the state of Florida. In addition, we had 38 stores operating under the “Western Auto” trade name primarily located in Puerto Rico and the Virgin Islands. We are the second largest specialty retailer of automotive parts, accessories and maintenance items to DIY customers in the United States, based on store count and sales. We are currently the largest specialty retailer of automotive products in the majority of the states in which we operate, based on store count.

Our combined operations are conducted in two operating segments, retail and wholesale. The retail segment consists of our retail operations operating under the trade names “Advance Auto Parts” and “Discount Auto Parts” in the United States and “Western Auto” in Puerto Rico, the Virgin Islands and one store in California. Our wholesale segment includes a wholesale distribution network, which includes distribution services of automotive parts and accessories to approximately 430 independently owned dealer stores in 44 states, the majority of which operate under the “Western Auto” trade name.

On November 28, 2001, Advance acquired Discount Auto Parts, Inc., or Discount, for $7.50 per share in cash (or approximately $128.5 million in the aggregate) plus 0.2577 shares of Advance’s common stock for each share of Discount’s common stock. The acquisition has been accounted for under the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their respective fair values. The initial purchase price allocation resulted in excess fair value over the purchase price of $75.7 million, and was allocated proportionately as a reduction to certain noncurrent assets, primarily property and equipment. During the first three quarters of 2002, we reduced the excess fair value by $18.7 million due to purchase accounting adjustments made to primarily adjust the fair market value of certain inventory and property and equipment and the related deferred income tax effects.

On July 23, 2002, we announced that we had received bankruptcy court approval to acquire certain assets of Trak Auto Corporation, or Trak, including the leases on 55 stores in Virginia, Washington, D.C. and Maryland. The closing of the acquisition occurred July 26, 2002, although the legal transfer and conversion of these stores will take place over time through the end of November 2002. On September 20, 2002, we agreed to acquire two additional Trak stores. Under this agreement, we will also pay up to $16,000 to purchase inventory and fixtures for all the acquired stores. The acquisition will be accounted for under the purchase method of accounting and, accordingly, each store’s results of operations will be included in our financial records from the date transferred to us. As of October 5, 2002, we had taken ownership and converted 22 of the 57 stores for $2,764 and assumed the respective lease obligations.

On November 1, 2002, Advance filed a registration statement on Form S-3 with the United States Securities and Exchange Commission to register the sale of 9,442,331 shares of its common stock, of which 8,596,937 shares will be offered by certain selling stockholders and 858,394 shares will be offered by Advance and one of the selling stockholders to cover over-allotments of shares, if any. Neither Advance nor us will receive any of the proceeds from the shares sold in the offering by the selling stockholders. We intend to use the net proceeds we receive from the sale of Advance's shares in the over-allotment option, if any, to repay borrowings under our Tranche A and Tranche C term loans. In addition, we may use a portion of the proceeds to repurchase a portion of our senior subordinated notes, depending on prevailing market prices, which would reduce the amount used to repay borrowings under the term loans.

Critical Accounting Policies

~~The~~ Our ~~Company’s~~ financial statements have been prepared in accordance with accounting policies generally accepted in the United States of America. Our ~~The Company’s~~ discussion and analysis of the financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of these accounting policies in addition to certain estimates and judgements by ~~the~~our ~~Company’s~~ management. ~~The~~Our ~~Company’s~~ estimates and judgements are based on currently available information, historical results and other assumptions we believe are reasonable. Actual results could differ from these estimates.

The following critical accounting policies are used in the preparation of the financial statements discussed above.

~~Vendor Incentives~~ 21

The Company receives incentives from vendors related to cooperative advertising allowances, volume rebates and other miscellaneous agreements. Many of the incentives are under long-term agreements (terms in excess of one year), while others are negotiated on an annual basis. Certain vendors require the Company to use certain cooperative advertising allowances exclusively for advertising. These restricted cooperative advertising allowances are recognized as a reduction to selling, general and administrative expenses as advertising expenditures are incurred. Unrestricted cooperative advertising revenue, rebates and other miscellaneous incentives are earned based on purchases and/or the sale of the product. Amounts received or receivable from vendors that are not yet earned are reflected as deferred revenue in the condensed consolidated balance sheets included elsewhere in this filing. The Company records unrestricted cooperative advertising and volume rebates earned as a reduction of inventory and recognizes the incentives as a reduction to cost of sales as the inventory is sold. Short-term incentives

~~are~~Vendor ~~recognized as a reduction to cost of sales over the course of the annual agreement and are not recorded as reductions to inventory.~~ Incentives

~~The~~ We ~~Company~~receive ~~recognizes other~~ incentives ~~earned~~from vendors related to ~~long-term~~cooperative ~~agreements~~advertising asallowances, avolume ~~reduction~~rebates toand ~~cost~~other ofmiscellaneous ~~sales~~agreements. Many ~~over~~of the ~~life~~incentives ofare ~~the~~under ~~agreement~~long-term ~~based~~agreements on(terms ~~the~~in ~~timing~~excess of ~~purchases.~~ ~~These~~one ~~incentives~~year), while others are ~~not~~negotiated ~~recorded~~on asan ~~reductions~~annual basis. Our vendors require us to ~~inventory.~~use ~~The~~certain ~~amounts~~cooperative ~~earned~~advertising ~~under~~allowances ~~long-term~~exclusively ~~arrangements~~for ~~not~~advertising. These ~~recorded~~restricted cooperative advertising allowances are recognized as a reduction ofto ~~inventory~~selling, general and administrative expenses as advertising expenditures are ~~based~~incurred. Unrestricted oncooperative ~~estimates~~advertising ofrevenue, ~~total~~rebates ~~purchases~~and ~~that~~other ~~will~~miscellaneous beincentives ~~made~~are ~~over~~earned based on purchases and/or the ~~life~~sale of the ~~contracts~~ ~~and~~product. Amounts ~~the~~received ~~amount~~or ofreceivable ~~incentives~~from vendors that ~~will~~are benot yet earned. ~~The incentives~~ are ~~generally~~reflected ~~recognized~~as ~~based~~deferred onrevenue in the ~~cumulative~~condensed ~~purchases~~consolidated asbalance asheets ~~percentage~~included ofelsewhere ~~the~~in ~~total~~this ~~estimated~~filing. We ~~purchases~~record ~~over~~unrestricted ~~the~~cooperative ~~life~~advertising and volume rebates earned as a reduction of inventory and recognize the incentives ~~contract.~~as ~~The~~a ~~Company’s~~reduction ~~margins~~to ~~could~~cost ~~be impacted~~of ~~positively~~sales oras ~~negatively~~the ifinventory ~~actual~~is ~~purchases~~sold. Short-term orincentives ~~results~~are ~~differ~~recognized ~~from~~as ~~our~~a ~~estimates,~~reduction ~~but~~to cost of sales over the ~~life~~course of the ~~contract~~annual ~~would~~agreement beand ~~the~~are ~~same.~~not recorded as reductions to inventory.

We recognize other incentives earned related to long-term agreements as a reduction to cost of sales over the life of the agreement based on the timing of purchases. These incentives are not recorded as reductions to inventory. The amounts earned under long-term arrangements not recorded as a reduction of inventory are based on estimates of total purchases that will be made over the life of the contracts and the amount of incentives that will be earned. The incentives are generally recognized based on the cumulative purchases as a percentage of the total estimated purchases over the life of the contract. Our margins could be impacted positively or negatively if actual purchases or results differ from our estimates, but over the life of the contract would be the same.

During the fourth quarter of fiscal 2001, we changed our method of accounting for unrestricted cooperative advertising allowances. These incentives are now treated as a reduction to inventory and the corresponding cost of sales. Previously, we accounted for these incentives as a reduction to selling, general and administrative expenses to the extent advertising expense was incurred.

Inventory

Minimal inventory shrink reserves are recorded related to Advance Auto Parts stores as a result of an extensive and frequent cycle counting program. Our ~~Estimates~~estimates related to these shrink reserves depend on the effectiveness of the cycle counting programs. We ~~The~~evaluate ~~Company evaluates~~ the effectiveness of these programs on an on-going basis and ~~believes~~believe they provide reasonable assurance that minimal shrink reserves are needed.

Minimal reserves for potential excess and obsolete inventories are recorded as well. The nature of ~~the~~our ~~Company’s~~ inventory is such that the risk of obsolescence is minimal. In addition, ~~the~~we ~~Company~~have ~~has~~ historically been able to return excess items to the vendor for credit. We ~~The Company does~~ provide reserves where less than full credit will be received for such returns and where we anticipate that items will be sold at retail prices that are less than recorded cost. Future changes by vendors in their policies or willingness to accept returns of excess inventory could require us to revise our estimates of required reserves for excess and obsolete inventory.

Warranties

~~The~~ We ~~Company records~~record accruals for future warranty claims related to warranty programs for batteries, tires, roadside assistance and Craftsman products. Our ~~These~~ accruals are based on current sales of the warranted products and historical claim experience. If claims experience differs from historical levels, revisions in our estimates may be required.

Restructuring and Closed Store Liabilities

~~The~~ We recognize ~~Company recognizes~~ a provision for future obligations at the time a decision is made to close a store location and includes future minimum lease payments, common area maintenance and taxes. Additionally, ~~the~~we ~~Company~~make ~~makes~~ certain assumptions related to potential subleases and lease buyouts that reduce the recorded amount of the accrual. These assumptions are based on knowledge of the market and the relevant experience. However, the inability to enter into the subleases or obtain buyouts within the estimated timeframe may result in adjustments to these reserves.

Contingencies

The Company accrues for obligations, including estimated legal costs, when it is probable and the amount of loss is reasonably estimable. As facts concerning contingencies become known, these estimates may require adjustment. Estimates that are particularly sensitive to future changes include, tax, environmental and legal matters, which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process.

The following discussion of the consolidated historical results of operations and financial condition of the Company should be read in conjunction with the unaudited condensed consolidated financial statements of the Company and the notes thereto included elsewhere in this Form 10-Q. The Company’s first quarter consists of 16 weeks and its other three quarters consist of 12 weeks each.

Results of Operations

The following tables set forth the statement of operations data for the Company expressed in dollars and as a percentage of net sales for the periods indicated.

	Twelve Week Periods Ended (dollars in thousands) (unaudited)						Twenty-Eight Week Periods Ended (dollars in thousands) (unaudited)
	July 13, 2002			July 14, 2001			July 13,2002			July 14,2001
Net sales	$	792,717		$	607,478		$	1,796,804		$	1,336,837
Cost of sales		443,703			350,250			1,011,282			768,159
Gross profit		349,014			257,228			785,522			568,678
Selling, general and administrative expenses		284,102			220,849			661,643			506,408
Operating income, as adjusted		64,912			36,379			123,879			62,270
Expenses associated with merger and integration		7,520			—			17,743			—
Expenses associated with merger related restructuring		109			—			451			—
Operating income		57,283			36,379			105,685			62,270
Interest expense		(16,291	)		(10,825	)		(40,116	)		(27,064	)
Other income, net		353			355			590			467
Provision for income taxes		15,848			10,079			25,291			13,766
Income before extraordinary item		25,497			15,830			40,868			21,907
Extraordinary item, loss on debt extinguishment, net of $4,101 and $4,592 income taxes, respectively		(6,468	)		—			(7,243	)		—
Net income	$	19,029		$	15,830		$	33,625		$	21,907

	Twelve Week Periods Ended (unaudited)				Twenty-Eight Week Periods Ended (unaudited)
	July 13, 2002		July 14, 2001		July 13, 2002		July 14, 2001
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	56.0		57.7		56.3		57.5
Gross profit	44.0		42.3		43.7		42.5
Selling, general and administrative expenses	35.8		36.3		36.8		37.9
Operating income, as adjusted	8.2		6.0		6.9		4.6
Expenses associated with merger and integration	0.9		—		1.0		—
Expenses associated with merger related restructuring	0.0		—		0.0		—
Operating income	7.3		6.0		5.9		4.6
Interest expense	(2.1	)	(1.8	)	(2.2	)	(2.0	)
Other income, net	0.0		0.1		0.0		—
Provision for income taxes	2.0		1.7		1.4		1.0
Income before extraordinary item	3.2		2.6		2.3		1.6
Extraordinary item, loss on debt extinguishment, net of $4,101 and $4,592 income taxes, respectively	(0.8	)	—		(0.4	)	—
Net income	2.4	%	2.6	%	1.9	%	1.6	%

assumptions related to potential subleases and lease buyouts that reduce the recorded amount of the accrual. These assumptions are based on our knowledge of the market and the relevant experience. However, the inability to enter into the subleases or obtain buyouts within the estimated timeframe may result in adjustments to these reserves.

Contingencies

We accrue for obligations, including estimated legal costs, when it is probable and the amount of loss is reasonably estimable. As facts concerning contingencies become known, these estimates may require adjustment. Estimates that are particularly sensitive to future changes include, tax, environmental and legal matters, which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process.

The following discussion of our consolidated historical results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q. Our first quarter consists of 16 weeks and our other three quarters consist of 12 weeks each.

Components of Statements of Operations

Net Sales

Net sales consist primarily of comparable store ~~net~~ sales, new store net sales, service net sales, net sales to the wholesale dealer network and finance charges on installment sales. Comparable store ~~net~~ sales is calculated based on the change in net sales starting once a store has been ~~open~~opened for 13 complete accounting periods (each period represents four weeks). Relocations are included in comparable store ~~net~~ sales from the original date of opening. Each Parts America store that was acquired in the Western merger and subsequently converted to an Advance Auto Parts store has been included in the comparable store sales calculation after 13 complete accounting periods following the completion of its physical conversion to an Advance Auto Parts store. Additionally, the stores acquired in the Carport acquisition are included in the comparable store sales calculation following 13 complete accounting periods after their system conversion to the Advance Auto Parts store system. Stores acquired in the Discount acquisition will be included in the comparable ~~store~~stores ~~net~~ sales calculation ~~following~~beginning in December 2002, which is 13 complete accounting periods after the acquisition date. ~~The~~of ~~Company~~November 28, 2001. We ~~does~~do not include net sales from the 4038 Western Auto retail ~~sales,~~stores ~~which operate service bays,~~ in the comparable store ~~net~~ sales calculation.

Cost of Sales

~~The~~ Our ~~Company’s~~ cost of sales includes merchandise costs and warehouse and distribution expenses as well as service labor costs for the Western Auto stores. Gross profit as a percentage of net sales may be affected by variations in among other things, ~~the~~our ~~Company’s~~ product mix, price changes in response to competitive factors, fluctuations in merchandise costs and vendor programs. We ~~The~~seek ~~Company seeks~~ to avoid fluctuation in merchandise costs by entering into long-term purchasing agreements with vendors inwhen ~~exchange~~we ~~for pricing~~believe ~~certainty.~~it is advantageous.

Selling, General and Administrative Expenses

Selling, general and administrative expenses are comprised of store payroll, store occupancy (including rent), net advertising expenses, other store expenses and general and administrative expenses, including salaries and related benefits of corporate employees, administrative office expenses, data processing, professional expenses and other related expenses. We lease substantially all of our stores.

Twelve Weeks Ended July 13, 2002 Compared to Twelve Weeks Ended July 14, 2001

Net sales for the twelve weeks ended July 13, 2002 were $792.7 million, an increase of $185.2 million, or 30.5%, over net sales for the twelve weeks ended July 14, 2001. Net sales for the retail segment increased $188.1 million, or 32.1%. The net sales increase for the retail segment was due to an increase in the comparable store sales of 5.0%, sales from Discount Auto Parts stores and contributions from new stores opened within the last year. The comparable store sales increase was a result of growth in both the DIY and DIFM market segments, as well as the continued maturation of new stores. Net sales for the wholesale segment decreased $2.9 million due to the decline in the number of dealer stores the Company serviced and lower average sales to each dealer.

During the twelve weeks ended July 13, 2002, the Company opened 11 new stores, relocated seven stores and closed 23 stores (nine of which were related to the Discount acquisition), bringing the total number of retail stores to 2,367. As of July 13, 2002, the Company had 1,411 stores participating in its commercial delivery program, as a result of adding 45 net programs during the twelve week period ended July 13, 2002.

Gross profit for the twelve weeks ended July 13, 2002 was $349.0 million or 44.0% of net sales, as compared to $257.2 million or 42.3% of net sales in the twelve weeks ended July 14, 2001. The increase in gross profit percentage over the comparable prior year quarter reflects the positive impact in purchasing synergies as a result of renegotiating vendor contracts in conjunction with the Discount acquisition and a positive shift in product mix due to our merchandising and marketing initiatives. The gross profit for the retail segment was $345.8 million or 44.6% of net sales for the twelve week period ended July 13, 2002, as compared to $253.7 million or 43.2% of net sales for the twelve week period ended July 14, 2001.

Selling, general and administrative expenses, before merger and integration expenses and merger related restructuring, increased to $284.1 million or 35.8% of net sales for the twelve week period ended July 13, 2002, from $220.8 million or 36.3% of net sales for the twelve week period ended July 14, 2001. The decrease in selling, general and administrative expenses as a percentage of sales is reflective of the Company’s ability to leverage its existing infrastructure against a higher store base, and lower rent expense as a result of owning a higher percentage of stores following the Discount acquisition.

~~Operating~~Results ~~income, as adjusted for merger and integration and merger related restructuring, was $64.9 million in the twelve week period ended July 13, 2002 or 8.2%~~ of net sales, as compared to $36.4 million or 6.0% of net sales in the twelve week period ended July 14, 2001. Merger and integration expenses of $7.5 million include non-recurring expenses associated with integrating the Discount operations. Merger related restructuring expenses primarily relate to lease costs associated with the Advance Auto Parts stores in overlapping markets that were closed as a result of the Discount acquisition. Operations

~~Interest~~ The ~~expense~~following intables ~~the~~set ~~twelve weeks ended July 13, 2002 was $16.3 million or~~forth ~~2.1%~~certain ofresults ~~net sales, as compared to $10.8 million or 1.8%~~ of ~~net~~our ~~sales~~operations indata ~~the~~expressed ~~twelve week period ended July 14, 2001. Interest expense reflects the overall increase~~ in ~~average~~dollars ~~borrowings~~and ~~offset by more favorable interest rates during the twelve weeks ended July 13, 2002~~ as ~~compared to the twelve weeks ended July 14, 2001. This increase in borrowings is~~ a ~~result~~percentage of ~~the~~net ~~additional~~sales ~~debt~~for ~~entered into in conjunction with~~ the ~~Discount~~periods ~~acquisition~~indicated.

During the twelve weeks ended July 13, 2002, the Company recorded $6.5 million in a loss on extinguishment of debt, net of tax. This loss reflects the ratable portion of the deferred loan costs associated with the Company’s partial repayment of its Tranche A and B term loans and refinancing of its Tranche B term loan under its credit facility and a partial repurchase and retirement of outstanding bonds at a premium during the second quarter of fiscal 2002.

	Twelve Week Periods Ended (dollars in thousands) (unaudited)						Forty Week Periods Ended (dollars in thousands) (unaudited)

	October 5, 2002			October 6, 2001			October 5, 2002			October 6, 2001

Net sales	$	788,662		$	598,793		$	2,585,466		$	1,935,630
Cost of sales⁽¹⁾		439,000			342,059			1,450,282			1,110,218

Gross profit		349,662			256,734			1,135,184			825,412
Selling, general and administrative expenses⁽¹⁾⁽²⁾		278,834			219,603			940,477			726,011

Operating income, as adjusted		70,828			37,131			194,707			99,401
Expenses associated with merger and integration		8,174			—			25,917			—
Expenses associated with merger related restructuring		74			—			525			—

Operating income		62,580			37,131			168,265			99,401
Interest expense		(13,476	)		(9,503	)		(53,592	)		(36,567	)
Other income, net		277			265			867			732
Provision for income taxes		18,139			10,958			43,430			24,724

Income before extraordinary item		31,242			16,935			72,110			38,842
Extraordinary item, loss on debt extinguishment, net of $187 and $4,779 income taxes, respectively		(295	)		—			(7,538	)		—

Net income	$	30,947		$	16,935		$	64,572		$	38,842

Income tax expense for the twelve weeks ended July 13, 2002 was $15.8 million compared to $10.1 million in the twelve weeks ended July 14, 2001. This increase was primarily due to the increase in income before taxes for the twelve weeks ended July 13, 2002 as compared to the twelve weeks ended July 14, 2001.

	Twelve Week Periods Ended *(unaudited)*						Forty Week Periods Ended *(unaudited)*

	October 5, 2002			October 6, 2001			October 5, 2002			October 6, 2001

Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales⁽¹⁾		55.7			57.1			56.1			57.4

Gross profit		44.3			42.9			43.9			42.6
Selling, general and administrative expenses⁽¹⁾⁽²⁾		35.3			36.7			36.4			37.5

Operating income, as adjusted		9.0			6.2			7.5			5.1
Expenses associated with merger and integration		1.1			—			1.0			—
Expenses associated with merger related restructuring		0.0			—			0.0			—

Operating income		7.9			6.2			6.5			5.1
Interest expense		(1.7	)		(1.6	)		(2.0	)		(1.9	)
Other income, net		0.0			—			0.0			—
Provision for income taxes		2.3			1.8			1.7			1.2

Income before extraordinary item		3.9			2.8			2.8			2.0
Extraordinary item, loss on debt extinguishment, net of $187 and $4,779 income taxes, respectively		(0.0	)		—			(0.3	)		—

Net income		3.9	%		2.8	%		2.5	%		2.0	%

The Company recorded net income of $30.2 million before merger and integration expenses and the extraordinary loss on extinguishment of debt for the twelve weeks ended July 13, 2002, as compared to $15.8 million for the twelve week period ended July 14, 2001. After merger and integration expenses and the extraordinary loss, the Company recorded net income of $19.0 million for the twelve weeks ended July 13, 2002. As a percentage of sales, net income for the twelve week period ended July 13, 2002 was 2.4% as compared to 2.6% for the twelve week period ended July 14, 2001.

⁽¹⁾	Cost of sales and selling, general and administrative expenses presented for the twelve and forty weeks ended October 5, 2002 and October 6, 2001 reflect the change in accounting principle related to cooperative advertising funds. This change resulted in lower cost of sales with corresponding increases in selling, general and administrative expenses.
⁽²⁾	Selling, general and administrative expenses are adjusted for certain non-recurring and other items.

Twenty-Eight Weeks Ended July 13, 2002 Compared to Twenty-Eight Weeks Ended July 14, 2001

Net sales for the twenty-eight weeks ended July 13, 2002 were $1,796.8 million, an increase of $460.0 million, or 34.4%, over net sales for the twenty-eight weeks ended July 14, 2001. Net sales for the retail segment increased $466.6 million, or 36.6%. The net sales increase for the retail segment was due to an increase in the comparable store sales of 6.5%, sales from Discount Auto Parts stores and contributions from new stores opened within the last year. The comparable store sales increase was a result of growth in both the DIY and DIFM market segments, as well as the continued maturation of new stores. Net sales for the wholesale segment decreased $6.7 million due to the decline in the number of dealer stores the Company serviced and lower average sales to each dealer.

During the twenty-eight weeks ended July 13, 2002, the Company opened 28 new stores, relocated 19 stores and closed 145 stores (128 of which were related to the Discount acquisition), bringing the total number of retail stores to 2,367. As of July 13, 2002 the Company had 1,411 stores participating in its commercial delivery program, as a result of adding 41 net programs during the twenty-eight week period ended July 13, 2002.

Gross profit for the twenty-eight weeks ended July 13, 2002 was $785.5 million or 43.7% of net sales, as compared to $568.7 million or 42.5% of net sales in the twenty-eight weeks ended July 14, 2001. The increase in gross profit percentage reflects the positive impact in purchasing synergies as a result of renegotiating vendor contracts in conjunction with the Discount acquisition, and the leveraging of logistics costs realized from our recent supply chain initiatives. Additionally, gross profit for the twenty-eight weeks ended July 13, 2001 includes an $8.3 million gain from a settlement reached between the Company and a vendor. The gross profit for the retail segment was $777.0 million or 44.6% of net sales for the twenty-eight week period ended July 13, 2002, as compared to $552.2 million, excluding the $8.3 million gain recorded as a result of a vendor settlement or 43.3% of net sales for the twenty-eight week period ended July 14, 2001.

Selling, general and administrative expenses, before merger and integration expenses and merger related restructuring, increased to $661.6 million or 36.8% of net sales for the twenty-eight week period ended July 13,

~~2002,~~Twelve ~~from~~Weeks ~~$506.4~~Ended ~~million~~October ~~or 37.9% of net sales for the twenty-eight week period ended July 14~~5, ~~2001.~~2002 ~~The~~Compared ~~decrease in selling, general and administrative expenses as a percentage of sales reflects the Company’s ability~~ to ~~leverage~~Twelve ~~its~~Weeks ~~existing~~Ended ~~infrastructure~~October ~~against a higher store base~~6, ~~and lower rent expense as a result of owning a higher percentage of stores following the Discount acquisition.~~ 2001

~~Operating~~ Net ~~income,~~sales asfor ~~adjusted~~the ~~for~~twelve ~~merger~~weeks ~~and~~ended ~~integration~~October ~~and~~5, ~~merger~~2002 ~~related~~were ~~restructuring~~$788.7 million, ~~was~~an increase of $~~123~~189.9 million, inor ~~the~~31.7%, ~~twenty-eight week~~over ~~period~~net ~~ended~~sales ~~July~~for ~~13,~~the ~~2002~~twelve orweeks ended October 6, 2001.9% Net ofsales ~~net~~for ~~sales,~~the asretail ~~compared~~segment toincreased $62192.36 million, or 433.62%, ofto $772.7 million. The net sales inincrease for the ~~twenty-eight~~retail ~~week~~segment ~~period~~was ~~ended~~due ~~July~~to ~~14,~~an ~~2001.~~increase ~~Merger~~in ~~and~~the ~~integration~~comparable ~~expenses~~store sales of ~~$17~~5.75%, ~~million~~sales ~~include~~from ~~non-recurring expenses associated~~stores ~~with~~acquired ~~integrating~~in the Discount ~~operations.~~acquisition ~~Merger~~and ~~related~~contributions ~~restructuring~~from ~~expenses~~new ~~primarily~~stores ~~relate~~opened towithin ~~lease~~the ~~costs~~last ~~associated~~year. The ~~with~~comparable ~~the~~store ~~Advance~~sales ~~Auto~~increase ~~Parts~~was ~~stores~~a result of growth in ~~overlapping~~both ~~markets~~the ~~that~~DIY ~~were~~and ~~closed~~DIFM market segments, as awell ~~result~~as the continued maturation of new stores. Net sales for the ~~Discount~~wholesale ~~acquisition~~segment decreased $2. 7 million due to the decline in the number of dealer stores we serviced and lower average sales to each dealer.

~~Interest~~ During ~~expense in~~ the ~~twenty-eight~~twelve weeks ended ~~July~~October 135, 2002, ~~was~~we ~~$40.1~~opened ~~million~~33 ornew ~~2.2%~~stores, ofrelocated ~~net~~eight ~~sales,~~stores ~~as compared~~and toclosed ~~$27.1~~seven ~~million~~stores or(two ~~2.0%~~ of ~~net~~which ~~sales~~were inrelated to the ~~twenty-eight week period ended July 14~~Discount acquisition), ~~2001.~~bringing ~~Interest expense reflects~~ the ~~overall~~total ~~increase~~number inof ~~average~~retail ~~borrowings~~stores ~~offset~~to by2,393. As ~~more~~of ~~favorable~~October ~~interest rates during the twenty-eight weeks ended July 13~~5, 2002, aswe ~~compared~~had to1,408 ~~the~~stores ~~twenty-eight~~participating ~~weeks~~in ~~ended~~our ~~July~~commercial 14delivery program, ~~2001.~~as ~~This increase in borrowings is~~ a result of ~~the~~consolidating ~~additional~~three ~~debt~~net ~~entered~~programs ~~into~~during inthe ~~conjunction~~twelve ~~with~~weeks ~~the~~ended October ~~Discount~~5, ~~acquisition~~2002.

~~During~~ Gross profit for the ~~twenty-eight~~twelve weeks ended ~~July~~October 135, 2002 was $349.7 million, ~~the~~or ~~Company~~44.3% ~~recorded~~of net sales, as compared to $7256.27 million, inor a42.9% ~~loss~~of onnet ~~extinguishment~~sales, offor ~~debt,~~the ~~net~~twelve ofweeks ~~tax~~ended October 6, 2001. ~~This~~The ~~loss~~increase ~~reflects~~in ~~the~~gross ~~ratable~~profit ~~portion of~~percentage over the ~~deferred~~prior ~~loan~~year ~~costs~~comparable ~~associated~~quarter ~~with~~reflects the ~~Company’s~~positive ~~partial~~impact ~~repayment~~in purchasing synergies as a result of ~~its~~renegotiating vendor ~~Tranche A~~contracts ~~and~~in Bconjunction ~~term~~with ~~loans~~the Discount acquisition, and ~~refinancing~~the leveraging of ~~its~~logistics ~~Tranche~~costs Brealized ~~term~~from ~~loan~~our ~~under~~recent ~~its~~supply ~~credit~~chain ~~facility~~initiatives. The ~~and~~gross profit for the ~~repurchase~~retail ~~and~~segment ~~retirement~~was $346.8 million, or 44.9% of ~~outstanding~~net ~~bonds~~sales, atfor athe ~~premium~~twelve weeks ended October 5, 2002, as compared to $253.4 million, or 43.7% of net sales, for the twelve weeks ended October 6, 2001.

~~Income~~ Selling, ~~tax~~general ~~expense~~and administrative expenses, before merger and integration expenses and merger related restructuring, increased to $278.8 million, or 35.3% of net sales, for the ~~twenty-eight~~twelve weeks ended ~~July~~October 135, 2002, ~~was~~from $25219.36 million, ~~compared~~or ~~to $13~~36.~~8 million~~7% inof net sales, for the ~~twenty-eight~~twelve weeks ended ~~July~~October 146, 2001. The ~~This~~decrease ~~increase~~in ~~was~~selling, ~~primarily~~general ~~due~~and administrative expenses as a percentage of sales reflects both our ability to ~~the~~leverage ~~increase~~our instore ~~income~~payroll ~~before~~expenses ~~taxes~~against ~~for~~a ~~the~~higher ~~twenty-eight~~sales ~~weeks~~base ~~ended~~and ~~July~~lower ~~13,~~rent ~~2002~~expense as ~~compared~~a toresult ~~the~~of ~~twenty-eight~~owning ~~weeks~~a ~~ended~~higher ~~July~~percentage ~~14,~~of ~~2001~~stores following the Discount acquisition.

~~The~~ Operating ~~Company recorded net~~ income, ofas ~~$52.0 million~~adjusted ~~before~~for merger and integration ~~expenses~~ and ~~the extraordinary~~merger ~~loss~~related onrestructuring, ~~extinguishment~~was of$70.8 million ~~debt~~ for the ~~twenty-eight~~twelve weeks ended ~~July~~October 135, 2002, or 9.0% of net sales, as compared to $2137.9 1 million, or 6.2% of net sales, for the ~~twenty-eight~~twelve ~~week~~weeks ~~period~~ ended ~~July~~October 146, 2001. Merger ~~After merger~~ and integration expenses ~~and the extraordinary loss, the Company recorded net income~~ of $338.62 million ~~for~~include ~~the twenty~~non-~~eight~~recurring ~~weeks~~expenses ~~ended~~associated ~~July 13,~~with ~~2002~~integrating the Discount operations. Merger Asrelated arestructuring ~~percentage~~expenses ofprimarily ~~sales,~~relate ~~net~~to ~~income~~lease ~~for~~costs ~~the~~associated ~~twenty-eight~~with ~~week~~the ~~period~~Advance ~~ended~~Auto ~~July~~Parts ~~13,~~stores ~~2002~~in ~~was~~overlapping ~~1.9%~~markets closed as ~~compared~~a toresult ~~1.6%~~of ~~for~~ the ~~twenty-eight~~Discount ~~week period ended July 14, 2001~~acquisition.

~~Liquidity~~ Interest ~~and~~expense ~~Capital~~for ~~Resources~~the twelve weeks ended October 5, 2002 was $13.5 million, or 1.7% of net sales, as compared to $9.5 million, or 1.6% of net sales, for the twelve weeks ended October 6, 2001. Interest expense reflects the overall increase in average borrowings, offset by more favorable interest rates during the twelve weeks ended October 5, 2002, as compared to the twelve weeks ended October 6, 2001. This increase in borrowings is a result of the additional debt entered into in conjunction with the Discount acquisition.

~~The~~ Income ~~Company~~tax ~~believes~~expense itfor ~~will~~the ~~have~~twelve ~~sufficient~~weeks ~~liquidity~~ended toOctober ~~fund~~5, ~~its~~2002 ~~debt~~was ~~service~~$18.1 ~~obligations~~million, ~~and~~as ~~implement~~compared ~~its~~to ~~growth~~$11.0 million ~~strategy~~for ~~over~~ the ~~next~~twelve 24weeks ~~months.~~ended AsOctober ~~of July 13~~6, ~~2002,~~2001. ~~the~~This ~~Company~~increase ~~had~~was ~~outstanding~~primarily ~~indebtedness~~due ~~consisting~~to ofthe ~~$336.8~~increase ~~million~~in ofincome ~~senior~~before ~~subordinated~~taxes ~~notes,~~for ~~borrowings of $340.0 million under~~ the ~~amended~~twelve ~~bank~~weeks ~~credit~~ended ~~facility~~October ~~and~~5, ~~$10.0~~2002, ~~million~~as ofcompared ~~indebtedness~~to ~~under~~ the ~~McDuffie~~twelve ~~County~~weeks ~~Development~~ended ~~Authority Taxable~~October ~~Industrial~~6, ~~Bonds~~2001.

~~During~~ As ~~second~~a ~~quarter,~~result of the ~~Company~~above ~~amended~~factors, ~~its~~we ~~credit~~recorded ~~agreement~~net inincome ~~addition~~of to$36.3 million ~~repaying a~~before ~~portion~~merger of and ~~refinancing~~integration expenses and the ~~Tranche~~extraordinary Bloss ~~term~~on ~~loan.~~extinguishment ~~For~~of debt, for the ~~twenty-eight~~twelve ~~week~~weeks ~~period~~ ended ~~July~~October 135, 2002, ~~the~~as ~~Company~~compared ~~repaid~~to $~~174~~16.49 million infor ~~debt~~the ~~with~~twelve ~~free~~weeks ~~cash~~ended ~~flow~~October ~~generated~~6, ~~and~~2001. After ~~equity~~merger ~~offering~~and ~~proceeds~~integration ~~during~~expenses and the ~~period.~~extraordinary Inloss, ~~conjunction with~~we ~~the~~recorded ~~refinancing~~net income of $30.9 for the ~~Tranche~~twelve weeks Bended ~~term~~October ~~loan~~5, ~~the~~2002. As ~~Company~~a ~~entered~~percentage ~~into~~of asales, ~~Tranche~~net Cincome ~~term~~for ~~loan~~the ~~for~~twelve ~~$250~~weeks ended October 5, 2002 was 3.09%, ~~million~~as compared to 2.8%, for the twelve

Under the amended credit facility, the Tranche C term loan requires scheduled repayments of $2.1 million semi-annually beginning November 30, 2003 through the maturity on November 30, 2007. The amended Tranche A term loan amortization schedule reflects required repayments of $1.5 million on May 31, 2003, $7.8 million on November 30, 2003, $12.4 million in May and November 2004 and $14.0 million each May and November during 2005 and 2006 through maturity on November 30, 2006.

Interest on the Tranche C term loan is based, at the Company’s option, on either an adjusted LIBOR rate plus 2.5% per annum, or an alternative base rate plus 1.5% per annum. These initial margins can step down to 2.25% and 1.25% per annum, respectively, if the Company’s leverage ratio is less than 2.00 to 1.00. The amended credit facility carried forward

~~the~~weeks prepayment provisions, covenant requirements and guarantees from the previous credit agreement entered into November in 2001. For a full discussion of the other terms of the credit facility, see section “Long Term Debt” in Item 7. of the Company’s annual report on Form 10-K for the year ended ~~December~~October 296, 2001.

~~The~~Forty ~~Company~~Weeks ~~was~~Ended inOctober ~~compliance with the above covenants under the amended credit facility as of July 13~~5, 2002. AsCompared ~~of July 13, 2002, $132.9 million was available under the amended credit facility. The Company intends~~ to ~~use borrowings~~Forty ~~under~~Weeks ~~this~~Ended ~~facility,~~October ~~as well as internally generated funds~~6, ~~for store expansion, including new store openings and store acquisitions, and funding of working capital, including among other things the Company’s restructuring program.~~ 2001

~~For~~ Net sales for the ~~twenty-eight~~forty weeks ended ~~July~~October 135, 2002, ~~net~~were ~~cash~~$2,585.5 million, ~~provided~~an byincrease ~~operating~~of ~~activities was~~ $~~180~~649.3 8 million~~. Of this amount~~, $or 33.6%, ~~million was provided by~~ over net ~~income~~sales ~~and~~for ~~$69.6~~the ~~million~~forty ~~was~~weeks ~~provided~~ended asOctober a6, ~~result of a net decrease in working capital and other~~2001. Net ~~Significant~~sales ~~non-cash items added back~~ for ~~operating~~the ~~cash~~retail ~~purposes~~segment ~~include~~increased ~~depreciation and amortization of~~ $49659.03 million, ~~amortization~~or of35.5% ~~bond~~to ~~discounts and deferred debt issuance costs of~~ $2,514.9 million. The ~~and~~net ~~provision~~sales increase for ~~deferred~~the ~~income~~retail ~~taxes~~segment ofwas ~~$25.2~~due ~~million.~~to ~~Net~~an ~~cash~~increase ~~used~~in ~~for~~the ~~investing~~comparable ~~activities~~store sales ~~was~~of ~~$37~~6.2%, ~~million~~sales ~~and~~from ~~was~~stores ~~comprised~~acquired ~~primarily~~in ~~of capital~~the ~~expenditures.~~Discount ~~Net~~acquisition ~~cash~~and ~~used~~contributions infrom ~~financing~~new ~~activities~~stores ~~was~~opened ~~$122~~within the last year.2 The ~~million~~comparable ~~and~~store sales increase was ~~comprised~~a ~~primarily~~result of ~~$174.4~~growth ~~million~~ in ~~net~~both ~~payments~~the onDIY ~~the~~and ~~credit~~DIFM ~~facility~~market ~~and~~segments, ~~payments~~as towell as ~~repurchase~~the ~~and~~continued ~~retire~~maturation ~~outstanding~~of ~~bonds~~new ~~and~~stores. Net asales ~~decrease~~for inthe ~~bank overdrafts~~wholesale ofsegment decreased $359.14 million, ~~all~~due ~~offset~~to bythe ~~$90.0~~decline ~~million~~ in ~~net~~the ~~proceeds~~number ~~from~~of ~~Advance’s~~dealer ~~equity~~stores ~~offering~~we ~~during~~serviced ~~the~~and ~~first~~lower ~~quarter~~average ofsales ~~fiscal~~to ~~2002.~~each dealer.

~~The~~ During ~~Company’s~~the ~~primary~~forty ~~capital~~weeks ~~requirements~~ended ~~have~~October ~~been~~5, ~~the~~2002, ~~funding~~we ofopened ~~its~~61 ~~continued~~new ~~store expansion program~~stores, ~~store~~relocated ~~relocations~~27 stores and ~~remodels,~~closed ~~inventory~~152 ~~requirements,~~stores ~~the~~(130 ~~construction~~of ~~and~~which ~~upgrading~~were ~~of distribution~~related ~~centers~~to the Discount acquisition), bringing the ~~development~~total ~~and~~number ~~implementation~~of retail stores to 2,393. As of ~~proprietary~~October ~~information~~5, ~~systems~~2002, ~~and~~we ~~strategic~~had ~~acquisitions.~~1,408 ~~The~~stores ~~Company~~participating ~~has~~in ~~financed~~our ~~its~~commercial ~~growth~~delivery ~~through~~program, as a ~~combination~~result of ~~internally~~adding ~~generated~~38 ~~funds,~~net ~~borrowings~~programs ~~under~~during the ~~credit~~forty ~~facility and~~weeks ~~issuances~~ended ofOctober ~~debt~~5, ~~and equity securities~~2002.

~~The~~ Gross ~~Company’s~~profit ~~new~~for ~~stores~~the forty weeks ended October 5, if2002 ~~leased~~was ~~require~~$1,135.2 ~~capital expenditures~~million, or 43.9% of ~~approximately~~net ~~$120~~sales,~~000~~ ~~per~~as ~~store~~compared ~~and~~to an$825.4 ~~inventory~~million, ~~investment~~or 42.6% of ~~approximately~~net ~~$150~~sales,~~000~~ ~~per~~for ~~store~~the forty weeks ended October 6, ~~net~~2001. The increase in gross profit percentage reflects the positive impact in purchasing synergies as a result of renegotiating vendor ~~payables.~~contracts Ain ~~portion~~conjunction ofwith the ~~inventory~~Discount ~~investment~~acquisition, and isthe ~~held~~leveraging atof alogistics ~~distribution~~costs ~~facility~~realized from our recent supply chain initiatives. Additionally, ~~Pre-opening~~gross ~~expenses~~profit for the forty weeks ended October 6, ~~consisting~~2001 includes an $8.3 million gain from our settlement with a vendor. The gross ~~primarily~~profit offor ~~store~~the ~~set-up~~retail ~~costs~~segment ~~and~~was ~~training~~$1,123.8 million, or 44.7% of ~~new~~net ~~store~~sales, ~~employees~~for the forty weeks ended October 5, ~~average~~2002, ~~approximately~~as compared to $25813.9 million,~~000~~ ~~per~~or ~~store~~43.9% ~~and~~of ~~are~~net ~~expensed~~sales, ~~when~~for ~~incurred~~the forty weeks ended October 6, 2001. The gross profit for the retail segment also includes the $8.3 million gain for the forty weeks ended October 6, 2001.

~~The~~ Selling, ~~Company’s~~general ~~future~~and ~~capital~~administrative ~~requirements~~expenses, before ~~will~~merger ~~depend~~and onintegration ~~the~~expenses ~~number of new stores the Company opens~~ and ~~the~~merger ~~timing~~related ofrestructuring, ~~these~~increased ~~within~~to ~~a given year~~$940.5 ~~The~~million, ~~Company~~or ~~expects~~36.4% toof ~~open~~net orsales, ~~acquire~~for ~~between~~the ~~100 and~~forty ~~125~~weeks ~~stores~~ended ~~during~~October ~~fiscal~~5, 2002, offrom ~~which~~$726.0 28million, ~~have~~or ~~been~~37.5% ~~opened as~~ of ~~July~~net 13sales, ~~2002.~~for ~~Subsequent~~the toforty ~~July~~weeks ~~13,~~ended ~~2002~~October 6, 2001. The ~~the~~decrease ~~Company~~in ~~announced~~selling, ~~the~~general ~~acquisition~~and ofadministrative 55expenses ~~Trak~~as ~~Auto~~a ~~stores,~~percentage inof ~~which~~sales ~~the~~reflects ~~Company~~both ~~will~~our ~~assume~~ability ~~the~~to ~~existing~~leverage ~~leases~~our ~~and~~store ~~anticipates paying~~payroll upexpenses toagainst ~~approximately~~a ~~$16.0~~higher ~~million~~sales ~~for~~base ~~inventory~~ and ~~fixtures.~~lower ~~These~~rent ~~stores~~expense ~~will~~as bea ~~considered~~result ~~part~~ of ~~the~~owning ~~100~~a tohigher percentage ~~125~~of ~~new~~ stores tofollowing bethe ~~opened~~Discount ~~during fiscal 2002~~acquisition.

~~Historically~~ Operating income, as adjusted for merger and integration and merger related restructuring, was $194.7 million for the ~~Company~~forty ~~has~~weeks ~~negotiated~~ended ~~extended~~October ~~payment~~5, ~~terms~~2002, ~~from~~or ~~suppliers~~7.5% of net sales, as compared to ~~help~~$99.4 million, ~~finance~~or ~~inventory~~5.1% ~~growth~~of net sales, ~~and~~for the ~~Company~~forty ~~believes~~weeks ~~that~~ended itOctober ~~will~~6, be2001. Merger ~~able~~and tointegration ~~continue~~expenses of ~~financing~~$25.9 ~~much~~million ofinclude ~~its~~non-recurring ~~inventory~~expenses ~~growth~~associated ~~through~~with ~~such~~integrating ~~extended~~the ~~payment~~Discount ~~terms~~operations. Merger ~~The~~related ~~Company~~restructuring ~~anticipates~~expenses ~~that~~primarily ~~inventory~~relate ~~levels~~to ~~will~~lease ~~continue~~costs toassociated ~~increase~~with ~~primarily~~the Advance Auto Parts stores in overlapping markets closed as a result of ~~new~~the ~~store~~Discount ~~openings~~acquisition.

As Interest ~~part~~expense offor ~~normal operations,~~ the ~~Company~~forty ~~continually~~weeks ~~monitors~~ended ~~store~~October ~~performance~~5, ~~which~~2002 ~~results~~was in$53.6 million, ~~the~~or ~~Company’s~~2.0% ~~closing~~of ~~certain~~net sales, ~~store~~as ~~locations~~compared ~~that~~to do$36.6 ~~not~~million, ~~meet profitability~~or ~~objectives~~1.9% ~~During first and second quarters~~ of ~~fiscal~~net ~~2002~~sales, for the ~~Company~~forty ~~closed~~weeks orended ~~relocated~~October ~~seven~~6, of2001. Interest expense reflects the ~~12 stores~~overall ~~included~~increase in ~~the~~average ~~fiscal~~borrowings, ~~2001~~offset ~~restructuring~~by ~~activities~~more ~~and~~favorable ~~decided~~interest torates ~~close~~during orthe ~~relocate~~forty 34weeks ~~additional stores that~~ended ~~are~~October ~~not~~5, ~~meeting profitability objectives~~2002, 19as ofcompared ~~which~~to ~~were~~the ~~closed~~forty orweeks ~~relocated~~ended atOctober ~~July 13~~6, ~~2002~~2001. This Inincrease ~~addition~~in toborrowings ~~its~~is ~~ongoing~~a ~~restructuring~~result ~~activities, the Company has closed substantially all~~ of the ~~Advance~~additional ~~Auto~~debt ~~Parts~~incurred ~~stores that were identified~~ in ~~overlapping~~ ~~markets~~conjunction with ~~certain~~the Discount ~~Auto Parts stores at December 29, 2001 and closed 103 Discount Auto Parts stores during the first and second quarters of fiscal 2002~~acquisition.

During the forty weeks ended October 5, 2002, we recorded $7.5 million in a loss on extinguishment of debt, net of tax. This loss reflects the ratable portion of the deferred loan costs associated with our partial repayment of our Tranche A and Tranche B term loans, the refinancing of the remaining portion of our Tranche B term loans and the repurchase and retirement of outstanding senior subordinated notes at a premium.

~~The~~ Income ~~Western~~tax ~~merger,~~expense ~~Carport acquisition and Discount acquisition also resulted in restructuring reserves recorded in purchase accounting~~ for the ~~closure~~forty ofweeks ~~certain~~ended ~~stores,~~October ~~severance and relocation costs and other facility exit costs. In addition~~5, ~~the Company assumed certain restructuring and deferred compensation liabilities previously recorded by Western and Discount. At July 13,~~ 2002, ~~these~~was ~~restructuring reserves had a remaining balance of~~ $1743.54 million~~. At July 13~~, ~~2002,~~as ~~the~~compared ~~total~~to ~~liability for the assumed restructuring and deferred compensation plans was~~ $124.5 7 million ~~and $3.1 million, respectively,~~ offor ~~which~~the ~~$0.9~~forty ~~million~~weeks ~~and~~ended ~~$0.7~~October ~~million~~6, ~~respectively,~~2001. This isincrease ~~recorded~~was asprimarily adue ~~current~~to ~~liability.~~increases ~~The~~in ~~classification~~pre-tax income for ~~deferred~~the ~~compensation~~forty isweeks ~~determined~~ended byOctober ~~payment~~5, ~~terms elected by plan participants~~2002, ~~primarily~~as ~~former~~compared ~~Western~~to ~~employees,~~the ~~which~~forty ~~can~~weeks ~~be changed~~ended ~~upon~~October 126, ~~months’ notice~~2001.

~~Seasonality~~ As a result of the above factors, we recorded net income of $88.3 million before merger and integration expenses and the extraordinary loss on extinguishment of debt for the forty weeks ended October 5, 2002, as compared to $38.8 million for the forty weeks ended October 6, 2001. After merger and integration expenses and the extraordinary loss, we recorded net income of $64.6 million for the forty weeks ended October 5, 2002. As a percentage of sales, net income for the forty weeks ended October 5, 2002 was 2.5%, as compared to 2.0%, for the forty weeks ended October 6, 2001.

~~The~~Liquidity ~~Company’s business is somewhat seasonal in nature, with the highest sales occurring in the spring~~ and ~~summer~~Capital months. In addition, the Company’s business is affected by weather conditions. While unusually heavy precipitation tends to soften sales as elective maintenance is deferred during such periods, extremely hot and cold weather tends to enhance sales by causing parts to fail. Resources

~~New~~ At ~~Accounting~~October ~~Pronouncements~~5, 2002, we had outstanding indebtedness consisting of $333.8 million of senior subordinated notes, borrowings of $339.5 million under our credit facility and $10.0 million of indebtedness under the McDuffie County Development Authority Taxable Industrial Revenue Bonds. At October 5, 2002, we had approximately $27.3 million in letters of credit outstanding and had no borrowings under the revolving credit facility, resulting in available borrowings of $132.7 million under the revolving credit facility.

In Our ~~April~~future ~~2002,~~contractual ~~the~~obligations ~~FASB~~related issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections”. As a result of rescinding FASB Statement No. 4, “Reporting Gains Losses from Extinguishment of Debt”, gains and losses from extinguishment of debt should be classified as extraordinary items only if they meet the criteria in APB No. 30. This statement also amends FASB Statement No. 13, “Accounting for Leases”, to ~~eliminate an inconsistency between the required accounting for sale~~long-~~leaseback~~term ~~transactions~~debt and ~~the~~operating ~~required~~leases ~~accounting~~at ~~for~~October certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Additional amendments include changes to other existing authoritative pronouncements to make various technical corrections5, clarify meanings or describe their applicability under changed conditions. The Company will adopt the provisions of SFAS No. 145 during the first quarter of fiscal 2003. For the twelve and twenty-eight week periods ended June 13, 2002, ~~the~~were ~~Company~~as recorded extraordinary losses on the extinguishment of debt, net of tax, of $6,468 and $7,243, respectively. Accordingly, reclassifications of these losses to income from continuing operations will be made throughout fiscal 2003 to maintain comparability for the reported periods. follows:

In June 2002, the FASB issued SFAS No. 146, “Accounting for Cost Associated with Exit or Disposal Activities”. This statement nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. This statement requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred instead of at the date an entity commits to an exit plan. The statement is effective for exit and disposal activities entered into after December 31, 2002. The Company does not expect adopting this statement will have a material impact on its financial position or the results of its operations.

Contractual Obligations at October 5, 2002	Total		Fiscal 2002			Fiscal 2003		Fiscal 2004		Fiscal 2005		Fiscal 2006		Thereafter

Long-term Debt ⁽¹⁾		$683,268		$10,000	⁽²⁾		$11,393		$28,890		$31,952		$31,952		$569,081
Operating Leases		$899,208		$37,510			$142,379		$126,422		$107,851		$89,760		$395,286

(1) Long-term debt includes the fully accreted senior subordinated notes.
(2) Represents indebtedness under the McDuffie County Development Authority taxable industrial revenue bonds, which was repurchased on November 1, 2002.

During second quarter of fiscal 2002, we amended and restated our credit agreement and refinanced the remaining portion of our Tranche B term loan facility by adding a new $250 million Tranche C term loan facility. For the forty weeks ended October 5, 2002, we repaid $178.3 million in debt with free cash flow generated during the period and proceeds from Advance’s equity offering in March 2002.

Additionally, during the third quarter of fiscal 2002, we recorded a $0.3 million extraordinary loss on extinguishment of debt as a result of writing off deferred debt issuance costs associated with the partial repayment of our Tranche A and Tranche C term loans and repurchasing a portion of our outstanding senior subordinated notes. For the forty weeks ended October 5, 2002, our extraordinary loss of $7.5 million also includes bank fees associated with the establishment of the Tranche C term loan facility during the second quarter, which we used to refinance our Tranche B term loan facility under our credit facility.

Subsequent to the third quarter of fiscal 2002, we also purchased $10.0 million of indebtedness under the McDuffie County Authority industrial revenue bonds, from which the proceeds were used to construct one of our distribution centers. We have leased this facility since its opening in 1999. Upon repayment of this indebtedness, we also exercised our option to purchase the distribution center for ten dollars. We also repurchased and retired $8.5 million in face value of the 10.25% senior subordinated notes.

The amended Tranche A term loan amortization schedule currently reflects required repayments of $1.5 million on May 31, 2003, $7.8 million on November 30, 2003, $12.4 million in May and November 2004 and $13.9 million each May and November in 2005 and 2006 through maturity on November 30, 2006. Under the amended credit facility, the Tranche C term loan facility requires scheduled repayments of $2.1 million semi-annually beginning November 30, 2003 through May 31, 2007, at which time we will be required to pay the remaining balance of $233.1 million at maturity on November 30, 2007.

The interest rate on the Tranche C term loan facility is based, at our option, on either an adjusted LIBOR rate, ~~Item~~plus a margin, or an alternate base rate, plus a margin. The interest rate under the Tranche C term loan facility is subject to adjustment according to a pricing grid based upon our leverage ratio (as defined in our credit facility). The initial margins for the Tranche C term loan facility are 2.5% and 1.5% per annum for the adjusted LIBOR rate and alternative base rate borrowings, respectively, and can step down to 2.25% and 1.25% per annum, respectively, if our leverage ratio is less than 2.00 to 1.00. The initial margins can step up to a maximum of 3. ~~Quantitative~~00% and ~~Qualitative~~2.00% ~~Disclosures~~per ~~About~~annum, ~~Market~~respectively, ~~Risks~~if our leverage ratio is greater than 3.50 to 1.00. Subsequent to October 5, 2002, we applied for a reduction in these rates based on our leverage ratio being 1.95 to 1.00 at October 5, 2002. The amended credit facility contains the prepayment provisions, covenant requirements and guarantees from the previous credit agreement entered into November in 2001. For a full discussion of the other terms of the credit facility, see section "Long Term Debt" in Item 7. of our annual report on Form 10-K for the year ended December 29, 2001. We were in compliance with the above covenants under the amended credit facility as of October 5, 2002.

~~The~~ For ~~Company~~the ~~currently~~forty ~~utilizes~~weeks noended ~~material~~October ~~derivative~~5, ~~financial~~2002, ~~instruments~~net ~~that~~cash ~~expose~~provided itby tooperating ~~significant~~activities ~~market~~was ~~risk~~$218.0 ~~The~~million. Of ~~Company~~this isamount, ~~exposed~~$64.6 million towas ~~cash~~provided ~~flow~~by net income and ~~fair~~$36.5 ~~value~~million ~~risk~~was ~~due~~provided toas ~~changes~~a inresult ~~interest~~of ~~rates~~a ~~with~~net ~~respect~~decrease ~~to its~~in working capital and other long-term ~~debt.~~assets ~~While~~and ~~the~~liabilities. Significant ~~Company~~non-cash ~~cannot~~items ~~predict~~added ~~the~~back ~~impact~~for ~~that~~operating ~~interest~~cash ~~rate~~purposes ~~movements~~include depreciation ~~will~~and ~~have~~amortization onof ~~its~~$71.5 ~~debt~~million, ~~exposure~~amortization toof ~~rate~~bond ~~changes~~discounts isand ~~managed~~deferred ~~through~~debt ~~the~~issuance ~~use~~costs of ~~fixed~~$3.9 million and ~~variable~~provision ~~rate~~for ~~debt~~deferred income taxes of $41.5 ~~The~~million. Net ~~Company’s~~cash ~~exposure~~used tofor ~~interest~~investing ~~rate~~activities was $51.9 million ~~risk~~and ~~decreased~~was ~~during~~comprised ~~the~~primarily ~~first~~of capital expenditures. Net cash used in financing activities was $127.9 million and ~~second~~was ~~quarters~~comprised primarily of ~~fiscal~~$178.3 ~~2002~~million ~~primarily~~in ~~due~~net topayments on the ~~refinancing~~credit facility and payments to repurchase and retire outstanding bonds and a decrease in bank overdrafts of it$35.1 million, all offset by $90.0 million in net proceeds from Advance’s ~~variable~~equity ~~rate~~offering ~~debt.~~in March 2002.

~~The~~ Our ~~Company’s~~primary ~~fixed~~capital ~~rate~~requirements ~~debt~~have ~~consists~~been ~~primarily~~the funding of ~~outstanding~~our ~~balances~~continued onstore ~~the~~expansion ~~senior~~program, ~~subordinated~~including ~~notes.~~new ~~The~~store ~~Company’s~~openings ~~variable~~and ~~rate~~store ~~debt~~acquisitions, ~~relates~~store relocations toand ~~borrowings~~remodels, ~~under~~inventory requirements, the ~~amended~~construction ~~credit~~and ~~facility~~upgrading of distribution centers, the development and implementation of proprietary information systems, the ~~McDuffie County~~Discount ~~industrial~~acquisition, ~~revenue~~the ~~bond.~~Western ~~The~~merger ~~Company’s~~and ~~variable~~the ~~rate~~Carport acquisition. We ~~debt~~have isfinanced ~~primarily~~our ~~vulnerable~~growth tothrough ~~movements~~a incombination ~~the~~of ~~LIBOR,~~internally ~~Prime~~generated funds, ~~Federal~~borrowings ~~Funds~~under the credit facility and ~~Base~~issuances CDof ~~rates.~~equity by Advance.

~~The~~ Our ~~table~~new ~~below~~stores, ~~presents~~if ~~principal~~leased ~~cash~~require ~~flows~~capital ~~and~~expenditures ~~related~~of ~~weighted~~approximately ~~average~~$120,000 ~~interest~~per ~~rates~~store onand ~~the~~an ~~Company’s~~inventory ~~long-term~~investment ~~debt~~of atapproximately ~~July 13~~$150,000 ~~2002~~per bystore, ~~expected~~net ~~maturity dates. Expected maturity dates~~of ~~approximate~~vendor ~~contract terms~~payables. A ~~Fair~~portion ~~values~~of ~~included~~the ~~herein~~inventory ~~have~~investment ~~been~~is ~~determined~~held ~~based~~at ona ~~quoted~~distribution ~~market prices~~facility. Pre-opening ~~Weighted~~expenses, ~~average~~consisting ~~variable~~primarily ~~rates~~of ~~are~~store ~~based~~set-up oncosts ~~implied~~and ~~forward~~training ~~rates~~of innew ~~the~~store ~~yield~~employees, ~~curve~~average atapproximately ~~July 13~~$25,000 ~~2002.~~per ~~Implied~~store ~~forward rates should not be~~and ~~considered~~are aexpensed ~~predictor~~when ~~of actual future interest rates~~incurred.

	Fiscal 2002			Fiscal 2003			Fiscal 2004			Fiscal 2005			Fiscal 2006			Thereafter			Total			Fair Market Value
	(dollars in thousands)
Long-term debt:
Fixed rate	$	—		$	—		$	—		$	—		$	—		$	348,820		$	348,820		$	366,261
Weighted average interest rate		—			—			—			—			—			10.3	%		10.3	%
Variable rate	$	10,000		$	11,436		$	29,003		$	32,079		$	32,079		$	235,417		$	350,014		$	350,014
Weighted average interest rate		4.5	%		4.8	%		6.3	%		7.3	%		7.7	%		7.9	%		6.3	%

Our future capital requirements will depend on the number of new stores we open or acquire and the timing of these openings or acquisitions within a given year. We anticipate adding approximately 110 stores during fiscal 2002 through new store openings and from our Trak Auto Parts acquisition, of which 61 (including 22 stores from our Track acquisition) had been added as of October 5, 2002. During the third quarter of fiscal 2002, we announced that we finalized an arrangement to acquire 57 Trak Auto Parts stores, in which we will assume the existing leases and pay up to approximately $16.0 million for inventory and fixtures. These stores are included as part of the approximately 110 new stores to be added during fiscal 2002.

For fiscal 2002, we anticipate our capital expenditures will be approximately $105 million (excluding up to $16 million to purchase inventory and fixtures in connection with our acquisition of the 57 Trak Auto Parts stores), of which approximately $35 million will involve conversion and other integration related capital expenditures associated with the Discount acquisition.

Historically, we have negotiated extended payment terms from suppliers to help finance inventory growth, and we believe that we will be able to continue financing much of our inventory growth through such extended payment terms. We anticipate that inventory levels will continue to increase primarily as a result of new store openings.

As part of normal operations, we continually monitor store performance, which results in our closing store locations that do not meet profitability objectives. During the first three quarters of fiscal 2002, we closed or relocated nine of the 12 stores identified in 2001 as not meeting profitability objectives and decided to close or

~~PART~~relocate II49 additional stores that did not meet profitability objectives, 28 of which were closed or relocated at October 5, 2002. ~~OTHER~~ In ~~INFORMATION~~addition, as part of our integration of Discount, we closed 130 Advance Auto Parts stores and Discount stores that were in overlapping markets.

The Western merger, ~~Item~~Carport acquisition and Discount acquisition also resulted in restructuring reserves recorded in purchase accounting for the closure of certain stores, severance and relocation costs and other facility exit costs. In addition, we assumed certain restructuring and deferred compensation liabilities previously recorded by Western and Discount. At October 5, 2002, the restructuring reserves had a remaining balance of $14.1 million. ~~Legal~~ At ~~Proceedings~~October 5, 2002, the total liability for the assumed restructuring and deferred compensation plans was $1.0 million and $3.0 million, respectively, of which $0.4 million and $1.5 million, respectively, is recorded as a current liability. The classification for deferred compensation is determined by payment terms elected by plan participants, primarily former Western employees, which can be changed upon 12 months’ notice.

In We ~~November~~expect ~~1997, Joe~~that C.funds ~~Proffitt,~~provided ~~Jr.,~~from onoperations ~~behalf of himself~~ and ~~all~~available ~~others~~borrowings ~~in the states~~ of ~~Alabama,~~approximately ~~California,~~$132.7 ~~Georgia,~~million ~~Kentucky,~~under ~~Michigan,~~our ~~North~~revolving ~~Carolina,~~credit ~~Ohio,~~facility ~~South~~at ~~Carolina,~~October ~~Tennessee~~5, ~~Texas~~2002, ~~Virginia and West Virginia who purchased batteries from Advance from~~will ~~November~~provide 1,sufficient ~~1991~~funds to ~~November~~operate 5,our ~~1997~~business, ~~filed~~make aexpected ~~class~~capital ~~action~~expenditures ~~complaint and motion~~ of ~~class~~approximately ~~certification~~$105 ~~against~~million us in ~~the~~2002, ~~circuit~~complete ~~court~~our ~~for~~acquisition ~~Jefferson~~of ~~County,~~Trak ~~Tennessee,~~Auto ~~alleging~~Parts ~~the~~stores, ~~sale~~finance byour ~~Advance~~restructuring ofactivities ~~used,~~and ~~old~~fund orfuture ~~out-of-warranty~~debt ~~automotive~~service ~~batteries~~on our assenior ~~new.~~subordinated ~~The~~notes ~~complaint seeks compensatory~~ and ~~punitive~~our ~~damages.~~credit Infacility ~~September~~over ~~2001,~~ the ~~court~~next ~~granted~~12 ~~Advance’s~~months. ~~motion~~We ~~for~~may ~~summary~~use ~~judgment~~additional ~~against~~funds ~~the~~from ~~plaintiff~~operations ~~and~~to ~~dismissed~~prepay ~~all~~borrowings ~~claims~~under ~~against~~the ~~Advance.~~term ~~The~~loans ~~period~~under ~~for~~our ~~appeal~~credit ~~has~~facility ~~expired~~ and, ~~no further~~depending ~~action~~upon isprevailing ~~expected~~market onprices, ~~this~~repurchase ~~case.~~our senior subordinated notes.

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

(1)	Exhibits:
	10.47	Amendment and Restatement Agreement dated as of June 28, 2002, among Advance Stores Company, Inc., Advance Auto Parts, Inc., the Lenders and JPMorgan Chase Bank, as administrative agent.
	10.48	Reaffirmation Agreement dated as of July 1, 2002, among Advance Stores Company, Inc., Advance Auto Parts, Inc., and JPMorgan Chase Bank, as administrative agent.
	10.49	Amended and Restated Credit Agreement dated as of June 28, 2002, among Advance Stores Company, Inc., Advance Auto Parts, Inc., the Lenders and JPMorgan Chase Bank, as administrative agent.
	99.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(2)	Reports on Form 8-K.
	(a)	The Company filed a Current Report on Form 8-K on July 13, 2002, disclosing the refinancing of a portion of the Company’s senior credit facility.

Our business is somewhat seasonal in nature, with the highest sales occurring in the spring and summer months. In addition, our business can be affected by weather conditions. While unusually heavy precipitation tends to soften sales as elective maintenance is deferred during such periods, extremely hot and cold weather tends to enhance sales by causing parts to fail.

New Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” As a result of rescinding FASB Statement No. 4, “Reporting Gains Losses from Extinguishment of Debt,” gains and losses from extinguishment of debt should be classified as extraordinary items only if they meet the criteria in APB No. 30. This statement also amends FASB Statement No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Additional amendments include changes to other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions. We will adopt the provisions of SFAS No. 145 during the first quarter of fiscal 2003. For the twelve and forty week periods ended October 5, 2002, we recorded extraordinary losses on the extinguishment of debt, net of tax, of $295 and $7,538, respectively. Accordingly, reclassifications of these losses to income from continuing operations will be made throughout fiscal 2003 to maintain comparability for the reported periods.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are exposed to cash flow risk due to changes in interest rates with respect to our long-term debt. While we cannot predict the impact that interest rate movements will have on our debt, exposure to rate changes is managed through the use of fixed and variable rate debt. Our future exposure to interest rate risk decreased during the forty weeks ended October 5, 2002 due to decreased interest rates and reduced variable rate debt. Additionally, during the third quarter, we entered into a hedge agreement in the form of a zero-cost collar, which will protect against interest rate fluctuations in the LIBOR rate on $150 million of our variable rate debt under our credit facility. The collar consists of an interest rate ceiling of 4.5% and an interest floor of 1.56% for a term of twenty-four months. Under this hedge, we will continue to pay interest at prevailing rates plus any spread, as defined by our credit facility, but will be reimbursed for any amounts paid on the LIBOR rate in excess of the ceiling. Conversely, we will be required to pay the financial institution that originated the collar if the LIBOR rate is less than the 1.56% floor.

Our fixed rate debt consists primarily of outstanding balances on the senior subordinated notes. Our variable rate debt relates to borrowings under our credit facility and our industrial revenue bonds. Our variable rate debt is primarily vulnerable to movements in the LIBOR, Prime, Federal Funds and Base CD rates.

The table below presents principal cash flows and related weighted average interest rates on our long-term debt at October 5, 2002 by expected maturity dates. Expected maturity dates approximate contract terms. Fair values included herein have been determined based on quoted market prices. Weighted average variable rates are based on implied forward rates in the yield curve at October 5, 2002, as adjusted by the limitations of the hedge agreement. Implied forward rates should not be considered a predictor of actual future interest rates.

		Fiscal 2002			Fiscal 2003			Fiscal 2004			Fiscal 2005			Fiscal 2006			Thereafter			Total			Fair Market Value

		*(dollars in thousands)*
Long-term debt:
	Fixed rate	$	—		$	—		$	—		$	—		$	—		$	345,315		$	345,315		$	364,307
	Weighted average interest rate		—			—			—			—			—			10.3	%		10.3	%
	Variable rate	$	10,000		$	11,393		$	28,890		$	31,952		$	31,952		$	235,297		$	349,484		$	349,484
	Weighted average interest rate		4.3	%		4.4	%		5.1	%		6.3	%		6.8	%		7.2	%		5.6	%

ITEM 4.

CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to ensure that information required in our periodic reports to the Securities and Exchange Commission is recorded, processed, summarized and reported in a timely and accurate manner. Subsequent to the date of their evaluation, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect the disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

	Our Western Auto subsidiary, together with other defendants including automobile manufacturers, automotive parts manufacturers and other retailers, has been named as a defendant in lawsuits alleging injury as a result of exposure to asbestos-containing products. We, Discount and Parts America also have been named as defendants in many of these lawsuits. The plaintiffs have alleged that these products were manufactured, distributed and/or sold by the various defendants. To date, these products have included brake and clutch parts and roofing materials. The number of cases in which we or one of our subsidiaries has been named as a defendant has increased in the past year. Many of the cases pending against us or our subsidiaries were filed recently and are in the early stages of litigation. The damages claimed against the defendants in some of these proceedings are substantial. Additionally, some of the automotive parts manufacturers that are named as defendants in these lawsuits have declared bankruptcy, which will limit plaintiffs’ ability to recover monetary damages from those defendants. We believe that we have valid defenses against these claims. We also believe that most of these claims are at least partially covered by insurance. Based on discovery to date, we do not believe the cases currently pending will have a material adverse effect on us. However, if we were to incur an adverse verdict in one or more of these claims and were ordered to pay damages that were not covered by insurance, these claims could have a material adverse affect on our operating results, financial position and liquidity. If the number of claims filed against us or any of our subsidiaries alleging injury as a result of exposure to asbestos-containing products increases substantially, the costs associated with concluding these claims, including damages resulting from any adverse verdicts, could have a material adverse effect on our operating results, financial position and liquidity in future periods.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(1)	Exhibits:

	3.1(*)	Restated Articles of Incorporation of Advance Stores Company, Incorporated.

	3.2(*)	Amended Bylaws of Advance Stores Company, Incorporated.

	99.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(2)	Reports on Form 8-K.

	(a)	The Company filed a Current Report on Form 8-K on August 16, 2002, announcing its operating results for the quarter end July 13, 2002 and the certification of its Chief Executive Officer and Chief Financial Officer.

(*) Filed on June 4, 1998 as an exhibit to the Registration Statement on Form S-4 (No. 333-56013) of Advance Stores Company, Incorporated.

SIGNATURE

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.

ADVANCE STORES COMPANY, INCORPORATED a Virginia corporation By: /s/ JIMMIE L. WADE Jimmie L. Wade President and Chief Financial Officer (as principal executive and accounting officer)

	ADVANCE STORES COMPANY, INCORPORATED
	a Virginia corporation


November 19, 2002		By:	/s/ Jimmie L. Wade

			Jimmie L. Wade President and Chief Financial Officer (duly authorized officer and principal financial and accounting officer)

August 14, 2002

S-1

CERTIFICATIONS

I, Lawrence P. Castellani, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Advance Stores Company, Incorporated;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	(c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date:	November 19, 2002

/s/ Lawrence P. Castellani

Lawrence P. Castellani Chief Executive Officer

I, Jimmie L. Wade, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Advance Stores Company, Incorporated;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	(a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
	(b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
	(c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date:	November 19, 2002

/s/ Jimmie L. Wade

Jimmie L. Wade President and Chief Financial Officer

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Filing Compare · ADVANCE STORES CO INC