TRAK AUTO CORP, 10-K, 1996-05-02

TRAK AUTO CORP
10-K, 1996-05-02
AUTO & HOME SUPPLY STORES

Previous: CYPRESS BIOSCIENCE INC, S-3/A, 1996-05-02

Next: DEAN WITTER VARIABLE INVESTMENT SERIES, 497J, 1996-05-02

<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

(Mark One)

(X) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required) for the fiscal year ended February 3, 1996
--------------------

( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) for the transition period
from __________ to __________

Commission file number 0-12202
------------

TRAK AUTO CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 52-1281465
- ------------------------------------ ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3300 75th Avenue, Landover, Maryland 20785
- ------------------------------------ ---------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (301) 731-1200
----------------------------

Securities registered pursuant to Section 12(b) of the Act: NONE
------------------
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $.01 Per Share
- --------------------------------------------------------------------------------
(Title of Class)

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 X No
------- -------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )

At April 30, 1996, the registrant had 5,893,764 shares of Common Stock
outstanding and the aggregate market value of such shares held by
non-affiliates of the registrant was approximately $29,788,000.

DOCUMENTS INCORPORATED BY REFERENCE.

1996 Information Statement ........................ Part III Items 10-13.

The exhibit index begins at page 74 of this Form 10-K.

1
<PAGE> 2
Table of Contents

<TABLE>
<CAPTION>
Part I
------
Page
----
<S> <C> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Part II
-------

Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . 30

Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 65

Part III
--------

Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . 65

Part IV
-------

Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
</TABLE>

2
<PAGE> 3
Part I

Forward-looking Statements

Statements in this report that are not historical in nature, including
references to beliefs, anticipations or expectations, are forward-looking. Such
statements are subject to a wide variety of risks and uncertainties that could
cause actual results to differ materially from those projected, including the
results of ongoing litigation affecting the Company (defined below), the
Company's ability to open new stores and close other stores, the effect of
national and regional economic conditions, the availability of capital to fund
operations and other risks described from time to time in the Company's filings
with the Securities and Exchange Commission. The Company undertakes no
obligation and does not intend to update, revise or otherwise publicly release
the result of any revisions to these forward-looking statements, which
revisions may be made to reflect any future events or circumstances, other than
through its regular quarterly and annual financial statements, and through the
accompanying discussion and analysis contained in the Company's Quarterly
Reports on Form 10-Q and Annual Report on Form 10-K, which will contain
disclosure concerning the Company's actual results of operations and financial
condition during the period covered by such reports.

Item 1. Business

Trak Auto Corporation ("Trak Auto") was incorporated in Delaware in 1983 and
operates retail discount auto parts stores. The term "Company" refers
collectively to Trak Auto and its wholly-owned subsidiaries, including Trak
Corporation ("Trak"), Super Trak Corporation ("Super Trak") and Trak DHC
Corporation ("Trak DHC"). Dart Group Corporation ("Dart") owns 67.3% of Trak
Auto's outstanding common stock, par value $.01 per share (the "Common Stock").

Operations

The Company operates retail discount auto parts stores in the metropolitan
areas of Washington, D.C.; Richmond, Virginia; Chicago, Illinois; Los Angeles,
California; and Pittsburgh, Pennsylvania.

The Company is engaged in the retail sale of a wide range of automobile parts
and accessories for the do-it-yourself market. The Company's products include
"hard parts" (such as alternators, starters, shock absorbers, fan belts, spark
plugs, mufflers, thermostats, and wheel bearings), as well as motor oil, oil
filters, headlights, batteries, waxes, polishes, anti-freeze and windshield
wipers. A typical "Classic Trak" store carries 10,000 different item numbers
or SKU's. The Company does not sell tires and does not provide automotive
service or installation.

Super Trak operates retail auto parts stores that offer more services and
merchandise than the "Classic Trak" stores described above. Super Trak stores
carry approximately 5,000 more SKU's, concentrated primarily in application
parts categories. Additionally, Super Trak stores feature special order
services that permit customers to access virtually any automotive part,

3
<PAGE> 4
Item 1. Business (Continued)

including engines. The stores also offer extensive technical assistance
through computerized parts look-up, instruction for repairs, free use of
specialized tools, and factory trained parts people.

During the year ended January 28, 1995, the Company expanded its Super Trak
concept to include Super Trak Warehouse stores. These stores are typically
between 13,000 and 25,000 square feet and carry approximately 35,000 SKU's. The
added SKU's are composed of additional application parts.

The Company has successfully opened or converted 113 Super Traks and 30 Super
Trak Warehouse stores. The Company plans to continue to convert Classic Trak
stores into Super Trak and Super Trak Warehouse stores and open new stores as
opportunities present themselves in the Company's five metropolitan markets as
well as new markets.

The Company's merchandise is generally purchased directly from a large number
of manufacturers and suppliers. The Company's distribution system is
computerized utilizing an automated replenishment and perpetual inventory
system to generate shipments of product from distribution centers in Landover,
Maryland; Bridgeview, Illinois and Ontario, California. The required items are
generally assembled and packaged for delivery in the order in which they will
be unpacked and displayed on the shelves at the retail stores, promoting store
efficiency. Inventories are monitored both at stores and in the distribution
centers to determine purchase requirements. The Company has a computerized
point of sale ("POS") register system in every store. The Company uses
scanners to identify most merchandise at the register and uses a price look-up
function to price the sale. Most merchandise is pre-labeled with bar codes by
the manufacturers.

The Company's merchandising philosophy is to develop strong consumer
recognition and acceptance of its name by use of mass-media advertising to
promote a broad selection of products at low prices. The Company emphasizes
quality customer service through knowledgeable personnel and advanced
technology such as electronic parts look-up, POS and computerized
do-it-yourself aids in all stores.

Classic Trak stores range in size from approximately 5,000 to 6,000 square
feet, Super Trak stores range in size from 6,000 to 11,000 square feet, and
Super Trak Warehouse stores range in size from approximately 13,000 to 25,000
square feet. The Company's stores use modern fixtures and equipment and the
interiors have been standardized, so that the interiors of new stores can be
assembled quickly. The stores are open seven days a week. No store
contributed more than 1.0% to the Company's consolidated sales during the year
ended February 3, 1996.

4
<PAGE> 5
Item 1. Business (Continued)

The following table sets forth by metropolitan area the locations of the
Company's stores for each of the last five fiscal years.

<TABLE>
<CAPTION>
Number of Stores
at end of fiscal year
-------------------------------
Metropolitan Area 1992 1993 1994 1995 1996
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Baltimore, Maryland ......... 6 0 0 0 0
Chicago, Illinois ........... 99 99 97 86 79
Los Angeles, California ..... 121 119 116 104 96
Pittsburgh, Pennsylvania 0 0 0 0 14
Richmond, Virginia .......... 15 15 15 11 10
San Diego, California........ 11 0 0 0 0
Washington, D.C. ............ 81 84 86 81 77
---- ---- ---- ---- ----
Total .............. 333 317 314 282 276
</TABLE>

The following tables set forth the number of stores of each of Classic Trak,
Super Trak, and Super Trak Warehouse that were opened, closed or remodeled
during each of the last five fiscal years, as well as the total number of such
stores as of the end of each such fiscal year.

<TABLE>
<CAPTION>
Super Trak Stores 1992 1993 1994 1995 1996
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Opened during the year............ - 12 62 34 17
Closed or converted to Super Trak
Warehouse during the year....... - - 1 1 10

Super Trak Warehouse Stores
- ---------------------------
Opened during the year ........... - - - 7 23

Classic Trak Stores
- -------------------
Opened during the year............ 19 6 1 - -
Closed or converted to Super Trak
or Super Trak Warehouse during
the year........................ 17 34 65 72 36

Total Open at End of Year
- -------------------------
Super Trak Stores.................. - 12 73 106 113
Super Trak Warehouse Stores........ - - - 7 30
Classic Trak Stores................ 333 305 241 169 133
</TABLE>

During the fourth quarter of fiscal 1996, the Company acquired the assets of 14
stores in Pittsburgh, PA, for approximately $6.2 million. This acquisition
places the Company with the largest market share in a viable new market. At
this date, the stores are undergoing remodeling and should be converted to the
Trak Auto concept by mid-year. Additional sites are currently being negotiated
with the intention of growing this new market to over 20 stores over the next
two years.

5
<PAGE> 6
Item 1. Business (Continued)

The Company believes that its superstore concept presents significant growth
opportunities and intends to open new Super Trak and Super Trak Warehouse
stores in existing and possibly new markets. As of February 3, 1996, the
Company had entered into lease agreements to open seven new stores and
amendments to existing lease agreements to convert two Classic Trak stores into
Super Trak or Super Trak Warehouse stores. In addition, the Company may from
time to time expand its retail operations through acquisitions of existing
stores from third parties in existing and possibly new markets.

The Company intends to continue its practice of reviewing the profitability
trends and prospects of existing stores. The Company may from time to time
close, relocate or sell stores (or groups of stores) that are not satisfying
certain performance objectives.

Store Closings and Restructuring Costs

The Company continually evaluates its store operations and the need to close,
relocate, or expand stores or convert existing Classic Trak stores into Super
Trak or Super Trak Warehouse stores. The Company recognizes store closing
costs when management determines to close a store. In prior years, the Company
has also recognized the anticipated costs for closing, relocating, expanding
and converting existing stores to the Super Trak and Super Trak Warehouse
concept. The costs associated with store closings and restructuring efforts
are primarily unrecoverable lease obligations (rent, real estate taxes and
common area charges, net of estimated sublease income) and the book value of
leasehold improvements as of the actual or estimated closing date of a store.

As of February 3, 1996, the Company had reserves of $4,491,000 for store
closings and restructurings. The restructuring reserve relates to 21 stores
that have been closed or converted into Super Trak or Super Trak Warehouse
stores and an additional 15 stores identified to be closed or converted but
which have remained open. The closed store reserve relates to eight Classic
Trak stores that were closed apart from the Company's restructuring efforts.
The activity in the closed store and restructuring reserves during the last two
years follows:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Reserve, beginning of year $ 6,945,000 $ 7,797,000
Less: Net provision recorded/(Charges) (2,454,000) (852,000)
----------- -----------
Reserve, end of year $ 4,491,000 $ 6,945,000
=========== ===========
</TABLE>

Included in the activity for fiscal 1996 is an additional closed store and
restructure reserve net provision of $673,000.

6
<PAGE> 7
Item 1. Business (Continued)

The lease obligation allocable to related party leases is approximately
$939,000. The closed store and restructuring reserves as of February 3, 1996
are expected to be utilized as follows:

<TABLE>
<CAPTION>
Fiscal
Year Total
------ -----
<S> <C>
1997 $1,324,000
1998 1,027,000
1999 976,000
2000 372,000
2001 327,000
2002-2005 465,000
----------
Total $4,491,000
==========
</TABLE>

The amount recorded for future lease obligations has been estimated at 95% of
the total lease obligation after the closing date because the Company believes
that certain alternatives (subleasing and favorable lease buy-outs) to
abandonment may be available. Since the recorded reserve represents an
estimate based upon anticipated closing dates and the book value of the
leasehold improvements at the time the store is closed, the ultimate amount of
costs associated with store closing is subject to change in the future.

The Company will continue to evaluate the performance and future viability of
its stores and may close or convert additional stores in the future.

Relationship with Dart

Dart provides the Company with certain general and administrative services.
Dart also pays certain "common expenses" for the Company and its affiliates and
allocates such expenses on a judgmental basis. Dart charged the Company
approximately $865,000 for such services in the year ended February 3, 1996.
In addition, the Company provides similar services to Dart and its other
subsidiaries. The Company charged Dart and its other subsidiaries
approximately $1,235,000 for such services in the year ended February 3, 1996.
See Note 4 to the Consolidated Financial Statements and Item 2.- Properties.
During the year ended 1995, the Company entered into a tax sharing agreement
with Dart, which would become effective if and when the Company is consolidated
into Dart's income tax returns.

7
<PAGE> 8
Item 1. Business (Continued)

Competition

The business in which the Company is engaged is highly competitive. The
Company competes with local, regional and national retail sellers of automobile
parts and accessories. To some extent, the Company competes with garages,
service stations, automobile dealers, supermarkets, and department, hardware
and other stores. Some of the Company's competitors offer installation
services, which are not offered by the Company. Many of its competitors have
greater resources than the Company and the Company encounters strong price
competition.

Seasonality

The Company's business is somewhat seasonal in nature, with the highest sales
occurring in the second and third fiscal quarters (May through October). Sales
for the combined second and third quarters in each of fiscal years 1996 and
1995 were 51% of total annual sales. The Company's business is also affected
by weather conditions. Extremely hot or cold weather tends to enhance sales by
causing a higher incidence of parts failure, thus increasing sales of seasonal
products. Rain or snow, however, tends to reduce sales by causing deferral of
elective maintenance.

Employees

On February 3, 1996, the Company employed approximately 2,150 full-time and
1,560 part-time persons engaged in retail, warehouse and administrative
operations. The Company considers its relations with employees to be good.

8
<PAGE> 9
Item 1. Business (Continued)

Executive Officers

The following table sets forth the names, ages and positions of the executive
officers of Trak Auto. Executive officers are appointed to serve until the
meeting of the Board of Directors following the next annual meeting of
stockholders or until their successors are appointed.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Herbert H. Haft 75 Chairman of the Board of
Directors and Chief
Executive Officer
R. Keith Green 45 President
David B. MacGlashan 52 Senior Vice President and
Chief Financial Officer
Robert E. Brann 44 Executive Vice President
Thomas V. Reilly 48 Executive Vice President
Dennis N. Weiss 50 Vice President, Real
Estate
</TABLE>

Herbert H. Haft has been Chairman of the Board and Chief Executive Officer of
Trak Auto since its incorporation in 1983. Mr. Haft is the founder of Dart and
has been its Chairman and Chief Executive Officer since 1960. He is also
Chairman of each of Dart's other subsidiaries, including Crown Books
Corporation ("Crown Books") and Total Beverage Corporation ("Total Beverage"),
and a director of Shoppers Food Warehouse Corp. ("Shoppers Food"), in which
Dart owns a 50% interest.

R. Keith Green has been President of Trak Auto since 1990 and a Director of
Trak Auto since 1991. From 1987 to 1990, Mr. Green was President and Chief
Executive Officer of Whitlock Corporation. Prior to 1987, he served as Vice
President of Stores of Auto Zone.

David B. MacGlashan has been Senior Vice President and Chief Financial Officer
of Trak Auto since December 1995. From 1991 to 1995, he was Principal
Accounting Officer of Trak Auto. From 1987 to 1991, Mr. MacGlashan was Vice
President of Finance and Chief Financial Officer of WSR, Inc. (formerly
Whitlock Corporation). Prior to 1987, he served as Chief Financial Officer of
I. B. Diffusion Ltd.

Robert E. Brann has been Executive Vice President of Trak Auto since 1990.
From 1989 to 1990, Mr. Brann was Vice President of Merchandising of Trak Auto.
Prior to 1989, he served as Vice President of Merchandising and later Vice
President of Store Operations and Administration of Franks Nursery and Crafts.

Thomas V. Reilly has been Executive Vice President of Trak Auto since 1987.
From 1984 to 1987, Mr. Reilly was Assistant Vice President and General Manager

9
<PAGE> 10
Item 1. Business (Continued)

of the Chicago Region of Trak Auto. Prior to 1984, he served as a Regional
Manager of Trak Auto.

Dennis N. Weiss has been Vice President of Real Estate of Trak Auto since 1987.
Mr. Weiss is also Vice President, Real Estate of each of Dart, Crown Books and
Total Beverage.

There is no family relationship between any director and executive officer of
Trak Auto.

Changes in Management

On September 7, 1994, the Board of Directors of Dart established an Executive
Committee comprised of Dart's outside directors to conduct the affairs of Dart
with respect to matters that were the subject of dispute between the Chairman
of the Board and Chief Executive Officer of Dart, Herbert H. Haft, and the then
President and Chief Operating Officer of Dart, Ronald S. Haft. Because Herbert
H. Haft is and Ronald S. Haft was an executive officer and/or director of Trak
Auto, on October 11, 1994, the Board of Directors of Trak Auto established an
Executive Committee comprised of the same outside directors, with authority
parallel to that of Dart's Executive Committee. The disputes between Herbert
H. Haft and Ronald S. Haft concerning issues involving Dart and Trak Auto have
been extensive. Accordingly, the respective Executive Committees assumed
day-to-day involvement in these disputed issues and other matters affecting
Dart and Trak Auto, in particular matters relating to litigation to which Dart
or Trak Auto is a party. While the Executive Committee remains involved in the
day-to-day affairs of Dart, its continuing role is dependent upon future
developments.

In connection with the RSH Settlement (defined below), Ronald S. Haft resigned
his positions as a director and officer of Dart and each of its subsidiaries.
The Standstill Order (defined below) contemplates that Ronald S. Haft will
continue as a director of Dart while the Standstill Order is in effect.
(Herbert H. Haft contends that Ronald S. Haft is no longer a director.)

Settlement with Ronald S. Haft

On October 6, 1995, Dart and Ronald S. Haft entered into a settlement of
certain litigation and other related transactions (collectively, the "RSH
Settlement"). The RSH Settlement transactions are subject to legal challenge.
See Item 3 - Legal Proceedings. If sustained, the RSH Settlement transactions
were intended to have the effect, by their terms, of transferring majority
control of Dart's voting stock to one or more voting trustees under a Voting
Trust Agreement (the "Voting Trust Agreement"), by and among Ronald S. Haft,
Dart and Larry G. Schafran and Sidney B. Silverman, as initial Voting Trustees.
On December 28, 1995, the initial Voting Trustees resigned and appointed
Richard B. Stone as successor Voting Trustee.

10
<PAGE> 11
Item 1. Business (Continued)

Standstill Order

In connection with legal challenges to the RSH Settlement, on December 6, 1995,
the Delaware Court of Chancery entered a Standstill Order (the "Standstill
Order"), which restricts certain actions by Dart. Without further order of the
court, Dart may not (i) change its Certificate of Incorporation or Bylaws; (ii)
change the current composition of Dart's Board of Directors (Herbert H. Haft,
Ronald S. Haft, Larry G. Schafran, Bonita A. Wilson and Douglas M. Bregman) or
any of its subsidiaries; (iii) change the current Haft family officers of Dart
or any of its subsidiaries; or (iv) issue any additional securities of Dart or
any of its subsidiaries (except employee stock options issued in the ordinary
course of business). In addition, without first giving Herbert H. Haft and
certain other litigants not less than seven days' written notice, Dart may not
take any extraordinary actions, including but not limited to actions that would
result in (a) the liquidation of Dart or any of its subsidiaries, (b) the sale
of any major subsidiary of Dart or (c) the disadvantage of any Class B
stockholder of Dart through any debt transaction. For purposes of the
Standstill Order, the phrase "extraordinary actions" means any transaction,
contract or agreement, the value of which exceeds $3 million. See Item 3 -
Legal Proceedings.

11
<PAGE> 12
Item 2. Properties

The Company subleases from Dart 210,000 square feet of a warehouse and office
facility, located in Landover, Maryland, which it shares with Crown Books. The
sublease is for 30 years and six months, provides for rental payments
increasing approximately 15% every five years over the term of the sublease and
commenced in 1985. The current annual rental is $1,422,000. The sublease also
requires the additional payment of maintenance, utilities, insurance and real
estate taxes allocable to the space subleased. Dart originally leased the
entire 271,000 square foot warehouse and office facility from a private
partnership in which Haft family members owned all of the partnership
interests. The Company's sublease is on the same terms as Dart's lease from
the Haft family partnership.

Dart has a lease agreement with a Haft family-owned entity for vacant land near
the Company's warehouse in Landover, Maryland. The lease is for the same
period as the warehouse and office facility lease described above and the
current annual rental is $25,000 with increases of three percent per year.
Dart, the Company and Crown Books each pay a pro-rata share of the rent in
proportion to their use of the headquarters building and distribution center.

The Company has an agreement with Dart to sublease 6,500 square feet in a
warehouse facility, adjacent to the above warehouse and office facility. Dart
leases the property from a partnership in which Haft family members own all of
the partnership interests (the "Pennsy Leases"). The sublease commenced April
1992 with a term of one year (with nine one-year option periods). Under the
sublease agreement the annual rent is $21,000 and increases to $24,000 for each
of the last five option periods. The sublease agreement also requires the
Company to pay approximately $6,000 annually for its full share of any common
area charges, real estate taxes and insurance premiums. The Company has given
notice to terminate the sublease and hold over in the warehouse on a
month-to-month basis.

The Company leases a 176,000 square foot warehouse located in Bridgeview,
Illinois from a private partnership in which Haft family members own all of the
partnership interests. The lease is for thirty years and six months, provides
for rental payments increasing approximately 15% every five years over the term
of the lease and commenced in 1984. The current annual rental is $728,000.
The lease also requires the Company to pay for maintenance, utilities,
insurance and real estate taxes on the warehouse. Under the terms of the lease
agreement, Dart is jointly and severally liable for the lease obligations.

The Company leases a 317,000 square foot warehouse located in Ontario,
California from a private partnership in which Haft family members own all of
the partnership interests. The lease is for 20 years and provides for
increasing rental payments, based upon the Consumer Price Index for the Los
Angeles area, over the term of the lease. The lease commenced in 1989. The
current annual rental is $1,374,000. The lease also requires the Company to
pay for maintenance, utilities, insurance and real estate taxes on the
warehouse.

12
<PAGE> 13

Item 2. Properties (Continued)

As part of the RSH Settlement, Ronald S. Haft agreed to transfer the real
estate and partnership interests controlled by him in the Landover, Maryland,
Bridgeview, Illinois and Ontario, California office and warehouse facilities to
Dart (or its subsidiaries) and to reduce rent. These transfers and rent
reductions are subject to contingencies, including bankruptcy court approval,
mortgagee approval, challenges brought by Herbert H. Haft concerning the extent
of Ronald S. Haft's ownership interest in the property and claims asserted by
Robert M. Haft and Linda G. Haft regarding the extent to which Ronald S. Haft
controls the aforementioned partnership interests.

The Company leases all of its 276 retail stores. As of February 3, 1996, the
total remaining minimum annual payments for the Company's retail stores
(excluding closed stores) were $154,213,000 to the lease expiration dates. The
lease and license expiration dates (without regard to renewal options) range
from 1996 to 2015.

Twenty-three of these leases are with entities in which the Haft family has
substantially all the beneficial interest, two are with joint ventures in which
Dart owns the majority interest and the remaining partnership interests are
held by members of the Haft family, and two are subleased from Crown Books (a
total of 27 leases). These 27 leases provide for various termination dates
that range from 1996 to 2024 and require payment of future minimum rentals
aggregating $49,979,000 (including renewal options) at February 3, 1996. These
lease agreements also require payment of a percentage of sales in excess of a
stated minimum. Annual fees and rentals paid to Haft-owned entities for stores
and office and warehouse space was $6,295,000 in the year ended February 3,
1996.

On February 10, 1995, after a legal review by Dart's Executive Committee, Dart
filed a complaint for rescission of the Pennsy Leases and for the return of
rent paid since 1991 on such leases. See Item 3 - Legal Proceedings. The
Executive Committees of Dart, Trak Auto and Crown Books have also undertaken a
legal review of other leasing arrangements and real estate related transactions
between Dart, the Company or Crown Books, on the one hand, and Haft-owned
entities, on the other hand. The Executive Committees have not yet determined
whether other actions will be taken as a result of this legal review.

13
<PAGE> 14

Item 3. Legal Proceedings

Robert M. Haft Employment Litigation

In August 1993, Robert M. Haft, a former president of Crown Books and Dart,
filed a lawsuit in the United States District Court for the District of
Delaware, Robert M. Haft v. Dart Group Corporation, et al. (D. Del. Civ. A. No.
93-384), naming as defendants Dart and two of its subsidiaries, Crown Books and
Trak Auto. The complaint, as amended, alleged breach of contract regarding
various employment, stock option, stock incentive and loan agreements and
sought declaratory judgment regarding a stock incentive agreement and a
possible right by Robert M. Haft to acquire an interest in Total Beverage, all
in connection with the termination of Robert M. Haft's employment in June
1993. The complaint, as amended, sought unspecified damages, costs and
attorneys' fees.

On September 20, 1994, a jury found that Dart had breached its employment
contract with Robert M. Haft and awarded him damages against Dart (equivalent
to the compensation projected to be due over a ten-year period) in the amount
of $18,856,964. The jury also found that Crown Books had breached an
employment agreement with Robert Haft and awarded him damages (equivalent to
the compensation projected to be due over a ten-year period) against Crown
Books in the amount of $12,800,910.

The jury also found that Robert M. Haft did not voluntarily terminate his
employment within the meaning of his Incentive Stock Agreement ("ISA") with
Crown Books. Under the terms of the ISA, a voluntary termination by Robert M.
Haft of his employment would have allowed Crown Books to repurchase all or a
portion of 100,000 shares of stock issued to Robert Haft by Crown Books
pursuant to the ISA, subject to certain transfer restrictions, in return for a
non-interest bearing promissory note, discounted at an effective rate of 11%,
for $203,750, due January 2, 2004. The jury's finding would preclude Crown
Books from making such a repurchase.

Robert M. Haft asked the judge presiding over the case to award him additional
damages in the amount of approximately $2.4 million based on the failure of
Crown Books to deliver 100,000 shares of unrestricted common stock of Crown
Books, which he would have a right to receive under the ISA in the event of his
termination without cause by Crown Books, when he demanded them in August 1993.
Robert M. Haft also requested a declaratory judgment on his claim against Dart,
Crown Books and Trak Auto arising from certain stock options granted to him by
those corporations and his claim that he has a purchase option for an interest
in Total Beverage.

14
<PAGE> 15
Item 3. Legal Proceedings (Continued)

On February 22, 1995, the federal district court in Robert M. Haft's employment
litigation made the following rulings against Dart, Crown Books and Trak Auto:

(1) The court found that Robert M. Haft was entitled to damages in
the amount of $2,146,250, plus interest, based on the failure
of Crown Books to deliver 100,000 shares of unrestricted Crown
Books Common Stock when he demanded them in August of 1993;

(2) The court found that Robert M. Haft was entitled to exercise
certain employee stock options under the 1981 and 1992 Stock
Option Plans of Dart, the Crown Books Stock Option Plan
adopted March 12, 1987, and the Trak Auto Corporation Stock
Option Plan adopted March 24, 1987. As to options that had
expired during the pendency of the case, the court extended
the time for exercise for a period equal to the period from
June 30, 1993 to the expiration date. As to options that had
not yet expired, the court extended the exercise date for a
period equal to the period from June 30, 1993 until final
judgment was entered. (Under the relevant plans, Robert M.
Haft would be entitled to exercise options for 50,000 of Class
A Common Stock of Dart having exercise prices of $71.50 -
$104.50 per share, 80,000 shares of Crown Books Common Stock
having exercise prices of $21.45 - $23.93 per share and 40,000
shares of Trak Auto Common Stock having exercise prices of
$6.60 - $13.75 per share.); and

(3) The court found that Robert M. Haft has the right to purchase
for $149,400 ten percent of Dart's interest in the entity that
acquired the assets of Total Beverage's Chantilly, Virginia
store.

The court entered final judgment on all claims in this lawsuit on March 23,
1995. On April 6, 1995, Dart and Crown Books filed with the court a motion for
a new trial and/or reduction of damages challenging the court's breach of
contract findings, damages awards and certain evidentiary rulings. In October
1995, the court denied such motion. On October 16, 1995, Dart, Crown Books and
Trak Auto filed a notice of appeal with the U.S. Court of Appeals for the Third
Circuit.

Derivative Litigation

In September 1993, Alan R. Kahn and the Tudor Trust (the "Kahn Derivative
Plaintiffs"), shareholders of Dart, filed a lawsuit in the Delaware Court of
Chancery for New Castle County naming as defendants Herbert H. Haft, Ronald S.
Haft, Douglas M. Bregman, Bonita A. Wilson, Combined Properties, Inc. ("CPI"),
Combined Properties Limited Partnership and Capital Resources Limited
Partnership. The suit is brought derivatively and names as nominal defendants
Dart, Trak Auto, Crown Books, Shoppers Food, Total Beverage and Cabot-Morgan
Real Estate Company.

15
<PAGE> 16
Item 3. Legal Proceedings (Continued)

The complaint, as amended on January 12, 1995, alleges waste, breach of
fiduciary duty, violation of securities laws and entrenchment in connection
with various lease agreements between the Combined Properties defendants and
Dart and its subsidiaries, the termination of Robert M. Haft, the compensation
paid to Ronald S. Haft and Herbert H. Haft, the employment agreement entered
into by Ronald S. Haft and Dart on August 1, 1993 (the "RSH Employment
Agreement"), the sale of 172,730 shares of Dart Class B Common Stock by Herbert
H. Haft to Ronald S. Haft, and the compensation paid to the Executive Committee.
Plaintiffs seek an accounting of unspecified damages incurred by Dart, voiding
of the options sold to Ronald S. Haft, appointment of a temporary custodian to
manage the affairs of Dart or to oversee its recapitalization or sale and costs
and attorneys' fees.

On April 27, 1995, the Kahn Derivative Plaintiffs and the Special Litigation
Committee of Dart's Board of Directors filed a Stipulation and Order which, if
entered by the court, would (i) dismiss claims against Douglas M. Bregman and
Bonita A. Wilson and (ii) realign Dart as a party plaintiff to the amended
complaint. The court has not yet acted upon this Stipulation.

In November 1993, Robert M. Haft filed another lawsuit in the Delaware Court of
Chancery for New Castle County. The lawsuit names as defendants Herbert H.
Haft, Ronald S. Haft, Douglas M. Bregman, and Bonita A. Wilson, and also names
Dart as a nominal defendant. The complaint derivatively alleges interested
director transactions, breach of fiduciary duty and waste in connection with
the RSH Employment Agreement. Robert M. Haft also brings individual claims for
breach of contract and dilution of voting rights in connection with the sale of
shares of Class B Common Stock by Herbert H. Haft to Ronald S. Haft and the RSH
Employment Agreement. The complaint seeks rescission of the sale of such
shares and the RSH Employment Agreement, unspecified damages from the
individual directors, and costs and attorneys' fees.

In January 1994, a Special Litigation Committee consisting of two outside,
independent directors of Dart, Crown Books and Trak Auto was appointed by the
Board of Directors to assess, on behalf of Dart, whether to pursue, settle or
abandon the claims asserted in these two derivative lawsuits. (Since the death
of one member in December 1994, the Special Litigation Committee has consisted
of one director.) In September 1994, the Special Litigation Committee moved
for dismissal of certain claims in those derivative lawsuits and for
realignment of the parties to permit Dart to prosecute other claims in those
derivative lawsuits. This motion is still pending before the court.

In connection with the RSH Settlement, on October 11, 1995, the plaintiff
shareholders, Ronald S. Haft, Combined Properties, Inc., Dart, Trak Auto and
Crown Books entered into a Stipulation and Agreement of Compromise, Settlement
and Release (the "Stipulation"). Pursuant to the Stipulation, the claims
against Ronald S. Haft and Combined Properties, Inc. will be dismissed on the
merits and with prejudice as against the shareholder plaintiffs and Dart and
its

16
<PAGE> 17
Item 3. Legal Proceedings (Continued)

subsidiaries, if the RSH Settlement and dismissal of these claims are approved
by the Delaware Court of Chancery.

Given that these derivative lawsuits are brought in the name of Dart and its
subsidiaries, recovery in them would inure to the benefit of Dart and its
subsidiaries if the claims are successfully litigated or settled. Therefore,
in the opinion of management, resolution of these actions will not have a
material adverse effect on the consolidated financial condition or results or
operations of the Company.

Pennsy Warehouse Litigation

In late 1994, the Executive Committee of Dart's Board of Directors undertook a
legal review of the Pennsy Leases. By their terms, the Pennsy Leases, which
run to 2016, require annual rental payments of $855,000 subject to escalation
in 1996 and thereafter based on increases in the Consumer Price Index. The
lease terms also require the lessee to pay real estate taxes, insurance,
utilities, and maintenance expenses. At January 31, 1996, Dart had reserved
approximately $18.5 million for the obligations represented by the Pennsy
Leases.

As a result of this review, on February 10, 1995, Dart filed a complaint (the
"Pennsy Warehouse Litigation") in Circuit Court for Prince George's County,
Maryland, alleging breaches of fiduciary duty, waste and other irregularities
by certain members of the Haft family and others in connection with the Pennsy
Leases and, in particular, with the resumption of rental payments for these
warehouses in 1991 following the bankruptcy of the prior tenant, Dart Drug
Stores, Inc. The complaint seeks rescission of the Pennsy Leases, restitution
of approximately $4.2 million of rent paid since 1991 and other monetary
damages.

Herbert H. Haft Proxy Litigation

In connection with Herbert H. Haft's sale of 172,730 shares of Dart Class B
Common Stock to Ronald S. Haft on July 28, 1993 (the "Stock Sale Agreement"),
Ronald S. Haft purportedly granted Herbert H. Haft an irrevocable proxy (the
"Proxy") to vote these shares of stock "to the same extent and with the same
effect as Ronald S. Haft might or could do under any applicable laws or
regulations governing the rights and powers of shareholders of Dart," until
Herbert H. Haft's death or incapacitation. On June 30, 1995, Ronald S. Haft
sent a letter to Herbert H. Haft purportedly revoking this proxy.

17
<PAGE> 18
Item 3. Legal Proceedings (Continued)

certain conditions, as well as costs and attorneys' fees. Ronald S. Haft also
requests that the court require Dart to refuse to recognize the validity of the
Proxy. On August 9, 1995, Herbert H. Haft filed an Answer and Counterclaim
denying liability and requesting rescission of the Stock Sale Agreement because
of Ronald S. Haft's alleged breach of contract and other grounds. On September
25, 1995, Dart filed its answer in this action. Both Ronald S. Haft and
Herbert H. Haft have moved for summary judgment in this lawsuit. On November
14, 1995, the court denied Ronald S. Haft's motion for summary judgment;
Herbert H. Haft's motion for summary judgment remains pending.

As part of the RSH Settlement, on October 6, 1995, Dart purchased from Ronald
S. Haft the 172,730 shares of Dart Class B Common Stock that were subject to
the Proxy.

Section 225 Action by Robert, Gloria and Linda Haft

On October 17, 1995, Robert M. Haft, Gloria G. Haft and Linda G. Haft
(collectively "RGL") filed a lawsuit captioned Gloria G. Haft, et al. v. Larry
G. Schafran, et al., Del. Ch., Civ. A. No. 14620 (the "Section 225 Action"), in
the Delaware Court of Chancery for New Castle County naming as defendants Dart
and all of its directors. RGL seek an order, under Section 225 of the Delaware
General Corporation Law, declaring that RGL validly removed all of Dart's
directors and replaced them with three individuals (John L. Mason, Ellen V.
Sigal and Michael Ryan), whom RGL purport to have elected. Such purported
election is premised on RGL's contention that RGL own a majority of Dart's
voting stock because, they argue, (i) the 172,730 Class B shares subject to
Herbert H. Haft's proxy have been purchased by Dart and may not be voted and
(ii) the shares of Dart Class B Common Stock placed in a voting trust (the
"Trust Shares") by Ronald S. Haft pursuant to the RSH Settlement also are not
entitled to vote because they have been unlawfully issued or they should be
deemed to be owned by Dart.

Dart's position is that this lawsuit is without merit and that the purported
action by RGL to reconstitute the Board of Directors is invalid. On October
27, 1995, Dart filed a motion for summary judgment.

Challenge to RSH Settlement by Herbert H. Haft

18
<PAGE> 19
Item 3. Legal Proceedings (Continued)

continues to be valid; (iii) declaring that Herbert H. Haft retains voting
control of Dart or, at a minimum, 34.55% of Dart's voting power; (iv) declaring
that the Trust Shares may not be lawfully voted; and (v) declaring that
defendants John L. Mason, Ellen V. Sigal and Michael Ryan are not duly elected
directors of Dart.

Dart's position is that this lawsuit, except for the declaration sought that
defendants John L. Mason, Ellen V. Sigal and Michael Ryan are not duly elected
directors of Dart, is without merit. Herbert H. Haft disagrees with Dart's
position.

Standstill Order

In connection with the legal challenges to the RSH Settlement, on December 6,
1995, the Delaware Court of Chancery entered the Standstill Order, which
restricts certain actions by Dart. Without further order of the court, Dart
may not (i) change its Certificate of Incorporation or Bylaws; (ii) change the
current composition of Dart's Board of Directors (Herbert H. Haft, Ronald S.
Haft, Larry G. Schafran, Bonita A. Wilson and Douglas M. Bregman) or any of its
subsidiaries; (iii) change the current Haft family officers of Dart or any of
its subsidiaries; or (iv) issue any additional securities of Dart or any of its
subsidiaries (except employee stock options issued in the ordinary course of
business). In addition, without first giving Herbert H. Haft and the other
parties to the Section 225 Action not less than seven days written notice, Dart
may not take any extraordinary actions, including but not limited to actions
that would result in (a) the liquidation of Dart or any of its subsidiaries,
(b) the sale of any major subsidiary of Dart or (c) the disadvantage of any
Class B stockholder of Dart through any debt transaction. For purposes of the
Standstill Order, the phrase "extraordinary actions" means any transaction,
contract or agreement, the value of which exceeds $3 million.

Other

Dart is engaged in discussions with Haft family members to explore
opportunities to settle litigation pending between the parties. There can be
no assurance that any settlement will be reached or as to the terms or timing
of any settlement, if one occurs.

Dart and the Company are defendants in litigation (Rollerson v. Dart
Group Corporation, et al., D.D.C. Civ. Action No. 95-CV-1172) involving a
former employee of the Company alleging sexual harassment. The suit claims $30
million in compensatory and punitive damages. Dart and the Company have filed
a motion for summary judgement and are awaiting a decision. While both Dart
and the Company are defending the suit vigorously and have made no accrual for
this litigation, it is not possible to assess the likelihood of plaintiff's
establishing liability against Dart or the Company, nor predict the amount of
damages that might be awarded in the event the claim succeeds. Management does
not anticipate that actual damages, if any, will bear any relation to the
magnitude of the damages claimed.

In the normal course of business, the Company is involved in various claims and
litigation. In the opinion of management, liabilities, if any, will not have a
material effect upon the consolidated financial condition and results of
operations of the Company.

The Company recorded expenses of approximately $780,000, $640,000 and $400,000
during the years ended February 3, 1996, January 28, 1995 and January 29, 1994,
respectively, for legal expenses incurred during these years.

19
<PAGE> 20

Item 4. Submission of Matters to a Vote of Security Holders

Inapplicable.

Part II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters

The Common Stock is quoted on the Nasdaq National Market ("Nasdaq") under the
symbol TRKA. The following table sets forth the range of the high and low sale
prices for the Common Stock, as reported by the Nasdaq, for the fiscal quarters
indicated.

<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
April 30, 1994 13 7/8 11
July 30, 1994 17 12 1/4
October 29, 1994 20 14
January 28, 1995 18 15
April 29, 1995 20 7/8 16 7/8
July 29, 1995 17 3/4 15 3/8
October 28, 1995 16 1/2 14 9/16
February 3, 1996 16 1/4 15
</TABLE>

There were approximately 150 record holders of the Common Stock as of April 30,
1996.

The Company has not paid dividends during the past two fiscal years and does
not expect to pay dividends in the foreseeable future.

20
<PAGE> 21

Item 6. Selected Financial Data

INCOME STATEMENT DATA: (in thousands, except per share and sales % data)

<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Sales $342,242 $348,599 $334,798 $315,793 $319,635
Interest and other income 2,358 1,887 1,562 1,759 1,145
Cost of sales, store
occupancy and
warehousing 253,582 256,210 255,669 233,472 242,787
Selling and administrative 69,626 69,260 70,838 66,053 64,918
Depreciation and
Amortization 6,292 6,004 6,756 6,029 6,488
Interest expense 3,638 3,849 3,561 3,521 3,549
Restructuring charge - - - 7,400 -
Unusual item - - - 3,894 -
Income (loss) before
income taxes 11,462 15,163 (464) 4,971 3,038
Income before
cumulative effect of
change in accounting
principle 7,290 10,265 81 3,355 2,084
Cumulative effect of change
in accounting principle - - - 1,658 -
Net income 7,290 10,265 81 5,013 2,084

Per share data:
Income before
cumulative effect of
change in accounting
principle $ 1.23 $ 1.67 $ .01 $ .57 $ .36
Cumulative effect of change
in accounting principle - - - .28 -
Net income $ 1.23 $ 1.67 $ .01 $ .85 $ .36

Weighted average common
share and common share
equivalents outstanding 5,928 6,139 6,107 5,928 5,795
Percentage increase
(decrease) in sales
Total stores (1.8)% 4.1% 6.0% (1.2)% 9.1%
Comparative stores (2.7)% 2.1% 1.3% 2.6% 6.1%
</TABLE>

21
<PAGE> 22

Item 6. Selected Financial Data (Continued)

BALANCE SHEET DATA: (in thousands)

<TABLE>
<CAPTION>
at end of Fiscal Year
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Current assets $133,993 $137,306 $129,805 $119,831 $101,404
Current liabilities 75,348 75,293 75,737 59,662 53,370
Working capital 58,645 62,013 54,068 60,169 48,034
Total assets 187,595 187,649 179,149 165,104 144,573
Long-term obligations 30,064 31,797 33,737 36,159 29,800
Stockholders' equity 82,183 80,559 69,675 69,283 61,403
</TABLE>

22
<PAGE> 23
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations

Control of Dart

Dart owns 67.3% of the outstanding common stock of Trak Auto. Dart's voting
stock, the Class B Common Stock, has been beneficially owned by Haft family
members.

The termination of Robert M. Haft as President and Chief Operating Officer of
Dart and as Chief Executive Officer and President of Crown Books in 1993, the
appointment of Ronald S. Haft as President and Chief Operating Officer of Dart
and the ensuing disagreements between Ronald S. Haft and Herbert H. Haft in
1994 has resulted in significant disputes over which Haft family members
control Dart. As a result of these disputes, Dart has been involved in
significant litigation involving Haft family members. See Item 3 - Legal
Proceedings.

On September 7, 1994, the Board of Directors of Dart established an Executive
Committee comprised of Dart's outside directors to conduct the affairs of Dart
with respect to matters that were the subject of dispute between the Chairman
of the Board and Chief Executive Officer of Dart, Herbert H. Haft, and the then
President and Chief Operating Officer of Dart, Ronald S. Haft. Because Herbert
H. Haft is and Ronald S. Haft was an executive officer and/or director of Trak
Auto, on October 11, 1994, the Board of Directors of Trak Auto established an
Executive Committee comprised of the same outside directors, with authority
parallel to that of Dart's Executive Committee. The disputes between Herbert
Haft and Ronald Haft concerning issues involving Dart and Trak Auto have been
extensive. Accordingly, the respective Executive Committees assumed day-to-day
involvement in these disputed issues and other matters affecting Dart and Trak
Auto, in particular matters relating to litigation to which Dart or Trak Auto
is a party. While the Executive Committee remains involved in the day-to-day
affairs of Dart, its continuing role is dependent upon future developments.

In connection with the RSH Settlement, Ronald S. Haft resigned his positions as
a director and officer of Dart and each of its subsidiaries. The Standstill
Order contemplates that Ronald S. Haft will continue as a director of Dart
while the Standstill Order is in effect. (Herbert H. Haft contends that Ronald
S. Haft is no longer a director.)

On October 6, 1995, Dart and Ronald S. Haft entered into the RSH Settlement,
which is subject to legal challenge. See Item 3 - Legal Proceedings. If
sustained, the RSH Settlement transactions were intended to have the effect, by
their terms, of transferring majority control of Dart's voting stock to one or
more voting trustees under the Voting Trust Agreement. On December 28, 1995,
the initial Voting Trustees resigned and appointed Richard B. Stone as
successor Voting Trustee.

In connection with legal challenges to the RSH Settlement, on December 6, 1995,
the Delaware Court of Chancery entered the Standstill Order, which restricts

23
<PAGE> 24
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)

certain actions by Dart. Without further order of the court, Dart may not (i)
change its Certificate of Incorporation or Bylaws; (ii) change the current
composition of Dart's Board of Directors (Herbert H. Haft, Ronald S. Haft,
Larry G. Schafran, Bonita A. Wilson and Douglas M. Bregman) or any of its
subsidiaries; (iii) change the current Haft family officers of Dart or any of
its subsidiaries; or (iv) issue any additional securities of Dart or any of its
subsidiaries (except employee stock options issued in the ordinary course of
business). In addition, without first giving Herbert H. Haft and certain other
litigants not less than seven days written notice, Dart may not take any
extraordinary actions, including but not limited to actions that would result
in (a) the liquidation of Dart or any of its subsidiaries, (b) the sale of any
major subsidiary of Dart or (c) the disadvantage of any Class B stockholder of
Dart through any debt transaction. For purposes of the Standstill Order, the
phrase "extraordinary actions" means any transaction, contract or agreement,
the value of which exceeds $3 million.

Although the impact cannot be precisely measured, management believes that the
continued uncertainty relating to the control of Dart and the surrounding
litigation has adversely affected the Company's reputation among banks, vendors
and landlords and made the Company's efforts to recruit highly-qualified
personnel more difficult. The uncertainty surrounding control of Dart (and the
associated adverse effects of such uncertainty) may continue until pending
litigation is adjudicated or settled.

Dart is engaged in discussions with Haft family members to explore
opportunities to settle litigation pending between the parties. See Item 3 -
Legal Proceedings. There can be no assurance that any settlement will be
reached or as to the terms or timing of any settlement, if one occurs.

Outlook

Except for historical information, statements in this Management's Discussion
and Analysis of Financial Condition and Results of Operations are
forward-looking. Actual results may differ materially due to a variety of
factors, including the results of ongoing litigation affecting the Company, the
Company's ability to open new stores and close other stores, the effect of
national and regional economic conditions, and the availability of capital to
fund operations. The Company undertakes no obligation and does not intend to
update, revise or otherwise publicly release the result of any revisions to
these forward-looking statements that may be made to reflect future events or
circumstances.

In January 1996, the Company acquired the assets of 14 stores in Pittsburgh for
approximately $6.2 million (at February 3, 1996, approximately $5.8 million had
been paid). The Company is currently remodeling the stores to convert them to
the Trak Auto concept. This acquisition makes the Company the largest auto
parts retailer in Pittsburgh, which management believes offers significant

24
<PAGE> 25
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)

growth opportunities. The Company is currently seeking additional locations in
Pittsburgh and expects to open new stores over the next two years.

The Company believes that its superstore concept presents significant growth
opportunities and intends to open new Super Trak and Super Trak Warehouse
stores in existing and possibly new markets. In the past, these superstores
have generated higher sales at locations converted from Classic Trak stores as
well as higher gross margins as a result of a change in product mix (increased
hard parts). The Company believes that as superstores mature, operating
expenses as a percentage of sales will decrease. In addition, the Company may
from time to time expand its retail operations through acquisitions of existing
stores from third parties in existing and possibly new markets.

Liquidity and Capital Resources

Cash, including short-term instruments, is the Company's primary source of
liquidity. Cash, including short-term instruments, decreased by $10,575,000 to
$13,559,000 at February 3, 1996 from $24,134,000 at January 28, 1995. The
decrease was primarily the result of the $5.8 million acquisition of the
merchandise inventory and fixed assets of 14 stores in the Pittsburgh,
Pennsylvania market, the $6.9 million repurchase of approximately 310,000
shares of outstanding Common Stock and capital expenditures.

Operating activities provided $7,598,000 to the Company for the 53 weeks ended
February 3, 1996 ("fiscal 1996") compared to $17,829,000 for the 52 weeks ended
January 28, 1995 ("fiscal 1995"). The decrease was primarily due to a $6.4
million decline in retail sales and $495,000 start-up costs associated with
entry into the Pittsburgh market.

Investing activities used $12,039,000 of the Company's funds in fiscal 1996
compared to $10,530,000 in fiscal 1995. The increase was primarily due to the
Pittsburgh acquisition (discussed above) and was partially offset by a net
reduction in the Company's marketable debt securities. Capital expenditures
were $7,835,000 in fiscal 1996 as a result of opening or converting Super Trak
or Super Trak Warehouse stores.

Financing activities used $6,134,000 of the Company's funds in fiscal 1996,
which principally resulted from the repurchase of outstanding shares of Common
Stock and was partially offset by proceeds from the exercise of stock options.
On December 21, 1994, Trak Auto offered to buy back from its shareholders
approximately 24% of the outstanding Common Stock, or 1,500,000 shares, at a

25
<PAGE> 26
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)

price of $17.50 per share. On February 6, 1995, Trak Auto amended the offer by
increasing the purchase price to $20.50 per share, and made certain other
changes. When the offer expired on February 28, 1995, Trak Auto had
repurchased approximately 310,000 shares for a total consideration of
$6,363,000 plus expenses of approximately $541,000.

The Company funds its requirements for working capital and capital expenditures
with net cash generated from operations and existing cash resources. The
Company's primary capital requirements relate to remodelings, new store
openings (including purchases of inventory and the costs of store fixtures and
leasehold improvements), and acquisitions. As of February 3, 1996, the Company
had entered into lease agreements to open seven new stores and amendments to
existing lease agreements to convert two Classic Trak stores into Super Trak or
Super Trak Warehouse stores.

At February 3, 1996

Working capital decreased to $58,645,000 in fiscal 1996 primarily as a result
of the costs associated with the entry into the Pittsburgh market, capital
expenditures for new store openings and the repurchase of outstanding common
stock. These uses of working capital were partially offset by operating
results.

At January 28, 1995

Working capital increased to $62,013,000 in fiscal 1995 as a result of the
Company's record year operating results.

Results of Operations

Year Ended February 3, 1996 Compared to the Year Ended January 28, 1995

During fiscal 1996, the Company opened or converted 17 Super Trak stores and
23 Super Trak Warehouse stores and closed or converted 36 Classic Trak stores
and ten Super Trak stores. At February 3, 1996, the Company had 276 stores,
including 113 Super Trak stores and 30 Super Trak Warehouse stores.

Sales of $342,242,000 for fiscal 1996 decreased by $6,357,000 or 1.8% compared
to fiscal 1995. The decrease was primarily due to lower sales during the 13
weeks ended April 29, 1995 compared to the 13 weeks ended April 30, 1994, as a
result of the mild winter conditions in Chicago and Washington, D.C.
metropolitan areas. (Extremely cold weather tends to enhance sales by causing a
higher incidence of parts failure and the need for anti-freeze). In addition,
sales were down due to a net decrease in the number of stores. The sales
decrease was partially offset by 53 weeks of sales during fiscal 1996 compared
to 52 weeks of sales in fiscal 1995. The extra sales week was approximately

26
<PAGE> 27
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)

$6,000,000. Comparable sales (stores open more than one year) decreased 2.7%
in fiscal 1996 compared to the 53 weeks ended February 4, 1995. Sales for
comparable Super Trak stores increased 0.1% in fiscal 1996. Sales for
comparable Classic Trak stores decreased 3.9% in fiscal 1996. Sales for Super
Trak and Super Trak Warehouse stores represented 56.2% of total sales during
fiscal 1996 compared to 42.6% for fiscal 1995.

Interest and other income increased by $471,000 in fiscal 1996 when compared to
fiscal 1995. The increase was primarily due to higher interest rates on the
Company's short-term investments.

Cost of sales, store occupancy and warehousing expenses (excluding closed store
reserves) as a percentage of sales were 74.0% in fiscal 1996 compared to 73.0%
in fiscal 1995. The increases were primarily due to a decrease in net
advertising income as a result of increased advertising costs and increased
occupancy costs for Super Trak and Super Trak Warehouse stores and were
partially offset by increased store margins. The Company recorded closed store
reserves of $418,000 and $1,580,000 in fiscal 1996 and 1995, respectively.
These reserves are for future lease obligations and net book value of leasehold
improvements for underperforming stores.

Selling and administrative expenses as a percentage of sales were 20.3% in
fiscal 1996 compared to 19.9% in fiscal 1995. The increase was primarily due
to increased payroll costs as a percentage of sales (actual payroll dollars
remained almost the same) and to increased health benefit costs.

Depreciation and amortization expenses increased $288,000 in fiscal 1996
compared to fiscal 1995. The increase was primarily the result of increased
fixed assets for new Super Trak and Super Trak Warehouse stores.

Interest expense decreased $211,000 in fiscal 1996 compared to fiscal 1995.

Net income decreased $2,975,000 (29.0%) from $10,265,000 in fiscal 1995 to
$7,290,000 in fiscal 1996 as a result of the foregoing factors.

The effective income tax rate was 36.4% in fiscal 1996 compared to 32.3% in
fiscal 1995. The increase was primarily the result of the valuation allowance
reversal in fiscal 1995 and is partially offset by a lower pre-tax income in
fiscal 1996 compared to fiscal 1995.

Year Ended January 28, 1995 Compared to the Year Ended January 29, 1994

During the year ended January 28, 1995, the Company closed 58 Classic Trak
stores and opened 20 Super Trak stores and 6 Super Trak Warehouse stores as
well as converted 14 Classic Trak stores to Super Trak stores.

27
<PAGE> 28
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)

Sales of $348,599,000 for the year ended January 28, 1995 increased by
$13,801,000 or 4.1% compared to the year ended January 29, 1994. The increases
were primarily attributable to increased sales by Super Trak stores that had
been converted from Classic Trak stores as well as a 2.1% increase in sales for
all stores open more than one year for the year ended January 28, 1995. Sales
for comparable Super Trak stores open more than one year increased 1.0% for the
year ended January 28, 1995. Sales for comparable Classic Trak stores open
more than one year increased 2.5% for the year ended January 28, 1995. Sales
for Super Trak and Super Trak Warehouse stores represented 42.6% of total sales
during the year ended January 28, 1995 compared to 23.3% for the year ended
January 29, 1994.

Interest and other income increased by $325,000 for the year ended January 28,
1995 when compared to the same period in the prior year. The increase was
primarily due to rental income resulting from a temporary sublease for a
portion of the Ontario, California warehouse. In addition, interest income
increased during the year ended January 28, 1995 compared to the same period
in the prior year as a result of increased funds available for short-term
investment.

Cost of sales, store occupancy and warehousing expenses as a percentage
of sales were 73.0% for the year ended January 28, 1995 (excluding the closed
store charge) compared to 76.4% for the year ended January 29, 1994. The
decrease was primarily due to increased store margins as a result of higher
overall merchandise margins and a favorable change in sales mix (increased hard
parts and decreased motor oils). Costs of sales, store occupancy and
warehousing expenses include a charge of $1,580,000 for store closings during
the year ended January 28, 1995 compared to a net income of $943,000 during the
year ended January 29, 1994, which resulted from early lease terminations, net
of cash buyouts.

Selling and administrative expenses as a percentage of sales were 19.9% for the
year ended January 28, 1995 compared to 21.1% for the year ended January 29,
1994. The decrease was primarily due to lower payroll costs as a result of the
Company's efforts to control store hours and administrative overhead and the
maturity of Super Trak stores.

Depreciation and amortization expenses decreased $752,000 for the year ended
January 28, 1995 when compared to the same period in the prior year. The
decrease was primarily the result of store closings and the full depreciation
of point-of-sale register systems.

The effective income tax rate was 32.3% for the year ended January 28, 1995.
The effective rate was lower than statutory rates primarily due to the reversal
of a $728,000 deferred tax valuation allowance. Management has concluded that
based on the weight of currently available evidence, it is more likely than not
that the entire deferred tax asset is realizable.

28
<PAGE> 29
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations (Continued)

Effects of Inflation

Inflation in the past several years has not had a significant impact on the
Company's business. The Company believes it will be able to recover future
cost increases due to inflation by increasing selling prices.

29
<PAGE> 30
Item 8. Financial Statements and Supplementary Data

Financial Statements

Page No.

Report of Independent Public Accountants 31

Consolidated Balance Sheets 32 - 33

Consolidated Statements of Income 34

Consolidated Statements of Stockholders' Equity 35

Consolidated Statements of Cash Flows 36 - 37

Notes to Consolidated Financial Statements 38 - 64

30
<PAGE> 31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO TRAK AUTO CORPORATION:

We have audited the accompanying consolidated balance sheets of Trak Auto
Corporation (a Delaware corporation and a majority-owned subsidiary of Dart
Group Corporation) and subsidiaries as of February 3, 1996 and January 28,
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three fiscal years in the period ended February
3, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trak Auto Corporation and
subsidiaries as of February 3, 1996 and January 28, 1995, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 3, 1996, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Washington, D.C.
April 26, 1996

31
<PAGE> 32
TRAK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
February 3, January 28,
1996 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 5,411,000 $ 5,196,000
Short-term instruments 8,148,000 18,938,000
Marketable debt securities 8,654,000 10,133,000
Accounts receivable 4,709,000 5,330,000
Merchandise inventories 99,471,000 89,797,000
Deferred income taxes 6,566,000 6,842,000
Other current assets 1,034,000 1,070,000
------------ ------------
Total Current Assets 133,993,000 137,306,000
------------ ------------

Property and Equipment, at cost:
Furniture, fixtures and equipment 56,982,000 49,008,000
Leasehold improvements 10,196,000 9,185,000
Property under capital leases 22,032,000 23 667,000
------------ ------------
89,210,000 81,860,000
Accumulated Depreciation
and Amortization 42,324,000 37,638,000
------------ ------------
46,886,000 44,222,000
------------ ------------

Other Assets 1,787,000 247,000
------------ ------------

Deferred Income Taxes 4,929,000 5,874,000
------------ ------------

Total Assets $187,595,000 $187,649,000
============ ============
</TABLE>

See notes to consolidated financial statements.

32
<PAGE> 33
TRAK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
February 3, January 28,
1996 1995
------------ ------------
<S> <C> <C>
Current Liabilities:
Accounts payable, trade $ 46,431,000 $ 50,403,000
Income taxes payable 698,000 393,000
Accrued expenses-
Salary and benefits 11,463,000 10,054,000
Taxes other than income 5,185,000 5,053,000
Other 11,399,000 8,944,000
Current portion of obligations under
capital leases 101,000 261,000
Due to affiliate 71,000 185,000
------------ ------------
Total Current Liabilities 75,348,000 75,293,000
------------ ------------

Obligations under Capital Leases 26,802,000 26,541,000
------------ ------------
Reserve for Store Closings and
Restructuring 3,167,000 5,029,000
------------ ------------
Other 95,000 227,000
------------ ------------
Total Liabilities 105,412,000 107,090,000
------------ ------------

Stockholders' Equity
Common stock, par value $.01 per
share; 15,000,000 shares
authorized; 6,416,058 and
6,331,458 shares issued
respectively 64,000 63,000
Paid-in capital 46,236,000 45,206,000
Unrealized investment gain (losses) 97,000 (110,000)
Retained earnings 44,506,000 37,216,000
Treasury stock, 528,190 and
217,812 shares of common
stock at cost, respectively (8,720,000) (1,816,000)
------------ ------------
Total Stockholders' Equity 82,183,000 80,559,000
------------ ------------

Total Liabilities and Stockholders'
Equity $187,595,000 $187,649,000
============ ============
</TABLE>

See notes to consolidated financial statements.

33
<PAGE> 34

TRAK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
Years Ended
----------------------------------------
February 3, January 28, January 29,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Sales $342,242,000 $348,599,000 $334,798,000
Interest and other income 2,358,000 1,887,000 1,562,000
------------ ------------ ------------
344,600,000 350,486,000 336,360,000
------------ ------------ ------------

Cost of sales, store occupancy
and warehousing 253,582,000 256,210,000 255,669,000
Selling and administrative 69,626,000 69,260,000 70,838,000
Depreciation and amortization 6,292,000 6,004,000 6,756,000
Interest expense 3,638,000 3,849,000 3,561,000
------------ ------------ ------------
333,138,000 335,323,000 336,824,000
------------ ------------ ------------

Income (loss) before income
taxes 11,462,000 15,163,000 (464,000)
Income taxes (benefit) 4,172,000 4,898,000 (545,000)
------------ ------------ ------------
Net income $ 7,290,000 $ 10,265,000 $ 81,000
============ ============ ============

Weighted average common share
and common share equivalents
outstanding 5,928,000 6,139,000 6,107,000
============ ============ ===========

Per share data:
Net income $ 1.23 $ 1.67 $ .01
============ ============ ============
</TABLE>

See notes to consolidated financial statements.

34
<PAGE> 35
TRAK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Years Ended
----------------------------------------
February 3, January 28, January 39,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Common Stock:
Balance, beginning of
period $ 63,000 $ 63,000 $ 63,000
Stock options exercised 1,000 - -
------------ ------------ ------------
Balance, end of period $ 64,000 $ 63,000 $ 63,000
============ ============ ============

Note Receivable:
Balance, beginning of period $ - $ - $ (124,000)
Payment of note receivable - - 124,000
------------ ------------ ------------
Balance, end of period $ - $ - $ -
============ ============ ============

Paid-in Capital:
Balance, beginning of period $ 45,206,000 $ 44,477,000 $ 44,290,000
Stock options exercised 1,030,000 729,000 187,000
------------ ------------ ------------
Balance, end of period $ 46,236,000 $ 45,206,000 $ 44,477,000
============ ============ ============

Unrealized Investment Gains
(Losses) $ 97,000 $ (110,000) $ -
============ ============ ============

Retained Earnings:
Balance, beginning of period $ 37,216,000 $ 26,951,000 $ 26,870,000
Net income 7,290,000 10,265,000 81,000
------------ ------------ ------------
Balance, end of period $ 44,506,000 $ 37,216,000 $ 26,951,000
============ ============ ============

Treasury Stock:
Balance, beginning of period $ (1,816,000) $ (1,816,000) $ (1,816,000)
Common Stock repurchased (6,904,000) - -
------------ ----------- ----------
Balance, end of period $ (8,720,000) $ (1,816,000) $ (1,816,000)
============ ============ ============

Common Stock Outstanding:
Balance, beginning of period 6,113,646 6,052,685 6,039,386
Stock Options Exercised 84,600 60,961 13,299
Common Stock repurchased (310,378) - -
------------ ------------ ----------
Balance, end of period 5,887,868 6,113,646 6,052,685
============ ============ ===========
</TABLE>

See notes to consolidated financial statements.

35
<PAGE> 36
TRAK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years Ended
------------------------------------------
February 3, January 28, January 29,
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Cash Flows from Operating
Activities:
Net Income $ 7,290,000 $ 10,265,000 $ 81,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 6,292,000 6,004,000 6,756,000
Provision for store closings
and restructuring 418,000 1,580,000 (943,000)
Change in assets and
liabilities:
Accounts receivable 738,000 1,004,000 1,522,000
Merchandise inventories (6,871,000) 4,165,000 (16,318,000)
Due from affiliate - 205,000 (20,000)
Other current assets 36,000 (80,000) (25,000)
Deferred income taxes 1,227,000 (3,382,000) (2,401,000)
Other assets 42,000 (8,000) 105,000
Accounts payable, trade (4,088,000) 477,000 12,735,000
Accrued expenses 4,953,000 255,000 2,689,000
Due to affiliate (137,000) - (35,000)
Income taxes payable 305,000 (762,000) 1,627,000
Reserve for closed
stores (2,607,000) (1,894,000) (1,039,000)
------------- ------------- ------------
Net cash provided by
operating activities $ 7,598,000 $ 17,829,000 $ 4,734,000
------------- ------------- ------------

Cash Flows from Investing
Activities:
Capital expenditures $ (7,835,000) $ (7,953,000) $(12,389,000)
Purchase of Pittsburgh
store assets (5,767,000) - -
Purchase of U.S. Treasury
Notes (499,000) (36,380,000) (25,777,000)
Dispositions of United States
Treasury Notes 500,000 33,097,000 23,414,000
Dispositions of marketable
debt securities 1,092,000 4,540,000 1,400,000
</TABLE>

(Continued on following page)

36
<PAGE> 37
TRAK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
Years Ended
----------------------------------------
February 3, January 28, January 29,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Maturities of marketable
debt securities 470,000 - -
Disposition of reverse
repurchase agreements - (1,023,000) -
Purchase of marketable
debt securities - (2,811,000) (7,726,000)
------------ ------------ ------------
Net cash used in
investing activities $(12,039,000) $(10,530,000) $(21,078,000)
------------ ------------ ------------

Cash Flows from Financing
Activities:
Principal payments under
capital lease obligations $ (261,000) $ (212,000) $ (196,000)
Purchase of treasury shares (6,904,000) - -
Proceeds from redemption
of note receivable - - 124,000
Proceeds from exercise of
stock options 1,031,000 729,000 187,000
------------ ------------ ------------
Net cash provided
by (used in) financing
activities $ (6,134,000) $ 517,000 $ 115,000
------------ ------------ ------------

Net Increase (Decrease) in Cash
and Equivalents $(10,575,000) $ 7,816,000 $(16,229,000)

Cash and Equivalents at
Beginning of Year 24,134,000 16,318,000 32,547,000
------------ ------------ ------------

Cash and Equivalents at
End of Year $ 13,559,000 $ 24,134,000 $ 16,318,000
============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
Supplemental Disclosures of Cash Flow Information:
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 3,638,000 $ 3,849,000 $ 3,561,000
Income taxes 3,339,000 8,948,000 340,000
</TABLE>

See notes to consolidated financial statements.

37
<PAGE> 38
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements reflect the accounts of Trak
Auto Corporation ("Trak Auto") and its wholly-owned subsidiaries. Trak Auto and
its wholly-owned subsidiaries are referred to collectively as the "Company".
All significant intercompany accounts and transactions have been eliminated.
The Company is engaged in the business of operating specialty retail stores.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ from
those estimates.

Fiscal Year

The fiscal year ends on the Saturday nearest to January 31. The year ended
February 3, 1996 included 53 weeks and the other fiscal years presented include
52 weeks.

Cash and Equivalents

The Company considers short-term instruments, consisting of United States
Treasury Bills, purchased with a maturity of less than one year to be cash
equivalents. The Company's United States Treasury Bills primarily consist of
instruments with a maturity of less than four months.

Short-term Instruments and Marketable Debt Securities

The Company's short-term instruments included United States Treasury Bills and
money market funds. Marketable debt securities included United States Treasury
Notes, corporate notes and municipal securities.

Management determines the appropriate classification of its investments in debt
securities at the time of purchase and reevaluates such determination at each
balance sheet date. Debt securities for which the Company does not have the
intent or ability to hold to maturity are classified as available for sale.

38
<PAGE> 39
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Securities available for sale are carried at fair value, with the unrealized
gains and losses, net of tax, reported as a separate component of stockholders'
equity. At February 3, 1996, market value was $97,000 greater than cost, net
of income taxes. At February 3, 1996, the Company had no investments that
qualified as trading or held to maturity.

The amortized cost of debt securities classified as available for sale is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization and interest are included in interest income. Realized gains
and losses are included in interest and other income. The cost of securities
sold is based on the specific identification method. The following table
(which excludes money market funds) presents the estimated fair value of debt
securities available for sale by contractual maturity at February 3, 1996:

<TABLE>
<S> <C>
Due in one year or less $ 12,425,000
Due after one year through three years 1,205,000
Due after three years 3,027,000
------------
$ 16,657,000
============
</TABLE>

Expected maturities will differ from contractual maturities because the issuers
of securities may have the right to prepay obligations without prepayment
penalties.

Fair Value of Financial Instruments

The fair values of current financial assets and liabilities are approximately
the reported carrying amounts. No value has been placed on the Company's line
of credit facility as any borrowings would bear interest at market rates.

Merchandise Inventories

The Company's inventories are priced at the lower of last-in, first-out
("LIFO") cost or market. At February 3, 1996 and January 28, 1995, inventories
determined on a first-in, first-out basis would have been greater by $6,579,000
and $5,870,000, respectively.

Effective January 30, 1994, the Company changed its method for determining the
index used to calculate the cost basis of the LIFO inventory for financial and
income tax reporting purposes. Under the new method, the Company uses an index
published by United States Bureau of Labor Statistics. Previously, an index
determined by the Company based upon inventory cost changes between financial

39
<PAGE> 40
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

reporting periods, was utilized. This change has been accounted for as a
change in accounting principle in the accompanying financial statements. Due
to limitations in the availability of historical information, it is not
possible to determine the effect, if any, on net income for the year ending
January 28, 1995 of the corresponding cumulative catch-up adjustment or on
retained earnings at January 28, 1995. Accordingly, the change in method was
accounted for on a prospective basis from January 30, 1994 and the effect on
per share data, if any, is not available.

Property and Equipment

Property and equipment are recorded at cost. The Company depreciates
furniture, fixtures and most equipment generally over a ten year period using
the straight-line method. Computer equipment is depreciated over a five year
period using the straight-line method. Computer software is charged to expense
in the year of acquisition. All stores and some equipment are leased.
Improvements to leased premises are amortized over a ten year period or the
term of the lease, whichever is shorter. Assets (primarily buildings) financed
through asset-based financing arrangements are depreciated over the lives of
the leases. Accumulated amortization for assets under capital lease was
$7,333,000 and $7,912,000 as of February 3, 1996 and January 28, 1995,
respectively.

Preopening Expenses

All costs of a noncapital nature incurred in opening a new store are charged to
expense as incurred.

Self Insurance Programs

The Company is self insured for certain levels of general liability, workers
compensation and employee medical coverage. Estimated costs of these self
insurance programs are accrued at the expected value of projected settlements
for known and anticipated claims.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk
consist primarily of short-term instruments, marketable debt securities and
accounts receivable from vendors. The Company restricts investment of
temporary cash investments to United States Treasury Notes and corporate notes
and municipal securities with a high credit standing. Credit risk on accounts

40
<PAGE> 41
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

receivable is minimized as a result of deducting such receivables from amounts
payable to the vendors.

Earnings Per Share

Earnings per share is computed using the weighted average number of shares of
common stock and common stock equivalents (certain stock options) outstanding
during the periods. The difference between primary earnings per common share
and fully diluted earnings per common share is not significant for the periods
presented.

New Accounting Standards

The Company is required to adopt Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for Long Lived Assets and Long-Lived Assets to be
Disposed of and SFAS No. 123, Accounting for Stock Based Compensation, no later
than its fiscal year ending February 1, 1997. The Company has determined
that implementation of SFAS No. 121 will not have a material impact on its
consolidated financial statements. The Company expects to disclose the fair
value of options granted in a footnote to its consolidated financial statements,
as permitted by SFAS No. 123.

Reclassifications

Certain reclassifications have been made to prior year statements to conform to
current year presentation.

41
<PAGE> 42
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

NOTE 2 - INCOME TAXES

The Company accounts for income taxes in accordance with SFAS 109, Accounting
for Income Taxes. This standard requires, among other things, recognition of
future tax benefits, measured by enacted tax rates, attributable to deductible
temporary differences between financial statement and income tax bases of
assets and liabilities and for tax net operating loss carryforwards, to the
extent that realization of such benefits is more likely than not.

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
Fiscal Years
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal $ 2,474,000 $ 5,255,000 $ 687,000
State 477,000 847,000 108,000
----------- ------------ ------------
2,951,000 6,102,000 795,000
Deferred:
Federal 829,000 (1,301,000) (1,052,000)
State 392,000 97,000 (288,000)
------------ ------------ ------------
$ 4,172,000 $ 4,898,000 $ (545,000)
============ ============ ============
</TABLE>

42
<PAGE> 43
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

The effective tax rate is reconciled to the Federal statutory rate as follows:

<TABLE>
<CAPTION>
Fiscal Years
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Federal statutory rate 35% 35% 34%
Income taxes at Federal
statutory rate $ 4,012,000 $ 5,307,000 $ (158,000)
Increase (decrease) in
taxes resulting from:
State income taxes,
net of Federal
income tax benefit 439,000 609,000 (118,000)
Tax exempt municipal
bond interest income (64,000) (108,000) (50,000)
Utilization of former
Trak West net
operating loss (225,000) (225,000) (219,000)
Effect of change in
deferred tax
valuation allowance - (728,000) -
Other 10,000 43,000 -
----------- ------------ ------------

Income tax provision
(benefit) $ 4,172,000 $ 4,898,000 $ (545,000)
=========== ============ ============

Effective tax rate 36.4% 32.3% n/a
=========== ============ ============
</TABLE>

43
<PAGE> 44
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

The effect of each type of temporary difference and carryforward that gives use
to a significant portion of deferred tax asset is as follows:

<TABLE>
<CAPTION>
February 3, January 28,
1996 1995
-------------- --------------
<S> <C> <C>
Gross deferred tax assets:
Capitalized leases treated as operating
leases for tax purposes $ 2,396,000 $ 2,326,000
Depreciation 1,031,000 1,321,000
Uniform capitalization of inventory costs 2,161,000 2,099,000
Reserve for expenses related to
unusual item - 206,000
Reserve for stores closings and
restructuring charges 1,798,000 2,782,000
Accrued rent 508,000 386,000
Accrued legal expenses - 200,000
Preacquisition basis adjustment for
Trak West 262,000 394,000
Accrued vacation reserve 498,000 446,000
Accrued self insurance reserve 2,253,000 1,827,000
State tax credit carryforward 767,000 963,000
Deferred income 83,000 99,000
Capital loss carryfoward 75,000 68,000
Other 80,000 130,000
-------------- --------------
Deferred tax assets 11,912,000 13,247,000

Deferred tax liability:
Book basis of asset acquired as a
result of involuntary conversion (417,000) (531,000)
-------------- --------------
Net deferred tax asset $ 11,495,000 $ 12,716,000
============== ==============
</TABLE>

44
<PAGE> 45
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

The Company established a valuation allowance of $728,000 against its deferred
tax asset in fiscal 1993. During the year ended January 28, 1995, the Company
reversed the $728,000 valuation allowance.

In the opinion of management, the deferred tax asset will be realized through
projected future earnings. The Company has achieved taxable income in each of
the last three years. The Company has a $201,000 capital loss carryforward
which will expire in fiscal year 2010. During the year ended January 28, 1995
the Company entered into a tax sharing agreement with Dart, which would become
effective, if and when the Company is consolidated with Dart's income tax
returns.

NOTE 3 - RESTRUCTURING AND CLOSED STORE CHARGES

45
<PAGE> 46
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Included in the activity for fiscal 1996 is an additional closed store and
restructure reserve net provision of $673,000.

The lease obligation allocable to related party leases is approximately
$939,000. The closed store and restructuring reserves as of February 3, 1996
are expected to be utilized as follows:

<TABLE>
<CAPTION>
Fiscal
Year Total
------ -----
<S> <C>
1997 $1,324,000
1998 1,027,000
1999 976,000
2000 372,000
2001 327,000
2002-2005 465,000
----------
Total $4,491,000
==========
</TABLE>

The Company will continue to evaluate the performance and future viability of
its stores and may close or convert additional stores in the future.

NOTE 4 - TRANSACTIONS WITH AFFILIATES

Dart Group Corporation ("Dart"), which currently owns 67.3% of the Company's
outstanding common stock, provides the Company with certain general and
administrative services. In addition, the Company provided similar services
to Dart and its other subsidiaries. In management's opinion, the intercompany
charges for these services were equal to the costs incurred by Dart or the
Company, as the case may be, to provide these functions. It is not practicable
for the Company to estimate the cost it would have incurred for these services
if it had operated as an unaffiliated entity.

46
<PAGE> 47
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

In addition to the intercompany charges for general and administrative
services, Dart charged the Company, on a quarterly basis, for actual expenses
which related directly to the Company's operations. Substantially all such
charges were supported by invoices from unrelated parties designating the
Company as recipient of the related goods or services or were for matters
related to all of the affiliated companies and were allocated on a judgmental
basis by management. Amounts receivable from or payable to affiliate relate to
transactions made on behalf of the Company by Dart or on behalf of Dart by the
Company.

In the Company's opinion, the methods used for allocating costs described above
constitute a reasonable basis on which to allocate such costs.

The following table summarizes the intercompany transactions:

<TABLE>
<CAPTION>
Fiscal Years
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Due to (from) Affiliate,
Beginning of year $ 185,000 $ (20,000) $ 35,000
------------ ------------ ------------

Expense charges-
Direct rentals (Note 6) 1,382,000 1,339,000 1,407,000
Salaries from Dart 865,000 712,000 929,000
Salaries to Dart (1,235,000) (468,000) (490,000)
Other expenses 5,154,000 2,893,000 1,586,000
------------ ------------ ------------
6,166,000 4,476,000 3,432,000
------------ ------------ ------------

Payments (6,280,000) (4,271,000) (3,487,000)
------------ ------------ ------------
Due to (from) Affiliate,
End of year $ 71,000 $ 185,000 $ (20,000)
============ ============ ============
</TABLE>

In fiscal 1996, other expenses reflect insurance premiums paid by Dart
previously paid directly by the Company. All transactions with Dart included
above are made under current payment terms that, in management's opinion, are
comparable to those with unrelated parties and are free of interest. The
average balance of amounts due to affiliate were $526,000, $355,000, and
$175,000 for the years ended February 3, 1996 and January 28, 1995 and January
29, 1994, respectively.

47
<PAGE> 48
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

NOTE 5 - SETTLEMENT WITH RONALD S. HAFT

On October 6, 1995, Dart and Ronald S. Haft entered into a settlement of
certain litigation and other related transactions (collectively, the "RSH
Settlement"). The RSH Settlement transactions are subject to legal challenge.
See Note 9. If sustained, the RSH Settlement transactions were intended to
have the effect, by their terms, of transferring majority control of Dart's
voting stock to one or more voting trustees (the "Voting Trustees") under a
Voting Trust Agreement, by and among Ronald S. Haft, Dart and Larry G. Schafran
and Sidney B. Silverman, as initial Voting Trustees. On December 28, 1995, the
initial Voting Trustees resigned and appointed Richard B. Stone as successor
Voting Trustee.

As part of the RSH Settlement, Ronald S. Haft consented to the termination of
all of his outstanding stock options to purchase up to 10,000 shares of Trak
Auto's common stock.

NOTE 6 - COMMITMENTS

Lease Commitments

The Company leases stores, warehouses, leasehold improvements, fixtures and
equipment. Renewal options are available on the majority of leases. In some
instances, store leases require the payment of contingent rentals and license
fees based on sales in excess of specified minimums. Certain properties are
subleased with various expiration dates. Certain capital leases have purchase
options at fair market value at the end of the lease.

48
<PAGE> 49
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Following is a schedule of future minimum payments under capital leases and
non-cancelable operating leases and license agreements which have initial or
remaining terms in excess of one year at February 3, 1996. The imputed
interest rate on capital leases is 14.8% in the aggregate.

<TABLE>
<CAPTION>
--in thousands--
---------------------------------------
Fiscal Capital Leases Operating
Year (see Related Party Leases) Leases
------ -------------------------- ---------
<S> <C> <C>
1997 $ 3,524 $ 28,709
1998 3,720 27,592
1999 3,918 24,324
2000 3,944 19,559
2001 4,074 15,016
2002-2017 63,652 45,156
---------- ---------
Total 82,832 $ 160,356
=========

Less-Imputed interest 55,929
----------
Present value of net
minimum lease payments 26,903
Less-Current maturities 101
----------
Long-term capital lease
obligations $ 26,802
==========
</TABLE>

The above table includes $4,230,000 for store operating leases where the store
has been closed and the lease obligation has been accrued in the restructuring
or store closing reserves. Minimum operating lease obligations have not been
reduced by total future minimum sublease rentals of $1,903,000 receivable in
the future under noncancelable leases.

Rent expense and license fees for operating leases and license agreements are
as follows:

<TABLE>
<CAPTION>
Fiscal Years
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Minimum rentals $ 19,695,000 $ 18,906,000 $ 18,101,000
Contingent rentals 363,000 564,000 361,000
------------ ------------ ------------
Total $ 20,058,000 $ 19,470,000 $ 18,462,000
============ ============ ============
</TABLE>

49
<PAGE> 50
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Related Party Leases and License Agreements

Members of the Haft family beneficially own all the issued and outstanding
voting stock of Dart. Under the RSH Settlement, a majority of Dart's voting
stock is held in a voting trust for Ronald S. Haft as beneficial owner. Of the
Company's 276 stores and three warehouses (discussed below) as of February 3,
1996, 23 stores and the three warehouses were held under leases from entities
in which Haft family members own substantially all beneficial interest. Two
stores are leased from joint ventures in which Dart owns the majority interest
and the remaining interest is owned by partnerships in which the Haft family
members own all the partnership interest. In addition, two stores are
subleased from Crown Books Corporation ("Crown Books"), an affiliate of Dart.
These 27 store lease and sublease agreements provide for various termination
dates which, assuming renewal options are exercised, range from 1996 to 2024,
and require the payment of future minimum license fees and rentals aggregating
$49,979,000 at February 3, 1996. These agreements also require payment of a
percentage of sales in excess of a stated minimum, and are included in the
lease and license commitments table above as operating leases. Annual fees and
rentals for licenses, leases and subleases involving the Haft family were
$6,295,000, $5,991,000, and $5,182,000 for fiscal 1996, 1995 and 1994,
respectively.

The Company leases a 176,000 square foot warehouse located in Bridgeview,
Illinois from a private partnership in which Haft family members own all of the
partnership interests. The lease, which is for 30 years and six months (which
commenced in 1984), provides for rental payments increasing approximately 15%
every five years over the term of the lease. The current annual rental is
$728,000. The lease also requires the payment of maintenance, utilities,
insurance and taxes on the warehouse. Under the terms of the lease agreement,
Dart is jointly and severally liable for the lease obligations. This lease
agreement has been classified as a capital lease and is included under the
capital lease caption of the lease commitment table above.

The Company subleases from Dart 210,000 square feet of a warehouse and office
facility located in Landover, Maryland which it shares with Dart and Crown
Books. The sublease is for 30 years and six months, provides for rental
payments increasing approximately 15% every five years over the term of the
sublease and commenced in 1985. The current annual rental is $1,422,000. The
sublease agreement also requires the payment for maintenance, utilities,
insurance and taxes allocable to the space subleased. Dart originally leased
the entire 271,000 square foot warehouse and office facility from a private
partnership in

50
<PAGE> 51
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

which Haft family members owned all of the partnership interests. The
Company's sublease is on the same terms as Dart's lease and is classified as a
capital lease and is included under the capital lease caption of the lease
commitment table above.

Dart has a lease agreement with a Haft family-owned entity for vacant land
near the Company's warehouse in Landover, Maryland. The lease is for
the same period as the headquarters building and distribution center lease
described above and the current annual rental is $25,000 with increases of
three percent per year. Dart, the Company and Crown Books each pay a pro-rata
share of the rent in proportion to their use of the headquarters building and
distribution center.

On April 20, 1992, the Company entered into an agreement with Dart to sublease
6,500 square feet in a warehouse facility, adjacent to the above warehouse and
office facility. Dart leases the property from a partnership in which Haft
family members own all of the partnership interest (the "Pennsy Leases"). The
term of the sublease is one year (with nine one-year option periods). Under
the sublease agreement, the annual rent is $21,000 and increases to $24,000
for each of the last five option periods. The sublease agreement also requires
the Company to pay approximately $6,000 annually for its full share of any
common area charges, real estate taxes and insurance premiums. The Company has
given notice to terminate this sublease and hold over in the warehouse on a
month-to-month basis. The Pennsy Leases are currently the subject of
litigation (see Note 9).

The Company has a lease agreement with a Haft family-owned entity for a 317,000
square foot distribution center in Ontario, California. The lease is for 20
years, commenced in 1989, and provides for increasing rental payments, based
upon the Consumer Price Index for the Los Angeles area, over the term of the
lease. Current annual rental is $1,374,000 per year. The lease requires the
payment for maintenance, utilities, insurance and taxes. This lease agreement
has been classified as a capital lease and is included under the capital lease
caption in the lease commitment table above.

51
<PAGE> 52
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

of Ronald S. Haft's ownership interest in the property, and claims asserted by
Robert M. Haft and Linda G. Haft regarding the extent to which Ronald S. Haft
controls the aforementioned partnerships.

On February 10, 1995, after a legal review by Dart's Executive Committee, Dart
filed a complaint for rescission of the Pennsy Leases and for the return of
rent paid since 1991 on such leases. See Note 9. The Executive Committees of
Dart, Trak Auto and Crown Books have also undertaken a legal review of other
leasing arrangements and real estate related transactions between Dart, the
Company and Crown Books, on the one hand, and Haft-owned entities, on the other
hand. The Executive Committees have not yet determined whether other actions
will be taken as a result of this legal review.

Employment Arrangements

On January 24, 1995, the Company entered into employment agreements with its
President, and other key executives. The employment agreements are for a one
year term through the Company's 1997 fiscal year and are automatically extended
one year at the end of the fiscal year unless the individual is terminated with
cause (the agreement with the President of the Company is for two years and is
automatically extended two years). The agreements provide for annual
compensation increases following review and performance appraisal by the Board
of Directors.

NOTE 7 - TENDER OFFER

On December 21, 1994, Trak Auto offered to buy back from its shareholders
approximately 24% of the outstanding Common Stock, or 1,500,000 shares, at a
price of $17.50 per share. On February 6, 1995, Trak Auto amended the offer by
increasing the purchase price to $20.50 per share, and made certain other
changes. When the offer expired on February 28, 1995, Trak Auto had
repurchased approximately 310,000 shares for a total consideration of
$6,363,000 plus expenses of approximately $541,000.

NOTE 8 - BOARD OF DIRECTORS

On January 4, 1994, the Board of Directors of Dart established a Special
Litigation Committee to assess, on behalf of the Company, whether to pursue,
settle or abandon, claims raised in the derivative lawsuits filed against the
Company. See Note 9 for a discussion of the derivative lawsuits.

52
<PAGE> 53
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

On September 7, 1994, the Board of Directors of Dart established an Executive
Committee comprised of Dart's outside directors to conduct the affairs of Dart
with respect to matters that were the subject of dispute between the Chairman
of the Board and Chief Executive Officer of Dart, Herbert H. Haft, and the then
President and Chief Operating Officer of Dart, Ronald S. Haft. Because Herbert
H. Haft is and Ronald S. Haft was an executive officer and/or director of Trak
Auto, on October 11, 1994, the Board of Directors of Trak Auto established an
Executive Committee comprised of the same outside directors, with authority
parallel to that of Dart's Executive Committee. The disputes between Herbert
Haft and Ronald Haft concerning issues involving Dart and Trak Auto have been
extensive. Accordingly, the respective Executive Committees assumed day-to-day
involvement in these disputed issues and other matters affecting Dart and Trak
Auto, in particular matters relating to litigation to which Dart or Trak Auto
is a party. While the Executive Committee remains involved in the day-to-day
affairs of Dart, its continuing role is dependent upon future developments.

Members of the Executive Committee are compensated at a rate of $275 per hour
plus reimbursement of expenses. Members of the Special Litigation Committee of
the Board of Directors, which was established on January 4, 1994, have been
compensated at a salary rate of $250 per hour plus reimbursement of expenses.
Compensation paid by Dart and its subsidiaries, including the Company, to
members of the Executive Committees for their services on those committees
totaled $1,263,000 and $666,000 in fiscal 1996 and 1995, respectively ($421,000
and $166,000 paid by the Company in fiscal 1996 and 1995, respectively).
Compensation paid by Dart and its subsidiaries, including the Company, to
members of the Special Litigation Committee for their service on that committee
totaled $269,000 ($27,000 paid by the Company) in fiscal 1995, exclusive of
expense reimbursement. There were no fees paid to members of the Special
Litigation Committee in fiscal 1996.

53
<PAGE> 54
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

NOTE 9 - LITIGATION

Robert M. Haft Employment Litigation

54
<PAGE> 55
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

those corporations and his claim that he has a purchase option for an interest
in Total Beverage.

On February 22, 1995, the federal district court in Robert M. Haft's employment
litigation made the following rulings against Dart, Crown Books and Trak Auto:

(3) The court found that Robert M. Haft has the right to purchase
for $149,400 ten percent of Dart's interest in the entity that
acquired the assets of Total Beverage's Chantilly, Virginia
store.

55
<PAGE> 56
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Derivative Litigation

56
<PAGE> 57
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Pennsy Warehouse Litigation

57
<PAGE> 58
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

warehouses in 1991 following the bankruptcy of the prior tenant, Dart Drug
Stores, Inc. The complaint seeks rescission of the Pennsy Leases, restitution
of approximately $4.2 million of rent paid since 1991 and other monetary
damages.

Herbert H. Haft Proxy Litigation

On July 18, 1995, Ronald S. Haft filed a lawsuit against Herbert H. Haft and,
nominally, Dart in the Delaware Court of Chancery for New Castle County for
Herbert H. Haft's alleged breach of contract and breach of fiduciary duties to
Ronald S. Haft and to Dart in connection with the Proxy (Ronald S. Haft v.
Herbert H. Haft, et al., Civ. A. No. 14425). In this action, Ronald S. Haft
seeks a declaration that the Proxy is revocable or would be revocable under
certain conditions, as well as costs and attorneys' fees. Ronald S. Haft also
requests that the court require Dart to refuse to recognize the validity of the
Proxy. On August 9, 1995, Herbert H. Haft filed an Answer and Counterclaim
denying liability and requesting rescission of the Stock Sale Agreement because
of Ronald S. Haft's alleged breach of contract and other grounds. On September
25, 1995, Dart filed its answer in this action. Both Ronald S. Haft and
Herbert H. Haft have moved for summary judgment in this lawsuit. On November
14, 1995, the court denied Ronald S. Haft's motion for summary judgment;
Herbert H. Haft's motion for summary judgment remains pending.

As part of the RSH Settlement, on October 6, 1995, Dart purchased from Ronald
S. Haft the 172,730 shares of Dart Class B Common Stock that were subject to
the Proxy.

Section 225 Action by Robert, Gloria and Linda Haft

58
<PAGE> 59
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

the Delaware Court of Chancery for New Castle County naming as defendants Dart
and all of its directors. RGL seek an order, under Section 225 of the Delaware
General Corporation Law, declaring that RGL validly removed all of Dart's
directors and replaced them with three individuals (John L. Mason, Ellen V.
Sigal and Michael Ryan), whom RGL purport to have elected. Such purported
election is premised on RGL's contention that RGL own a majority of Dart's
voting stock because, they argue, (i) the 172,730 Class B shares subject to
Herbert H. Haft's proxy have been purchased by Dart and may not be voted and
(ii) the shares of Dart Class B Common Stock placed in a voting trust (the
"Trust Shares") by Ronald S. Haft pursuant to the RSH Settlement also are not
entitled to vote because they have been unlawfully issued or they should be
deemed to be owned by Dart.

Challenge to RSH Settlement by Herbert H. Haft

On November 6, 1995, Herbert H. Haft filed a lawsuit captioned Herbert H. Haft
v. Dart Group Corporation, et al., Del. Ch., Civ. A. No. 14685, in the
Delaware Court of Chancery for New Castle County naming as defendants Dart, all
of its directors except Herbert H. Haft, RGL, John L. Mason, Ellen V. Sigal
and Michael Ryan. Herbert H. Haft seeks a judgment (i) declaring the RSH
Settlement unlawful, hence null and void; (ii) declaring either that 172,730
shares of Dart Class B Common Stock belong to him, were wrongfully sold by
Ronald S. Haft to Dart, and that Herbert H. Haft is entitled to restitution of
such shares or, alternatively, that his purportedly irrevocable proxy on the
172,730 shares continues to be valid; (iii) declaring that Herbert H. Haft
retains voting control of Dart or, at a minimum, 34.55% of Dart's voting power;
(iv) declaring that the Trust Shares may not be lawfully voted; and (v)
declaring that defendants John L. Mason, Ellen V. Sigal and Michael Ryan are
not duly elected directors of Dart.

59
<PAGE> 60
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Standstill Order

In connection with the legal challenges to the RSH Settlement raised by RGL and
Herbert H. Haft, on December 6, 1995, the Delaware Court of Chancery entered a
Standstill Order (the "Standstill Order"), which restricts certain actions by
Dart. Without further order of the court, Dart may not (i) change its
Certificate of Incorporation or Bylaws; (ii) change the current composition of
Dart's Board of Directors (Herbert H. Haft, Ronald S. Haft, Larry G. Schafran,
Bonita A. Wilson and Douglas M. Bregman) or any of its subsidiaries; (iii)
change the current Haft family officers of Dart or any of its subsidiaries; or
(iv) issue any additional securities of Dart or any of its subsidiaries (except
employee stock options issued in the ordinary course of business). In
addition, without first giving Herbert H. Haft and the other parties to the
Section 225 Action not less than seven days written notice, Dart may not take
any extraordinary actions, including but not limited to actions that would
result in (a) the liquidation of Dart or any of its subsidiaries, (b) the sale
of any major subsidiary of Dart or (c) the disadvantage of any Class B
stockholder of Dart through any debt transaction. For purposes of the
Standstill Order, the phrase "extraordinary actions" means any transaction,
contract or agreement, the value of which exceeds $3 million.

Other

The Company recorded expenses of approximately $780,000, $640,000 and $420,000
during the years ended February 3, 1996, January 28, 1995 and January 29, 1994,
respectively, for legal expenses incurred during these years.

60
<PAGE> 61
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

NOTE 11 - CREDIT AGREEMENTS

On February 6, 1995, the Company entered into a $10 million revolving credit
facility with Dart. The credit facility is intended to be used for the
Company's short-term working capital purposes. Any advance under this credit
facility bears interest at an annual rate equal to the prime rate as set forth
in the "Money Rates" column of the Wall Street Journal, as such the rate may
change from time to time, plus one percent (1%). Interest must be paid monthly
in arrears and the agreement expires May 1, 1996. In addition, the Company has
a $750,000 commercial letter of credit facility for use in importing
merchandise.

On February 27, 1996, the boards of directors of the Company and Dart
approved a resolution authorizing a credit facility, but as of April 26, 1996,
the Company and Dart have not established the facility pending a
reconsideration of its need. If the Company and Dart establish the credit
facility as authorized on February 27, Dart would be able to borrow up to $15.0
million from the Company on a short-term secured basis. The credit facility
would expire March 31, 1998. The Company expects that it would fund any loans
under the credit facility from cash on hand. Any advances under the credit
facility would bear interest at an annual rate equal to the prime rate as set
forth in the "Money Rates" column of The Wall Street Journal, as such rate may
change from time to time, plus one percent. Any advances under the credit
facility would be secured by a pledge, of shares of the Company owned by Dart.

At February 3, 1996, there had been no borrowing under these credit agreements.

NOTE 12 - PITTSBURGH ACQUISITION

On January 27, 1996, the Company acquired the inventory and fixed assets of 14
auto part stores in Pittsburgh, Pennsylvania for approximately $6,200,000 (as
of February 3, 1996, approximately $5,800,000 had been paid). The purchase
price included approximately $1,582,000 for favorable lease rights which is
being amortized over the primary term of the leases and any option periods
beginning before February 1999.

NOTE 13 - EMPLOYEES' PROFIT-SHARING AND RETIREMENT PLANS

The Company maintains a non-contributory profit-sharing plan for all full-time
employees with one year of continuous employment. The Company's annual
contribution's to the plan is based on a discretionary percentage of the
Company's consolidated net income, as defined in the plan, and as determined by
the Board of Directors. Contributions are allocated to individual employees
based on each employee's salary in relation to the total salaries of all
eligible employees. The Company's contributions were approximately $420,000 and
$770,000 in 1996 and 1995, respectively. No contribution was made for fiscal
1994.

In June 1995, the Company established a 401(k) Retirement Plan for all
employees projected to work 1,000 hours and 90 days continuous employment. The
Company is obligated to contribute an amount equal to 25% of the employees
deferral up to 6%. The Company's contribution was approximately $250,000 for
the year ended February 3, 1996.

61
<PAGE> 62
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

NOTE 14 - STOCK OPTION PLAN

Trak Auto Corporation 1993 Stock Option Plan

The Trak Auto Corporation 1993 Stock Option Plan (the "1993 Option Plan") was
approved by the shareholders at the June 1993 annual meeting. The 1993 Option
Plan is for officers, directors and key employees. The total number of shares
that may be issued under the 1993 Option Plan is 1,250,000 and the 1993 Option
Plan will terminate June 30, 2003. Based on options outstanding at February 3,
1996 the maximum shares issuable under options exercisable over the next five
years are: 163,947 in 1997, 228,708 in 1998, 268,388 in 1999, 202,491 in 2000
and 123,240 in 2001.

Information concerning the 1993 Option Plan:
<TABLE>
<CAPTION>
Number of Option Price
Options per Share
----------- --------------
<S> <C> <C>
Outstanding at January 29, 1994 114,690 $ $12.50
Granted 6,000 14.00
Exercised (7,078) 12.50
Expired (7,763) 12.50
------- --------------
Outstanding at January 28, 1995 105,849 12.50-14.00
Granted 207,925 14.00-16.125
Exercised (16,132) 12.50-14.00
Expired (29,354) 12.50-16.125
------- --------------
Outstanding at February 3, 1996 268,288 $ 12.50-16.125
======= ==============
</TABLE>

Options to purchase 81,646 shares were exercisable at February 3, 1996 and
958,502 options remained available for grant. Employee stock options granted
by the Board of Directors (pending court approval) in December 1994, were
approved by the Delaware court in April 1995.

Trak Auto Corporation Stock Option Plan

The Trak Auto Corporation Stock Option Plan (the "Option Plan") has provided
for option grants to officers, directors and key employees of the Company and
its parent and subsidiaries. Based on the options outstanding, as of February
3, 1996, the maximum shares issuable under options exercisable over the next
four years are: 83,933 in 1997, 68,716 in 1998, 20,000 in 1999 and 10,000 in
2000. The Option Plan expired on January 31, 1993 and no new options have been
granted after that date.

62
<PAGE> 63
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

Information concerning the Option Plan:
<TABLE>
<CAPTION>
Number of Option Price
Options per Share
--------- ---------------
<S> <C> <C>
Outstanding January 29, 1994 224,891 $ 6.00 - 13.75
Exercised (53,883) 6.00 - 12.50
Expired (14,737) 6.00 - 13.75
-------- ---------------
Outstanding January 28, 1995 156,271 6.00 - 13.75
Exercised (68,468) 6.00 - 13.75
Expired (3,870) 10.25 - 12.50
-------- ---------------
Outstanding February 3, 1996 83,933 $ 6.00 - 13.75
======== ===============
</TABLE>

Options to purchase 83,933 shares were exercisable at February 3, 1996.

The Board of Directors of the Company has authorized certain officers and
directors of the Company to apply for loans from the Company to exercise their
vested stock options. Under the plan approved by the board, the loans must
bear interest at the prime rate, adjusted annually, must be secured by all of
the stock acquired by exercise of the options, must be repaid out of the first
proceeds of sale of the stock or at the end of three years, whichever is
earlier, and the borrower must demonstrate to the Company's chief financial
officer both that it would be difficult to dispose of the number of shares on
the open market and that he or she presents a reasonable credit risk to the
Company.

63
<PAGE> 64
TRAK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended February 3, 1996, January 28, 1995

And January 29, 1994

NOTE 15 - INTERIM FINANCIAL DATA - (UNAUDITED)

Selected interim financial data for the years ended February 3, 1996 and
January 28, 1995 are as follows:

<TABLE>
<CAPTION>
---- In Thousands Except Per Share Data -----

QUARTER ENDED: FEBRUARY OCTOBER JULY APRIL
3, 1996 28, 1995 29, 1995 29, 1995
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Sales $ 87,998 $ 88,226 $ 86,407 $ 79,611
Gross Profit (1)(2) 22,683 22,770 22,720 20,487
Net Income 1,117 2,164 2,893 1,116
Net Income
Per Share (4) $ .19 $ .37 $ .49 $ .18

<CAPTION>
QUARTER ENDED: JANUARY OCTOBER JULY APRIL
28, 1995 29, 1994 30, 1994 30, 1994
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Sales $ 82,184 $ 88,848 $ 89,180 $ 88,387
Gross Profit (1)(3) 21,446 21,872 25,338 23,733
Net Income 2,047 2,198 3,490 2,530
Net Income
Per Share (4) $ .33 $ .36 $ .57 $ .42
</TABLE>

(1) After deduction for cost of sales, store occupancy and warehousing.
(2) After deduction of store closing reserve during the 4th Quarter.
(3) After deduction of store closing reserve during the 3rd Quarter.
(4) The sum of these amounts may not equal the annual amount because
of changes in the average number of shares outstanding during the
year.

64
<PAGE> 65

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures

Inapplicable.

PART III

The following Items 10 through 13 are incorporated herein by reference to the
Company's definitive Information Statement to be filed with the Commission
pursuant to Regulation 14C.

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and
Management

Item 13. Certain Relationships and Related Transactions

65
<PAGE> 66

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K

(a)

1. Financial Statements

See Item 8.

2. Schedules (Consolidated) -

All schedules are omitted because the required
information is inapplicable or it is presented in the
consolidated financial statements or related notes.

3. Exhibits

3.1 Certificate of Incorporation of Trak Auto Corporation as
amended by Certificate of Amendment dated October 30, 1987
(incorporated by reference to Exhibit 3a to Trak Auto's 1988
Form 10-K).

3.2 By-laws, amended and restated September 14, 1993
(incorporated by reference to Exhibit 3b to Trak Auto's 1994
Form 10-K).

10.1 Indemnity Agreement dated March 10, 1983, between Dart Drug
Corporation and Trak Auto Corporation (incorporated by
reference to Trak Auto's registration statement Form S-1,
Reg. No. 2-82430).

10.2 Lease Agreement dated January 1, 1980 between Oxon Hill
Plaza, Inc., Agent and Nominee for Combined Properties
Corporation, and Trak Auto Corporation (incorporated by
reference to Trak Auto's registration statement Form S-1,
Reg. No. 2-82430). (606)

10.3 License Agreement dated March 4, 1983 between Dart Drug
Corporation and Trak Auto Corporation; Addendum to Lease
Agreement dated June 1, 1976 between Kaufman Company S.
Greenhoot Fischer, Carol B. Fisher and Dart Vienna, Inc.;
Lease Agreement dated April 14, 1960 (incorporated by
reference to Trak Auto's registration statement Form S-1,
Reg. No. 2-82430). (616)

10.4 Lease Agreement dated May 26, 1981 between Maryland City
Plaza, Inc., Agent and Nominee for Combined Properties
Corporation, and Trak Auto Corporation (incorporated by
reference to Trak Auto's registration statement Form S-1,
Reg. No. 2-82430). (623)

10.5 Lease Agreement dated May 26, 1981 between Bradlick, Inc.,
Agent and Nominee for Combined Properties Corporation, and
Trak Auto

66
<PAGE> 67

Corporation (incorporated by reference to Trak Auto's
registration statement Form S-1, Reg. No. 2-82430). (629)

10.6 Agreement, dated March 31, 1983, between Dart Drug
Corporation and Trak Auto East Corporation (incorporated by
reference to Trak Auto's registration statement Form S-1,
Reg. No. 2-82430).

10.7 Lease Agreement dated April 27, 1984, between Trak Chicago
Limited Partnership I and Trak Auto Corporation (incorporated
by reference to Trak Auto's registration statement Form S-1,
Reg. No. 2-82430).

10.8 Sublease Agreement dated December 26, 1984, between Dart
Group Corporation and Trak Auto Corporation (75th Avenue)
(incorporated by reference to Exhibit 10(hhhh) to Trak Auto's
1985 Form 10-K).

10.9 Indemnity Agreement, dated June 9, 1986, by and between Dart
Group Corporation and Trak Auto Corporation (incorporated by
reference to Exhibit 10(pppp) to Trak Auto's 1987 Form 10-K).

10.10 Agreement of Merger dated May 28, 1987 between Trak Auto East
Corporation and Trak Auto West, Inc. (incorporated by
reference to Exhibit 10 (qqqq) to Trak Auto's 1988 Form
10-K).

10.11 1988 Trak Auto Corporation Deferred Compensation Plan for
Directors, effective January 1, 1988 (incorporated by
reference to Exhibit 10(ssss) to Trak Auto's 1988 Form 10-K).

10.12 Lease Agreement dated February 3, 1989 between Trak Auto
Corporation and Combined Properties/Ontario Limited
Partnership (incorporated by reference to Exhibit 10(tttt) to
Trak Auto's 1989 Form 10-K).

10.13 Lease Agreement dated February 3, 1988 between Trak
Corporation and Haft/Equities - General (incorporated by
reference to Exhibit 10(uuuu) to Trak Auto's 1989 Form 10-K).

10.14 Lease Agreement dated June 17, 1987 between Trak Auto West,
Inc. and Haft/Equities/Rose Hill Limited Partnership
(incorporated by reference to Exhibit 10(vvvv) to Trak Auto's
1989 Form 10-K). (670)

10.15 Assignment and Assumption agreement dated December 30, 1989
between Greenway Center Associates Limited Partnership and
CM/CP Greenway Center Joint Venture, and lease agreement
dated March 13, 1980, between Greenway Center Associates
Limited Partnership and Trak Auto Corporation (incorporated
by reference to Exhibit 10(wwww) to Trak Auto's 1990 Form
10-K). (612)

10.16 Assignment and Assumption agreement dated December 30, 1989
between Briggs Chaney Associates Limited Partnership and
CM/CP Briggs Chaney Plaza Joint Venture, and lease agreement
dated June 26, 1981, between

67
<PAGE> 68

Western Development Corporation and Trak Auto Corporation
(incorporated by reference to Exhibit 10(xxxx) to Trak Auto's
1990 Form 10-K). (641)

10.17 Amended Stock Option Plan (incorporated by reference to
Exhibit 10(yyyy) to Trak Auto's 1990 Form 10-K).

10.18 Lease Agreement dated May 18, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement date March 31, 1990 between
Retail Lease Acquisition Limited Partnership and Trak
Corporation re: Enterprise (incorporated by reference to
Exhibit 10(ccccc) to Trak Auto's 1991 Form 10-K)(614).

10.19 Lease Agreement dated May 18, 1990 between Retail Lease
Acquisition Limited Partnership and Trak Corporation and
License Termination Agreement date March 31, 1990 between
Retail Lease Acquisition Limited Partnership and Trak
Corporation re: Rolling Valley (incorporated by reference to
Exhibit 10 (ddddd) to Trak Auto's 1991 Form 10-K) (630).

10.20 Lease Agreement dated May 18, 1990 between Combined
Properties Limited Partnership and Trak Corporation and Lease
Termination Agreement date March 31, 1990 between Combined
Properties Limited Partnership, Retail Lease Acquisition
Limited Partnership and Trak Corporation re: White Flint
(incorporated by reference to Exhibit 10(eeeee) to Trak
Auto's 1991 Form 10-K) (632).

10.21 Lease Agreement dated November 6, 1990 between CP Acquisition
Limited Partnership and Trak Corporation and Settlement
Agreement dated November 6, 1990 between CP Acquisition
Limited Partnership and Trak Corporation re: Aspen Manor
(incorporated by reference to Exhibit 10(fffff) to Trak
Auto's 1991 Form 10-K) (615).

10.22 Lease Agreement dated November 6, 1990 between CP Acquisition
Limited Partnership and Trak Corporation and Settlement
Agreement dated November 6, 1990 between CP Acquisition
Limited Partnership and Trak Corporation re: Lee and Harrison
(incorporated by reference to Exhibit 10(ggggg) to Trak
Auto's 1991 Form 10-K)(633).

10.23 Lease Agreement dated November 6, 1990 between CP Acquisition
Limited Partnership and Trak Corporation and Settlement
Agreement dated November 6, 1990 between CP Acquisition
Limited Partnership and Trak Corporation re: Penn Daw
(incorporated by reference to Exhibit 10(hhhhh) to Trak
Auto's 1991 Form 10-K)(642).

10.24 Lease Agreement dated November 6, 1990 between Combined
Properties Limited Partnership and Trak Corporation and
Settlement Agreement dated November 6, 1990 between Combined
Properties Limited

68
<PAGE> 69

Partnership and Trak Corporation re: Fairfax Circle
(incorporated by reference to Exhibit 10(iiiii) to Trak
Auto's 1991 Form 10-K) (656).

10.25 Lease Agreement dated March 23, 1990 between Combined
Properties/Silver Hill Limited Partnership and Trak
Corporation and Termination Agreement dated April 13, 1990
between Combined Properties/Silver Hill Limited Partnership
and Trak Corporation re: Silver Hill (incorporated by
reference to Exhibit 10 (jjjjj) to Trak Auto's 1991 Form
10-K)(619).

10.26 Lease Agreement dated November 6, 1990 between
Haft/Equities-Bladen Limited Partnership and Trak Corporation
and Lease Termination Agreement dated November 6, 1990
between Haft/Equities-Bladen Limited Partnership and Trak
Corporation re: Bladen Plaza (incorporated by reference to
Exhibit 10(kkkkk) to Trak Auto's 1991 Form 10-K)(662).

10.27 Lease agreement dated December 23, 1991 between Combined
Properties Limited Partnership and Trak Corporation re:
Manaport Plaza Shopping Center (incorporated by reference to
Exhibit 10 (lllll) to Trak Auto's 1992 Form 10-K) (607).

10.28 Amendment of lease dated December 24, 1991 between
Haft/Equities-Bladen Limited Partnership and Trak Corporation
re: Bladen Plaza (incorporated by reference to Exhibit
10(mmmmm) to Trak Auto's 1992 Form 10-K). (662)

10.29 Sublease Agreement dated February 19, 1992 between Crown
Books Corporation and Trak Corporation re: Vienna
(incorporated by reference to Exhibit 10(nnnnn) to Trak
Auto's 1992 Form 10-K)(616).

10.30 Sublease agreement dated February 12, 1991 between Crown
Books Corporation and Trak Corporation re: McLean Shopping
Center (incorporated by reference to Exhibit 10(ooooo) to
Trak Auto's 1992 Form 10-K) (627).

10.31 Sublease Agreement dated April 20, 1992 between Dart Group
Corporation and Trak Corporation re: Pennsy Drive Whse 3
(incorporated by reference to Exhibit 10(ppppp) to Trak
Auto's 1992 Form 10-K).

10.32 Amendment of lease dated December 11, 1992 between Combined
Properties Limited Partnership and Super Trak Corporation re:
Oxon Hill (incorporated by reference to Exhibit 10(qqqqq) to
Trak Auto's 1993 Form 10-K). (606)

10.33 Amendment of lease dated December 1, 1992 between
Haft/Equities-Bladen Limited Partnership and Super Trak
Corporation re: Bladen Plaza (incorporated by reference to
Exhibit 10(rrrrr) to Trak Auto's 1993 Form 10-K). (662)

69
<PAGE> 70

10.34 Amendment of lease dated January 8, 1993 between Retail Lease
Acquisition Limited Partnership and Trak Corporation re:
Chantilly Plaza (incorporated by reference to Exhibit
10(sssss) to Trak Auto's 1992 Form 10-K). (609)

10.35 Trak Auto Corporation 1993 Stock Option Plan (incorporated by
reference to Trak Auto's registration statement Form S-8,
Reg. No. 33-53389).

10.36 Amendment of lease dated February 4, 1993 between Retail
Lease Acquisition Limited Partnership and Super Trak re:
College Plaza (incorporated by reference to Exhibit 10(wwwww)
to Trak Auto's 1994 Form 10-K). (610)

10.37 Amendment of lease dated September 13, 1993 between Combined
Properties Limited Partnership and Super Trak Corporation re:
Fair City Mall (incorporated by reference to Exhibit
10(xxxxx) to Trak Auto's 1994 Form 10-K). (605)

10.38 Amendment of lease dated September 13, 1993 between Combined
Properties Limited Partnership and Super Trak Corporation re:
Maryland City (incorporated by reference to Exhibit 10(yyyyy)
to Trak Auto's 1994 Form 10-K). (623)

10.39 Second Amendment of lease dated March 31, 1994 between
Combined Properties Limited Partnership and Super Trak
Corporation re: Oxon Hill (incorporated by reference to
Exhibit 10 (zzzzz) to Trak Auto's 1994 Form 10-K) (606).

10.40 Third Amendment of lease dated March 31, 1994 between
Combined Properties/Montebello Limited Partnership and Trak
Auto West, Inc. Re: Montebello (incorporated by reference
to Exhibit 10(B) to Trak Auto's 1994 Form 10-K). (197)

10.41 Lease Agreement dated September 29, 1993 between Combined
Properties/Reseda Associates Limited Partnership and Super
Trak Corporation re: Reseda (incorporated by reference to
Exhibit 10(c) to Trak Auto's 1994 Form 10-K). (193)

10.42 Amendment of lease dated June 30, 1994 between Combined
Properties Limited Partnership and Super Trak Corporation re:
Bradlick (incorporated by reference to Exhibit 10.42 to Trak
Auto's 1995 Form 10-K)(629).

10.43 Employment Agreement between Trak Auto and R. Keith Green
dated January 25, 1995 (incorporated by reference to Exhibit
10.43 to Trak Auto's 1995 Form 10-K).

10.44 Tax Allocation Agreement dated December 27, 1994 between Dart
Group

70
<PAGE> 71

Corporation and Trak Auto Corporation (incorporated by
reference to Exhibit 10.44 to Trak Auto's 1995 Form 10-K).

10.45 Loan Agreement dated February 6, 1995 between Dart Group
Corporation and Trak Auto Corporation (incorporated by
reference to Exhibit 99(a) (16) to Amendment No. 2 to the
Trak Auto Corporation Statement on Schedule 13E-4/A,
Commission File No. 5-34497, filed with the Commission on
February 6, 1995).

10.46 Employment Agreement between Trak Auto and Robert Brann dated
as of January 24, 1995 (incorporated by reference to Exhibit
10.46 to Trak Auto's 1995 Form 10-K).

10.47 Employment Agreement between Trak Auto and Thomas Reilly
dated as of January 24, 1995 (incorporated by reference to
Exhibit 10.47 to Trak Auto's 1995 Form 10-K).

10.48 Employment Agreement between Trak Auto and David MacGlashan
dated as of January 24, 1995 (incorporated by reference to
Exhibit 10.48 to Trak Auto's 1995 Form 10-K).

10.49 Standstill Agreement executed on behalf of Dart Group
Corporation and Ronald S. Haft and ordered on September 14,
1994 by the Court in Ronald S. Haft v. Dart Group
Corporation, Del Ch. 13736 (filed September 12, 1994)
(incorporated by reference to Exhibit 99(b) to the Current
Report of the Trak Auto Corporation on Form 8-K of September
6, 1994 and filed on September 14, 1994).

10.50 Standstill Order entered on December 6, 1995 by the Delaware
Chancery Court in Gloria G. Haft, et al. v. Larry G.
Schafran, et al. (Del. Ch. Civ. A. No. 14620) and Herbert H.
Haft v. Dart Group Corporation, et al. (Del. Ch. Civ. A. No.
14685) (incorporated by reference to Exhibit 99.1 to the
Quarterly Report of Trak Auto Corporation on Form 10-Q for
the period ended October 28, 1995).

11 Statement on Computation of Per Share Net Income.

21 Subsidiaries of Trak Auto Corporation

23 Consent of Independent Public Accountants

27 Financial Statement Schedules

71
<PAGE> 72

(b) Reports on Form 8-K

During the fourth quarter of fiscal year end February 3, 1996, Trak Auto
filed one Current Report on Form 8-K.

1. On November 1, 1995, Trak Auto filed a Current Report of Form
8-K reporting under Item 1 (Changes in Control of Registrant)
and Item 5 (Other Events) a lawsuit filed on October 17, 1995
against Dart and its directors by Gloria G. Haft, Robert M.
Haft and Linda G. Haft.

72
<PAGE> 73

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

TRAK AUTO CORPORATION

Date: May 2, 1996 By: R. Keith Green
------------------------ --------------------------------
R. Keith Green
Director and President

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

Date: May 2, 1996 R. Keith Green
------------------------ --------------------------------
R. Keith Green
Director and President

Date: May 2, 1996 Herbert H. Haft
------------------------ -------------------------------
Herbert H. Haft
Chairman of the Board of
Directors and Chief Executive
Officer

Date: May 2, 1996 Bonita A. Wilson
------------------------ --------------------------------
Bonita A. Wilson
Director

Date: May 2, 1996 Douglas M. Bregman
------------------------ -------------------------------
Douglas M. Bregman
Director

Date: May 2, 1996 Larry G. Schafran
------------------------ ---------------------------------
Larry G. Schafran
Director

Date: May 2, 1996 David B. MacGlashan
------------------------ -------------------------------
David B. MacGlashan
Senior Vice President and
Chief Financial Officer

73
<PAGE> 74
TRAK AUTO CORPORATION

Exhibit Index

<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
11 Statement on Computation of Per Share
Net Income

21 Subsidiaries of Trak Auto Corporation

23 Consent of Independent Public Accountants

27 Financial Statement Schedules
</TABLE>

<PAGE> 1

Exhibit 11

STATEMENT ON COMPUTATION OF EARNINGS PER SHARE

<TABLE>
<CAPTION>
Years Ended
----------------------------------------
February 3, January 28, January 29,
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Weighted average common
shares outstanding
during the year 5,867,000 6,078,000 6,046,000

Effect of dilutive stock
options, net of shares
assumed repurchased
at average market price 61,000 61,000 61,000
------------ ------------ ------------

Weighted average common
share and common share
equivalents 5,928,000 6,139,000 6,107,000
============ ============ ============

Net Income $ 7,290,000 $ 10,265,000 $ 81,000
============ ============ ============

Earnings per share:
Net income $ 1.23 $ 1.67 $ .01
============ ============ ============
</TABLE>

The difference between primary net income per common share and fully diluted
net income per common share is not significant for the periods presented.

<PAGE> 1

Exhibit 21

SUBSIDIARIES OF TRAK AUTO CORPORATION

<TABLE>
<CAPTION>
State of Incorporation
----------------------
<S> <C> <C>
Trak Corporation (A) (100%) Delaware
Trak DHC Corporation (100%) Delaware
Super Trak Corporation (100%) Delaware
Trak Acquisition Corp. (100%) Delaware
</TABLE>

(A) Does business in certain states under the name "Trak Auto
Corporation I".

<PAGE> 1
Exhibit 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into Trak Auto Corporation's previously
filed registration statements on Form S-8 (File Number 33-34665 and File Number
33-53389).

ARTHUR ANDERSEN LLP

Washington D.C.
April 26, 1996.

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> FEB-03-1996
<CASH> 13,559
<SECURITIES> 8,654
<RECEIVABLES> 4,709
<ALLOWANCES> 0
<INVENTORY> 99,471
<CURRENT-ASSETS> 133,993
<PP&E> 89,210
<DEPRECIATION> 42,324
<TOTAL-ASSETS> 187,595
<CURRENT-LIABILITIES> 75,348
<BONDS> 26,802
0
0
<COMMON> 64
<OTHER-SE> 82,119
<TOTAL-LIABILITY-AND-EQUITY> 187,595
<SALES> 342,242
<TOTAL-REVENUES> 344,600
<CGS> 253,582
<TOTAL-COSTS> 253,582
<OTHER-EXPENSES> 75,918
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,638
<INCOME-PRETAX> 11,462
<INCOME-TAX> 4,172
<INCOME-CONTINUING> 7,290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,290
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23

</TABLE>