DISCOUNT AUTO PARTS INC, 10-K, 1998-08-28

DISCOUNT AUTO PARTS INC
10-K, 1998-08-28
AUTO & HOME SUPPLY STORES

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<PAGE> 1

FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 2, 1998

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

Commission file number 1-11276

DISCOUNT AUTO PARTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

FLORIDA 59-1447420
- --------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)

4900 Frontage Road South, Lakeland, Florida 33815
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(941) 687-9226
-------------------------------
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Name of Each Exchange
Title of Each Class on Which Registered
- -------------------------------------- -----------------------
Common Stock, Par Value $.01 Per Share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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 past 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 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. [ ]

State the aggregate market value of the voting stock held
by non-affiliates of the registrant. Approximately
$200,663,000 as of August 17, 1998 (based upon the
closing sales price reported by the New York Stock
Exchange and published in the Wall Street Journal on
August 17, 1998)

Indicate the number of shares outstanding of each of the registrant's
classes of common equity, as of the latest practicable date:

Common Stock, par value $.01 per share -- 16,637,937 shares as of August 17,
1998

<PAGE> 2

Documents incorporated by reference:

Part II Annual Report to Stockholders for the Fiscal Year Ended June 2, 1998.

Part III Definitive Proxy Statement for the Company's Annual Meeting of
Stockholders presently scheduled for October 6, 1998.

2
<PAGE> 3

DISCOUNT AUTO PARTS, INC.

ANNUAL REPORT ON FORM 10-K
for the
YEAR ENDED JUNE 2, 1998

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
PART I........................................................................................................... 4
ITEM 1. BUSINESS......................................................................................... 4
ITEM 2. PROPERTIES....................................................................................... 15
ITEM 3. LEGAL PROCEEDINGS................................................................................ 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.............................................. 17

PART II.......................................................................................................... 18
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............................ 18
ITEM 6. SELECTED FINANCIAL DATA.......................................................................... 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................... 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........................................................... 24

PART III......................................................................................................... 24
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................................... 24
ITEM 11. EXECUTIVE COMPENSATION........................................................................... 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................................................... 25
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................... 25

PART IV.......................................................................................................... 25
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K................................................................ 25
</TABLE>

<PAGE> 4

PART I

ITEM 1. BUSINESS

GENERAL

Discount Auto Parts, Inc. ("Discount Auto Parts" or the "Company") is one
of the Southeast's leading specialty retailers of automotive replacement parts,
maintenance items and accessories for the "Do-It-Yourself" ("DIY") consumer. As
of June 2, 1998, the Company operated a chain of 452 Discount Auto Parts
stores, with 351 stores located throughout Florida, 61 stores in Georgia, 20
stores in Mississippi, 16 stores in Alabama, and four stores in South Carolina.
Each Discount Auto Parts store carries an extensive line of brand name
replacement "hard" parts, such as starters, alternators, brake pads, brake
shoes and water pumps, for domestic and imported cars, vans and light trucks,
as well as brand name maintenance items and accessories. The Company is not in
the business of selling tires or performing automotive repairs or
installations.

In February 1998, the Company began the rollout of a commercial delivery
program. Under the Company's commercial delivery program, commercial customers
(such as auto service centers, commercial mechanics, garages and the like) can
establish commercial accounts with the Company and order automotive parts from
the Company, with such parts being delivered from, or being available for pick
up at, nearby Discount Auto Parts stores. As of August 12, 1998, the commercial
delivery program had been rolled out to 45 Discount Auto Parts stores.

Discount Auto Parts has achieved significant growth in each of its five
latest fiscal years. Net sales have increased to $447.5 million in fiscal 1998
from $207.6 million in fiscal 1994 and income from operations has increased to
$52.0 million in fiscal 1998 from $26.1 million in fiscal 1994. The number of
stores has increased to 452 as of the end of fiscal 1998 from 175 at the
beginning of fiscal 1994. DIY comparable store sales have increased an average
of 4.4% annually during the past five fiscal years, and increased 7.7% in
fiscal 1998.

The Company's success has resulted primarily from implementing clear and
effective operating and growth strategies. The Company's operating strategies
include building a highly knowledgeable and motivated work force, developing
customers for a lifetime, attaining leading market share in every one of its
existing markets and utilizing advanced information systems. With respect to
growth strategies, the Company believes in continuing with new store openings,
standardizing new store formats and constantly seeking to improve merchandising
concepts. Effectively executing these strategies has helped the Company provide
customers with superior service, value and parts selection at conveniently
located, well-designed stores. The implementation of a successful commercial
delivery program is also part of the Company's future growth strategy.

Discount Auto Parts was founded with a single 800 square foot store in
Winter Haven, Florida by Herman Fontaine, his son, Denis L. Fontaine, and other
members of the Fontaine family. Since the Company's inception, members of the
Fontaine family, including Herman Fontaine, Denis L. Fontaine and Peter J.
Fontaine, managed the Company and played key roles in formulating and carrying
out its business strategies. Herman Fontaine served as President from 1972
until 1978 and as the Chairman of the Board from 1972 until 1986, at which time
he became Chairman Emeritus. Although he no longer serves as an executive
officer or director, the Company continues to have the benefit of Herman
Fontaine's advice and counsel. Denis L. Fontaine assumed the roles of Chief
Executive Officer and President in 1978 and held such positions until his death
in June 1994. Peter J. Fontaine, who has been with the Company for over 22
years and previously served as Chief Operating Officer, was elected as
President and Chief Executive Officer in 1994. Effective February 1, 1997,
William (Bill) C. Perkins, who has been with the Company for over 15 years and
served as Chief Financial Officer from 1992 to 1996, assumed the positions of
President and Chief Operating Officer while Peter J. Fontaine remained Chief
Executive Officer.

The Company completed an initial public offering in August 1992 raising
approximately $64.1 million in net proceeds and a secondary offering in October
1995, which generated net proceeds to the Company of $75.4 million. The
Fontaine family continues to control approximately 46% of the Company's
outstanding common stock.

<PAGE> 5

INDUSTRY OVERVIEW

The automotive aftermarket refers to products and services purchased for
motor vehicles after the original sale of the vehicles such as accessories,
maintenance and repairs, replacement parts, fuel, etc. According to the
Automotive Parts and Accessories Association (APAA), an industry group that
compiles statistics on aftermarket activity, in 1995 the market for domestic
automotive aftermarket products and services represented approximately $188
billion in annual sales. Lang Marketing, which publishes Lang Report, a monthly
analysis of the vehicle products industry, estimates the overall automotive
aftermarket earnings growth rate to be 3.8%, and retail auto parts chain growth
rate to be approximately 8%. The Company believes there are several main items
driving performance in the automotive aftermarket industry. These include (i)
increases in the average number of miles driven per vehicle each year, (ii)
increases in the average age of cars on the road, and (iii) an increase in the
average ticket price of repair services.

The automotive aftermarket distribution channels are highly fragmented.
The Company believes, however, that the industry is consolidating as national
and regional specialty retail chains gain market share at the expense of
smaller independent operators and less specialized mass merchandisers.
Automotive specialty retailing chains with multiple locations in given market
areas, such as the Company, are believed to enjoy competitive advantages in
purchasing, distribution, advertising and marketing compared to most small
independent retailers. In addition, the increase in the number of automotive
replacement parts caused by the significant increase in recent years in the
variety of domestic and imported vehicle makes and models has made it difficult
for smaller independent retailers and less specialized mass merchandise chains
to maintain inventory selection broad enough to meet customer demands. The
Company believes this has created a competitive advantage for those automotive
specialty retailing chains, such as Discount Auto Parts, that have the
financial resources and distribution capability to stock and deliver an
inventory selection broad enough to meet customer needs.

OPERATING STRATEGY

BUILDING THE TEAM

Guided by the principle "First build the team, then the team will build
the business", Discount Auto Parts has made a commitment to building and
retaining employees who are highly motivated and knowledgeable team players.
The Company considers itself to be a highly selective employer, screening
prospective team members to identify individuals of high integrity who are
motivated to succeed. The Company considers its ability to recruit, train and
retrain its employees a key aspect of its success.

The Company provides extensive team-building training programs which focus
on providing superior customer service, automotive parts knowledge, selling
skills, store operational procedures and personal development. A typical
training program encompasses a two year time period. Initially, new team
members participate in an intensive one week training program administered by a
district training specialist at specially designated training stores. Following
such orientation, new team members are assigned to a specific store. At the
store, new team members receive on-the-job training from store management on
advanced aspects of daily store operations, parts knowledge and the use of the
Company's computerized parts catalog. Thereafter, team members are required to
complete a "Parts Pro" certification which provides advanced training on
technical customer service skills, such as turning drums and rotors, testing
and charging batteries and testing starters and alternators.

In order to qualify for promotion, team members are required to complete
the "Tech 2000" training program which consists of courses and hands on
instruction relating to product knowledge, trouble-shooting, problem solving
and related selling techniques. The Company's vendors also provide formal
training that emphasizes specific automotive systems and related parts.
Individuals identified as potential store managers attend "DAP University", a
five-day training program at the Company's headquarters and distribution center
covering all major aspects of the Company's operations. In addition to these
formal training programs, senior team members continually provide informal
training during frequent store visits.

<PAGE> 6

Financial incentives and stock ownership are also an important element of
the Company's team building focus. All team members, particularly store
managers, assistant managers and team leaders, are eligible for financial
incentives based on meeting monthly, quarterly and annual sales and other
performance related goals that are in large part to be under the control of the
respective team members. The Company's Team Members Stock Purchase Plan gives
all full time team members who have been employed for more than one year the
ability to purchase shares of the Company's Common Stock for 85% of the then
current market price during specified offering periods each year. In addition,
the Company has a Team Members Profit Sharing Plan whereby the employees who
have been with the Company for more than one year can make contributions and
with respect to which the Company provides certain matching benefits. Options
to purchase shares of the Company's Common Stock under the Company's stock
option plans are also awarded to key members of management, store managers and
other key team members.

The Company believes in providing opportunities for the promotion of
qualified team members. The Company's "promote from within" policy helps
attract, motivate and retain quality team members. The 44 team members
comprising the senior management team (including 26 Division Managers) average
approximately 37 years of age with more than 12 years of experience with the
Company. All 26 Division Managers and the majority of the remaining members of
the senior management team started with the Company in Discount Auto Parts
stores as part time or full time team members and average more than 12 years
with Discount Auto Parts. The Company's 452 store managers average more than
four years experience with the Company.

The Company encourages its employees to propose any new ideas which will
help the Company run more efficiently and/or improve customer satisfaction.
Team members who present new ideas that are successfully implemented are
rewarded with incentive compensation.

The Company believes that a high level of involvement from team members
increases motivation, company loyalty and overall performance. The Company's
employee-focused strategy has resulted in the Company maintaining what it
believes to be one of the highest sales per team member in the industry. In
addition, management believes that the Company has one of the lowest employee
turnover rates in the industry. The low turnover rate tends to lead to superior
customer service and product knowledge, which are key factors in attracting
customers in the DIY automotive industry.

DEVELOPING CUSTOMERS FOR A LIFETIME

The Company believes that the attributes most valued by DIY consumers are
superior customer service, convenient and accessible neighborhood locations,
broad product selection and competitive everyday low prices. In an effort to
develop DIY customers for a lifetime, the Company is committed to developing,
maintaining and improving these key value drivers.

SUPERIOR CUSTOMER SERVICE

In the DIY consumer market, customer service plays a major role in a
customer's store loyalty. Therefore, the Company places a strong emphasis on
customer service. The Company promotes a corporate culture which is designed to
"always put the customers first" and emphasizes knowledgeable and courteous
service. Through its extensive training programs, the Company's team members
develop the technical expertise necessary to provide customers with superior
service.

Customer service is further enhanced by a variety of programs that the
Company offers such as: in-store computerized catalogs which assist in the
selection of parts; free testing of starters, alternators, electronic
components, coils, voltage regulators and batteries; free battery charging;
installation assistance for batteries, windshield wipers and selected other
products; free use of specialty tools for do-it-yourself installation; free oil
and battery recovery programs under which Discount Auto Parts accepts used oil
and batteries for proper disposal; liberal return policies; and lifetime
warranties on certain parts.

<PAGE> 7

The Company's special order program (the "S.O. Program") assures the
broadest availability of its merchandise at each of the Company's stores. The
S.O. Program provides the Company on-line access to numerous third party
warehouse distributors with which the Company has a relationship. If
merchandise is unavailable at a particular store or one of the Company's
express warehouses, Company team members can order an item on-line and
generally have it available for the customer within 24 hours.

The Company's stores are open seven days per week, 364 days per year,
typically from 8 a.m. to 9 p.m. Some higher volume stores have extended hours
in order to better serve the DIY customer.

CONVENIENT AND ACCESSIBLE NEIGHBORHOOD LOCATIONS

Locating stores at sites that are convenient and accessible to its
customers is an essential part of the Company's customer service philosophy.
The Company believes that over 50% of its customers view convenience and
accessibility as the number one driver in choosing an automotive parts store.
Given this customer priority, one of the Company's strategies is to cluster
stores in neighborhood locations in order to offer its customers increased
convenience and accessibility. The Company's strategy is generally to draw
customers from a 3 mile radius. Management believes that the Company's
relatively low cost structure gives it the ability to profitably operate stores
in close proximity, thereby offering customers greater convenience than do most
of its competitors. In addition, the Company attempts to build new stores in
locations that are easily accessible from a number of major roadways and
arteries.

BROAD PRODUCT SELECTION

The Company offers a wide selection of automotive replacement parts,
maintenance items and accessories designed to cover a broad range of specific
vehicle applications. Depending on the store format, a typical Discount Auto
Parts store carries between 16,000 and 20,000 SKU's. The Company's operating
strategy emphasizes DIY automotive replacement hard parts. To support this
strategy, over the last several years and particularly during fiscal 1995, the
Company substantially increased the number of replacement hard parts carried in
its stores.

Replacement hard parts sold at the Company's stores include brake shoes,
brake pads, belts, hoses, starters, alternators, batteries, shock absorbers,
struts, CV half shafts, carburetors, transmission parts, clutches, electronic
components, and suspension, chassis and engine parts. The Company also offers
complete engines which are stocked at its distribution center. Other products
include: maintenance items, such as oil, antifreeze, brake and power steering
fluids, engine additives, car paints, protectants and waxes; and accessories,
such as floor mats, seat covers and car stereos and speakers.

Although an emphasis is placed on brand names, the Company also carries a
number of its own private label products under the "Discount Auto Parts" and
"Power Pak" names. Other private label product names include "Power Force",
"Hydro Force", "Stopping Force", and "Driving Force". Some of the private label
products include hard parts, such as batteries, brakes, water pumps, clutches,
belts; maintenance items, such as motor oil, antifreeze/coolant and windshield
washer fluid. These private label products, which are intended to be of equal
or better quality than comparable brand name products, are packaged
attractively and are priced below comparable brand name products in the store
in order to promote customer interest. For fiscal year 1998, private label
products accounted for approximately 11% of the Company's sales. The Company
expects this percentage to remain fairly static in the future.

PRICE LEADERSHIP

The Company utilizes an everyday low price strategy with prices that are
generally at or below those of its competitors in the market area served by
each store. The Company's depot stores generally offer even lower pricing than
other Discount Auto Parts stores. Along with everyday low prices, the Company
often runs special promotional pricing on selected products.

<PAGE> 8

In an effort to offer the lowest price to its customers, the Company
continually seeks to reduce the purchasing and distribution costs of its
merchandise. The Company achieves such cost reductions by working with its
vendors to secure product cost savings and other benefits, making volume
purchases and achieving efficiencies in its distribution system and higher
productivity at the store level. The Company believes that its ability to
control costs and thereby maintain price leadership is a key advantage over its
competitors.

The Company's name "Discount Auto Parts" reinforces the Company's pricing
strategy. The Company promotes both its name and its pricing strategy through
newspaper, direct mail, radio and television advertisements, and through
in-store promotional signage and displays. Most of the Company's stores have a
free-standing highly visible pole or marquee sign promoting special prices and
customer service programs.

LEADING THE DIY MARKET

The Company's goal is to be the leading DIY specialty retailer of
automotive parts and accessories in every one of its existing markets and new
markets. The Company believes that its ability to achieve market leadership is
dependent upon successful implementation of its operating strategies and
careful selection of new markets and store sites. The Company believes that
market leadership provides higher consumer name recognition and economies of
scale in purchasing, distribution, advertising, marketing and management.

The Company is the largest DIY specialty retailer of automotive parts and
accessories in Florida. As of June 2, 1998, 351 (78%) of the Company's 452
stores were located in Florida. The Company believes that it has the leading
market share in the state of Florida. The demographics within Florida are
favorable for continued growth. In particular, Florida ranks third in the
nation in the total number of registered cars and light trucks, is the fourth
most populous state and continues to be one of the fastest growing states in
the nation due to its favorable climate.

The Company's believes that the strength of its market position in Florida
has provided a competitive advantage and a solid foundation for further
expansion into nearby southeastern states including Georgia, Alabama, South
Carolina, Mississippi and Louisiana. These states provide many of the same
favorable conditions and opportunities that are in Florida, which will help the
Company further expand into these states and adjust more quickly to these new
markets.

UTILIZING ADVANCED INFORMATION SYSTEMS

In order to maintain its competitive position, the Company emphasizes and
continually invests in advanced distribution and information systems. As a
result of continually updating these systems with state of the art equipment,
management believes that the Company has some of the most advanced integrated
distribution and point-of-sale capabilities in its industry. These systems
provide many benefits, including lower distribution and operating costs,
improved in-stock positions at its stores and enhanced customer service. In
addition, during fiscal 1998, the Company completed the implementation of frame
relay technology at its stores. Frame relay is essentially a technology that
provides for enhanced transmission of data between single or multiple
locations. As a result, communications between the Company's stores and
communications between the stores, the distribution center and corporate
headquarters have been improved significantly. The implementation of frame
relay technology is critical to the Company's implementation of a new perpetual
inventory system at the store level which is expected to be completed in fiscal
1999. In addition, the Company plans to continue to upgrade its systems through
the integration of additional related specialized software over the next
several years. All of these changes are designed to serve all functional areas
of the Company and enhance the inventory management and selection processes.

DISTRIBUTION

The Company's distribution system, which the Company believes utilizes one
of the most advanced inventory management information systems in the industry,
uses computer-aided, laser scanning and wireless technology and interfaces with
the Company's management information systems and point-of-sale system. The
system features computer aided ordering and inventory management, having the
capability to monitor inventory levels and determine store by store product
needs.

<PAGE> 9

The Company has a warehouse management system referred to as the Wizard
system ("Wizard"). Wizard has continued to improve the Company's efficiency
regarding shipment of merchandise. The system utilizes wireless hand held bar
code scanning terminals which operate in a real time environment and which are
integrated with a racking and flow system featuring conveyers and computerized
sorting devices. These integrated systems enable the Company's team members to
efficiently pick, assemble and palletize merchandise for shipment to individual
stores. All product movement, including receiving, put-away, restock, cycle
counting, picking and shipping, is monitored and tracked by Wizard.

Stores typically place orders each week which are delivered electronically
to the Company's distribution center. These orders are generally delivered
within 48 hours of receipt on the Company's fleet of trucks and trailers. Over
80% of the Company's stores are currently within six hours of the Company's
distribution center.

The Company's distribution center was recently expanded to double its
size. The expanded distribution center, which comprises approximately 600,000
square feet, should be capable of serving approximately 675 stores. Additional
office space, support facilities and extensions of the merchandise handling
systems are in the process of being completed. When the expanded center becomes
fully operational in the fall of 1998, the expanded distribution center will
also provide service to the Company's express warehouses, and will be utilized
in the providing of its commercial delivery program.

STORE OPERATIONS

The Company has point-of-sale computer terminals at all of its stores
which communicate interactively with the Company's distribution and management
systems. These terminals decrease transaction times, reduce register lines and
eliminate labor time previously spent in price labeling of merchandise. In
addition, point-of-sale terminals perform valuable functions for management.
Since these terminals capture sales information at the time of the transaction,
management can generate real time sales reports which assist in-store and
Company-wide planning. The point-of-sale system also has an automated suggested
reordering function which has been instrumental in increasing the store level
in-stock positions. The automation of the re-order process has decreased the
time and labor required for store inventory management.

GROWTH STRATEGIES

CONTINUING NEW STORE OPENINGS

The Company currently plans to continue with a growth plan to open new
stores both within the state of Florida and in other southeastern states. In
the last five fiscal years, the Company has opened an average of 56 stores per
year including 52 net stores in fiscal 1998. The Company currently plans to
open approximately 75 new stores in fiscal 1999. Over the near term a
significant portion of the Company's growth will continue to be concentrated in
Florida and other southern states. The Company estimates that the Florida
market can support 450 to 500 Discount Auto Parts stores due to Florida's high
population densities, strong economic and population growth and favorable
climate.

As of August 12, 1998, the Company had opened 15 new stores in fiscal
1999. Also, as of August 12, 1998, 14 new stores were under construction and an
additional 71 sites for new stores had been purchased, leased or were under
contract for acquisition.

In certain markets, particularly in Florida, the Company has and continues
to open stores in close geographic proximity to other Discount Auto Parts
stores. This operating strategy is meant to establish a competitive position in
each of the DAP's markets as well as to support its strategy of providing the
customer with shopping convenience. Although the new stores tend to attract
sales that would otherwise have been made in other Discount Auto Parts stores,
management believes that the negative impact on comparable store sales is
substantially offset by the Company's ability to leverage costs such as
advertising and store management expenses. Furthermore, the Company believes
that in the long term the increased growth in the Florida population will
support stores that are in close proximity.

<PAGE> 10
The following table sets forth information concerning increases in the
number of Discount Auto Parts stores during the past five fiscal years and the
anticipated increase for fiscal 1999:

<TABLE>
<CAPTION>
PLANNED
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Beginning Stores 175 208 248 314 400 452
New Stores(1) 33 40 66 86 53 75
Stores Closed - - - - 1 -
--- --- --- --- --- ---
Ending Stores 208 248 314 400 452 527
=== === === === === ===
</TABLE>

(1) Does not include stores that opened as relocations of previously existing
stores within the same general market area (approximately one mile) or
substantial renovations of stores.

When opening a new store, the Company generally seeks high visibility
sites in high traffic locations (often on corners). Prior to entering new
markets, the Company performs extensive research with key factors including
population, demographics, vehicle profile and number and strength of
competitive stores. The Company generally seeks to open new stores within or
contiguous to existing market areas and attempts to cluster development in new
urban and suburban markets in a relatively short period of time in order to
achieve economies of scale in management, advertising and distribution costs.
The Company also evaluates the potential first year sales return on investment
when determining specific store site locations.

STORE FORMATS AND EXPRESS WAREHOUSES

Beginning in fiscal 1992 and 1993, the Company developed two types of
store formats: the "mini-depot" and the depot store format. As a result of the
success of these formats in the market, the Company has developed standardized
formats for the development of new stores as either a mini-depot or depot
store. These standardized formats have tended to lower new store operating
costs through increased efficiency and consistency in the selection,
acquisition, design and opening of new stores. As a result, the Company is
modeling new stores according to the standardized formats and using appropriate
elements of these new store formats to remodel existing stores. Since the
initiation of the standardized formats, the Company has converted all of the
existing stores to either the mini depot or depot formats in terms of product
selection.

Under the standardized store formats, a mini-depot store has approximately
4,400 selling square feet and carries an average of approximately 16,000 SKU's.
The average depot store has approximately 8,800 selling square feet, offers
greater product selection and carries an average of approximately 20,000 SKU's.

<PAGE> 11

The following table indicates certain information about the 452 Discount
Auto Parts stores in operation as June 2, 1998:

AVERAGE STOCK NUMBER OF TOTAL SELLING
STORE FORMAT KEEPING UNITS STORES SQUARE FOOTAGE(1)
------------ ------------- --------- -----------------
<S> <C> <C> <C>
Mini-depot 16,000 429 1,819,000
Depot 20,000 23 188,000
---------
Total selling square footage 2,007,000
=========
</TABLE>

(1) Total selling square footage includes normal selling space, but excludes
office, stockroom, shelving space behind the parts counter, receiving and
any excess space not utilized in a store's operations space. Such square
footage also excludes square footage associated with the express
warehouses.

In September 1996, in an effort to provide support for product
availability at its stores and to help facilitate the rollout of its commercial
delivery program, the Company developed an express warehouse concept and opened
the first such express warehouse in Orlando, Florida. During fiscal 1998, the
Company opened three additional express warehouses in Tampa, Jacksonville and
South Florida. Each express warehouse carries approximately 32,000 SKU's and
has on average approximately 8,600 square feet of space. The objective of
establishing express warehouses is to provide inventory (primarily replacement
hard parts) support to mini-depot and depot stores within the same geographic
market of the respective express warehouse as well as to support the Company's
commercial delivery program. To date, the express warehouses have been
established utilizing excess space in identified depot stores. In the future,
the plan is to continue using excess depot store space; however, if deemed
appropriate, an express warehouse may be designed as a stand alone facility.
During fiscal 1999, the Company expects to open four additional express
warehouse locations.

Depot stores are targeted for major metropolitan markets where such stores
can serve densely populated market areas. Depot stores are also utilized as
support locations for nearby mini-depot stores in a hub-and-spoke fashion and,
along with the new express warehouse, offers van delivery for inventory
transfers to other Discount Auto Parts stores. The Company's merchandising
staff also utilizes depot stores to test new products in an effort to help
maximize the success of new SKU additions at mini-depot stores.

CONTINUING TO IMPROVE MERCHANDISING

One of the Company's growth strategies is to improve its merchandising
concepts, primarily by broadening product selection and emphasizing the sale of
replacement hard parts which generally provide higher gross profit margins. In
fiscal 1995, the Company updated its store plan-o-grams for both of its store
formats to improve merchandise presentation and in-stock positions and to
accommodate a substantial number of additional SKU's. Another resource which
the Company is using to improve merchandising is its point-of-sale system. This
system helps the Company maintain proper inventory levels and provide real time
sales information. The interface of new plan-o-grams with the Company's
point-of-sale system provide a more sophisticated means of inventory control
and management. In turn, these systems are designed to enhance overall sales
and gross margins in each individual store.

The Company is also in the process of implementing a new perpetual
inventory system at its stores. The new system is expected to be completely
rolled out in fiscal 1999. As a result, the Company will have even more
enhanced information to determine proper individual store merchandise and
inventory levels. These enhancements coupled with the establishment of express
warehouses in selected metropolitan markets, should enable the Company to
improve its overall inventory turnover.

<PAGE> 12

Although each Discount Auto Parts store carries the same basic product
lines, each Division Manager with input from individual store managers, has
certain abilities to adapt product mix based on the specific needs of the
market area served by the stores.

COMMERCIAL MARKET BUSINESS

The Company began the rollout of a commercial delivery service in the
third quarter of fiscal 1998. Under the Company's commercial delivery service
program, commercial customers (such as auto service centers, commercial
mechanics, garages and the like) can establish commercial accounts with the
Company and order automotive parts from the Company, with such parts being
delivered from, or being available for pick up at, nearby Discount Auto Parts
stores. During fiscal 1998, the Company's entry into the commercial delivery
market required total capital expenditures of approximately $3.6 million. In
addition, the commercial delivery program can be expected to require the
Company to extend trade credit to certain of the commercial account customers
in the ordinary course of business. The extension of such trade credit will
increase the capital requirements associated with the rollout of the program
and will expose the Company to credit risk from uncollectible accounts. The
Company has established systems designed to manage and control such credit
risk. The amount of capital that is needed for extension of trade credit will
be dependent in large part upon the success of the commercial delivery service
roll-out and how quickly the commercial business develops. Because this is a
relatively new aspect of the auto parts supply business for the Company, there
are risks associated with the Company's entry into this new aspect of the
business and there can be no assurance if and/or when the commercial delivery
service business will be profitable or whether the Company will experience any
financial or other challenges in managing and controlling the credit risk.

STORE OPERATIONS

STORE DESIGN AND VISUAL MERCHANDISING

The Company seeks to design and build stores with a high visual impact.
The Company's stores are generally free-standing buildings situated in highly
visible locations and are designed to provide easy access and ample parking.
The Company utilizes colorful exterior signage which display the "Discount Auto
Parts" name and advertise current product specials. In-store signage and
special displays are used to aid customers in locating merchandise and
promoting products. The inside of the stores is organized by department in an
attractive and brightly lit store environment which makes it easy to locate
merchandise. The Company employs a plan-o-grammed store layout system designed
to maximize sales in a generally consistent merchandise presentation in all of
its stores.

Stores are designed to maximize selling space, keeping most of the
merchandise within view of the customer. The majority of the selling space
contains gondolas for automotive replacement parts, maintenance items and
accessories, with selected merchandise featured at the ends of the aisles, at
the cash register areas and in other high traffic and visibility areas. All
stores have a hard parts counter that is staffed by knowledgeable,
customer-service oriented team members. All of the stores have computerized
parts catalogs located at the hard parts counter that provide parts information
based on the make, model and year of an automobile.

The Company believes that continually improving and upgrading the
appearance of its stores increases sales per store. As market conditions
warrant, Discount Auto Parts relocates or substantially renovates existing
stores. Stores are relocated primarily to secure improved site locations and to
expand store size. In addition, some stores are increased in size in connection
with renovations. The Company considers a store to have been substantially
renovated when it has spent more than $70,000 on store improvements other than
for ordinary course of business maintenance and upkeep expenses.

<PAGE> 13

STORE TEAM MEMBERS

A typical mini-depot format store employs 8 to 10 team members and a
typical depot format store employs 15 to 20 team members. Each store employs a
manager, one or two assistant managers, a team leader and additional full and
part-time team members.

Each store manager's incentive compensation is based upon the performance
of his or her store vis-a-vis the average Company store. Store managers are
reviewed quarterly on sales levels, gross margins and operating margin. This
review and compensation program attempts to align the goals of the Company's
store managers with those of senior management (i.e., primarily increased same
store sales, stable gross margins and selling, general and administrative
expense control).

The Company supervises store operations primarily through its Vice
President of Operations and 26 Division Managers, each of whom supervises
between 13 and 26 stores. The Vice President of Operations in turn reports to
William C. Perkins, the Company's President and Chief Operating Officer.

Purchasing, merchandising, advertising, accounting, cash management and
other store support functions are provided by the Company's corporate
headquarters. The Company believes that relieving store managers of primary
responsibility for these functions allows them more time to focus on customer
service and the execution of the Company's in-store merchandising and marketing
strategies.

DIMENSIONS OF EXCELLENCE REVIEWS

The Company prides itself on continuous store improvement and an overall
high level of customer service. To assure these standards, the Company conducts
"dimensions of excellence" reviews of each of its stores twice each year in
order to evaluate the stores' operations. Each dimensions of excellence review
encompasses a comprehensive itinerary of store characteristics and performance
criteria. The dimensions of excellence teams are made up of store managers from
other districts selected based on their success as managers and their depth of
experience, as well as members of senior management from the Company's
headquarters.

The Company also has a program whereby each week members of the senior
management team visit several of the Company's stores to monitor operations. In
addition, every store is generally visited weekly by a division manager. All of
these review programs help insure that the Company's stores are being
maintained in accordance with the Company's standards of excellence.

PURCHASING AND DISTRIBUTION

Merchandise is selected and purchased for all stores at the Company's
headquarters. Approximately 94% of the Company's merchandise is shipped by
vendors to the Company's distribution center located in Lakeland, Florida.
Deliveries are usually made to individual stores on a weekly basis by the
Company's fleet of trucks and trailers.

In fiscal 1998, the Company purchased products from over 400 suppliers.
During fiscal 1998, the Company's ten largest suppliers accounted for
approximately 31% of the Company's purchases but no single supplier accounted
for more than 6% of total purchases. During fiscal 1996 and 1997 the Company's
ten largest suppliers accounted for approximately 38% and 28%, respectively, of
the Company's total inventory purchases.

The Company believes that its relationships with its suppliers are
excellent. The Company also believes that alternative sources of supply exist
(and in some cases such relationships are maintained on a smaller scale), at
similar cost and on similar terms, for substantially all types of products
sold.

<PAGE> 14

Automotive replacement parts manufacturers generally accept obsolete
inventory for return credit on an annual or more frequent basis. The Company
has historically not incurred any significant losses as a result of slow moving
or obsolete inventory.

ADVERTISING AND PROMOTION

The Company uses various methods to promote its products, including
newspaper, direct mail, radio and television, in-store banners, displays and
promotions. The Company also uses sales incentives and price based promotions
to advertise its products. In addition, the Company believes that DIY customers
are also strongly influenced by "word of mouth" recommendations from satisfied
customers. The Company also works closely with its suppliers in order to
promote its products. The Company views its suppliers as an important element
of the advertising and operating process. The suppliers, in turn, provide
certain benefits to the Company, such as volume discounts, rebates, credits,
return allowances, cooperative advertising and signage assistance programs. The
suppliers also provide product knowledge and training and education which
assist the Company's team members in providing excellent customer service.

COMPETITION

Both the retail and commercial delivery automotive parts aftermarket are
highly competitive. Automotive products similar or identical to those available
at the Company's stores are generally available from a variety of different
competitors in the communities served by Discount Auto Parts stores. The number
of competitors and the level of competition faced by Discount Auto Parts stores
varies by market area. The principal competitive factors which affect the
Company's business are store location, customer service, product selection,
product quality, timeliness of commercial deliveries and price. In the state of
Florida, the Company operates the largest specialty retail chain offering
automotive replacement parts, maintenance items and accessories to the DIY
consumer. The Company competes in its various markets with a number of local,
regional and national automotive retail chains including Auto Zone, Pep Boys,
Western Auto, One Stop, Advance Auto, and Automotive One. To a lesser extent,
the Company's stores also compete with automotive wholesalers or jobbers such
as NAPA, Big A and Steego and, in certain product categories, such as
batteries, oil, filters and accessories, mass merchandisers such as Wal-Mart,
Target and Kmart. In the commercial delivery program, the Company competes with
many of those same companies.

Although the Company believes that it competes effectively in its various
markets, certain of its competitors, or their parent organizations, are larger
in terms of sales volume, have access to greater capital and management
resources, or have been operating longer in particular market areas.

TEAM MEMBERS

As of June 2, 1998, the Company employed 4,350 team members, 3,328 of whom
were full-time team members. Approximately 86% of the Company's team members
are employed in stores or in direct field supervision, while 14% work in the
distribution center and/or in corporate and support functions.

The Company has no collective bargaining agreements covering any of its
team members, has never experienced any material labor disruption and is
unaware of any present efforts or plans to organize its team members. The
Company believes that its relations with its team members are excellent.

<PAGE> 15

TRADEMARKS

The Company believes that its name, distinctive lettering and eye-catching
store exteriors are important to its operating strategy but that the Company's
business is not otherwise dependent on any patent, trademark, service mark or
copyright. The Company is not aware of any infringing uses or, any assertion of
infringing uses in any of its current market areas that, in the opinion of the
Company, could materially affect the Company's use of its name and trade dress
described above.

ITEM 2. PROPERTIES

DISTRIBUTION CENTER AND HEADQUARTERS

The Company's distribution center, which also houses its headquarters and
administrative offices, is located in one consolidated building in Lakeland,
Florida on property owned by the Company. The facilities (including parking
areas),which occupy substantially all of the Company owned 31.5 acre tract, are
located in an industrial park area, fronting Interstate 4, the east-west
expressway that cuts across central Florida. Over 80% of the Company's stores
are within a six-hour drive of the distribution center. The property has the
potential to be modified to provide direct rail access.

The Company's distribution center was recently expanded to double its
size. The expanded distribution center, which comprises approximately 600,000
square feet, should be capable of serving approximately 675 stores. The
distribution center was designed with a 30-foot clear span allowing for a total
of 16 million cubic feet of storage space. Additional office space, support
facilities and extensions of the merchandise handling systems are in the
process of being completed. When the expanded center becomes fully operational
in the fall of 1998, the expanded distribution center will also provide service
to the Company's express warehouses, and will be utilized to support its
commercial delivery program.

The Company is also currently leasing an additional 42,000 square feet of
warehouse space approximately one mile from the existing distribution center
through December 1998.

DISCOUNT AUTO PARTS STORES

Discount Auto Parts stores are located throughout Florida, Georgia,
Alabama, South Carolina, Mississippi and Louisiana. The Company adheres to a
strategy of owning the vast majority of its store locations and currently owns
approximately 92% of its locations. Management believes that this strategy
maximizes the Company's real estate flexibility, as well as controls operating
costs.

The following table sets forth certain information about the Company's
current ownership and leasehold interests in its stores as of June 2, 1998:

<TABLE>
<CAPTION>
NATURE OF COMPANY'S INTEREST NUMBER OF STORES
---------------------------- ----------------
<S> <C>
Own land and buildings 416
Lease land and/or buildings 36
------
TOTAL 452
======
</TABLE>

<PAGE> 16

Certain of the stores in which the Company has an ownership interest are
affected by credit facilities or mortgages on which the total unpaid principal
balance as of June 2, 1998, was approximately $9.6 million. These borrowings,
which are to be repaid in aggregate annual installments of $2.4 million, accrue
interest at rates ranging between 9.8% and 10.11% per annum.

Most of the Company's leases provide for the payment of a fixed rent, plus
increases in ad valorem taxes, insurance and maintenance costs. The leases are
generally for a term of five years, with the Company having the right to renew
for one or more additional five-year terms. The leases in existence at the
close of fiscal 1998 will expire between 1999 and 2003 (not including
renewals). The Company will continue to evaluate additional lease alternatives
as market conditions dictate.

ITEM 3. LEGAL PROCEEDINGS

Airgas, Inc., Airgas Management, Inc., and Airgas Speciality Gases, Inc.,
vs. Discount Auto Parts, Inc., Brad Davis, JLM Enterprises, Inc. d/b/a Autoplex
Parts, Jerral L. Mayes, Sr., William D. Morris, and John Does 1-100. United
States District Court for the Southern District of Georgia, Civil Division,
Civil Action CV 497-32.

In February 1997, a complaint was filed by Airgas, Inc. and certain Airgas
affiliates against several defendants, including the Company and one of its
employees. The complaint alleged, among other things, that the Company took
part in a conspiracy with other companies and individuals unrelated to Discount
Auto Parts to defraud Airgas in connection with commercial sales of refrigerant
R-12 (freon) and sought compensatory damages in excess of $20 million, treble
damages and other relief totaling in excess of $80 million.

Effective July 26, 1997, the Company entered into a Compromise and
Settlement Agreement (the "Settlement Agreement") with Airgas and its
affiliates, the other defendants, and certain other parties. Under the terms of
the Settlement Agreement, the Company purchased from Airgas Specialty Gases, on
an "as is, where is" basis, approximately 6,500 cylinders believed to contain
an alternative to R-12 refrigerant for an aggregate price of $4.0 million,
which represents a price that was believed by the Company to be approximately
$3.6 million in excess of the then current market value of such product. In
addition, the Company paid an additional $13.0 million to Airgas Specialty
Gases.

As a separate but related part of the Settlement Agreement, the Company
paid $500,000 to the bankruptcy estate of Refrigeration Station, Inc. (RSI) to
settle any claims, including claims of preference, that the RSI bankruptcy
estate might have asserted against the Company and purchased from the
bankruptcy estate approximately 7,200 cylinders of merchantable Freeze 12
refrigerant (an R-12 alternative), for an additional $1.0 million (believed to
have a bulk sale value of approximately $600,000).

Pursuant to the terms of the Settlement Agreement, Discount Auto Parts,
Airgas, the RSI bankruptcy estate, the other defendants and certain other
parties exchanged mutual releases of all claims and issues between them. In the
Settlement Agreement, there was no finding or admission of wrongdoing on the
part of Discount Auto Parts.

The Company is presently involved in litigation with its insurance carrier
pursuant to which the Company is seeking recovery under its insurance policy of
certain amounts incurred in connection with the Airgas litigation and the
settlement thereof. The ultimate outcome of such litigation or an estimate of
the amount of potential insurance recoveries, if any, cannot be determined at
this time. No benefit for any recovery which may result has been reflected in
the Company's fiscal 1998 financial statements.

<PAGE> 17

In addition to the Airgas litigation, certain federal investigations into
the subject matter of this litigation are ongoing. In particular, federal grand
jury proceedings in Savannah, Georgia in which the Company had been called upon
to respond to subpoenas may be continuing and the Company is aware that the SEC
has commenced its own informal investigation. In connection with these
proceedings, the Company intends to continue its cooperation.

Dexter Carson, et. al. vs. Discount Auto Parts, Inc., et. al., United
States District Court for the Southern District of Florida, Case No.
96-08833-CIV-HURLEY, Southern District of Florida

This action involves a lawsuit which was filed in the United States
District Court for the Southern District of Florida arising out of the
employment of the Plaintiffs and alleged incidents which occurred at various
Discount Auto stores. The action seeks damages and other relief as a result of
alleged discrimination under both federal and state laws, violations of the
Florida Whistleblower law, negligent misrepresentations, fraudulent
misrepresentations, negligence-personal injuries and gross negligence-personal
injuries. The Company filed numerous motions, including a Motion to Dismiss and
a Motion to Strike. On May 19, 1998, the court entered an Order Granting in
Part the Company's Motion to Dismiss and Severing Plaintiffs From Case And
Dismissing Selected Claims Without Prejudice. The order dismissed nine of the
eleven plaintiffs and left only Carson and Williamson's case remaining. The
plaintiffs filed a notice to appeal the judge's order, which they subsequently
voluntarily dismissed. The Company intends to vigorously oppose the Carson and
Williamson case. It is not clear whether the plaintiffs who have been dismissed
from the case will refile.

Automotive Supply Company vs. Discount Auto Parts et al., United States
District Court for the Central District of California, Case No. CV 98-0275 CAS
(VAPx).

On or about December 9, 1997, a complaint was filed in California against
the Company by Automotive Supply Company alleging, among other things, breach
of contract, account stated, breach of implied covenant of good faith and fair
dealing, fraud and negligent misrepresentation, all in connection with the
supply by Automotive Supply Company of rotating electrical parts to the
Company. Although the complaint was initially filed in Superior Court, the
Company successfully removed the action to federal district court. The
complaint seeks compensatory damages in excess of $16,000,000 as well as
punitive and exemplary damages. The Company believes the claims in the
complaint are without merit and intends to defend the action vigorously. The
Company has filed an answer denying the essential allegations in the complaint
and, by way of a counterclaim, is seeking to recover amounts the Company
asserts it is owed by Automotive Supply Company as well as amounts representing
other damages the Company has suffered as a result of Automotive Supply
Company's own actions. Discovery has commenced and is continuing.

Discount Auto Parts is not a party to any other legal proceedings, other
than various claims and lawsuits arising in the normal course of the Company's
business. The Company does not believe that such claims and lawsuits,
individually or in the aggregate, will have a material adverse effect on its
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

None.

<PAGE> 18

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is listed on the New York Stock Exchange.
Information included under the caption "Common Stock Price Range" and "Number
of Stockholders" on page 36 of the Company's 1998 Annual Report to Stockholders
are incorporated herein by reference.

Since the initial public offering, the Company has not paid any cash
dividends. The Company does not intend to pay any cash dividends for the
foreseeable future and intends to retain earnings, if any, for the future
operation and expansion of the Company's business. Any determination to pay
dividends in the future will be at the discretion of the Company's Board of
Directors and will be dependent upon the Company's results of operations,
financial condition, contractual restrictions and other factors deemed relevant
by the Board of Directors. The Company's existing credit facilities contain
restrictions on the payment of cash dividends on the Common Stock. At June 2,
1998, approximately $36.9 million of the Company's retained earnings were
available for dividend distribution.

ITEM 6. SELECTED FINANCIAL DATA

Information under the caption "Selected Financial Data" on page 13 of the
Company's 1998 Annual Report to Stockholders is incorporated herein by
reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the income
statement data and the percentage of the Company's net sales represented by
each line item presented:

FISCAL YEAR ENDED
---------------------------------------------------------
JUNE 2 JUNE 3 MAY 28
1998 % 1997 % 1996 %
----------------- ----------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 447,491 100.0% $ 405,186 100.0% $ 307,476 100.0%
Cost of sales, including distribution costs 271,404 60.7 256,646 63.3 186,917 60.8
---------------- ---------------- ----------------
Gross profit 176,087 39.3 148,540 36.7 120,559 39.2
Selling, general and administrative expenses 124,125 27.7 101,336 25.0 80,090 26.0
---------------- ---------------- ----------------
Income from operations 51,962 11.6 47,204 11.7 40,469 13.2
Litigation settlement - - (20,545) (5.1) - -
Other income, net 2,434 .6 187 - 1,164 .4
Interest expense (10,203) (2.3) (6,125) (1.5) (5,078) (1.7)
---------------- ---------------- ----------------
Income before income taxes 44,193 9.9 20,721 5.1 36,555 11.9
Income taxes 17,013 3.8 7,980 2.0 14,092 4.6
---------------- ---------------- ----------------
Net income $ 27,180 6.1% $ 12,741 3.1% $ 22,463 7.3%
================ ================ ================
</TABLE>

<PAGE> 19

FISCAL 1998 COMPARED TO FISCAL 1997

Net sales for the fifty-two week period ended June 2, 1998 increased $42.3
million, or 10.4%, over net sales for the fifty-three week period ended June 3,
1997. Commercial sales of R-12 freon represented approximately $32.7 million or
8.1% of the total sales for fiscal 1997. Such commercial sales were negligible
for fiscal 1998. Excluding the impact of such commercial sales and the extra
week in fiscal 1997, traditional DIY retail sales for fiscal 1998 increased
22.5% over the comparable fiscal 1997 period. Traditional DIY comparable store
sales increased 7.7% for fiscal 1998 as compared to fiscal 1997, after
excluding the effect of the extra week. When including commercial sales of
freon in comparable store sales for fiscal 1997, comparable store sales would
have reflected a decrease of 1.9% for fiscal 1998. The remaining increase in
net sales from the Company's core operations was attributable to approximately
$83.1 million in sales from new stores opened since the beginning of fiscal
1997. As of June 2, 1998, the Company had 452 stores in operation compared to
400 at the end of fiscal 1997.

Gross profit for the fifty-two week period ended June 2, 1998 was $176.1
million, or 39.3% of net sales, compared with $148.5 million, or 36.7% for
fiscal 1997. The improvement in gross margins for fiscal 1998 was due in part
to the higher level of commercial sales of R-12 freon in the fiscal 1997
comparable period, which generally had lower gross margins due to the product's
commodity nature. Excluding the impact of commercial freon sales in fiscal
1997, the gross margin would have been 38.0% for fiscal 1997. The remaining
improvement in gross margin for fiscal 1998 was primarily attributable to lower
product costs and modifications to the Company's merchandising strategy.

Selling, general and administrative ("SG&A") expenses for fiscal 1998
increased by $22.8 million over such expenses for fiscal 1997, and increased as
a percentage of net sales from 25.0% in fiscal 1997 to 27.7% in fiscal 1998.
The increase was primarily the result of higher levels of commercial sales of
R-12 freon in fiscal 1997. Such commercial sales generally had very limited
associated SG&A expenses. Excluding the commercial sales of R-12 freon, SG&A
expenses as a percentage of sales for fiscal 1997 would have been 27.2%. After
the exclusion of such sales, the increase in SG&A expense as a percentage of
sales for fiscal 1998 was primarily attributable to expenses incurred in the
development and rollout of the Company's commercial delivery program.

Income from operations for fiscal 1998 increased 10.1% to $52.0 million as
compared to $47.2 million for fiscal 1997. Income from operations for fiscal
1997 include earnings associated with commercial sales of freon while similar
sales generally were not made in fiscal 1998. The fiscal 1997 income from
operations also reflects an extra week of results. When excluding the impact of
such commercial sales and the effects of the extra week of operations in the
fiscal 1997 period, traditional DIY operating income (which reflects operating
income exclusive of commercial freon sales and associated cost of sales)
increased 31.6% for fiscal 1998 over the fiscal 1997 results.

As further discussed in Note 9 of the Notes to Consolidated Financial
Statements, the Company reached an agreement in July 1997 to settle a lawsuit
brought by Airgas, Inc. and certain Airgas affiliates against several
defendants, including the Company and one of its employees. As a result of the
settlement, the Company recorded a pre-tax charge of $20.5 million in the
fourth quarter of fiscal 1997. The charge reflects the payments made pursuant
to the terms of the actual settlement plus associated legal and professional
fees.

Other income for fiscal 1998 primarily includes a $4.0 million fee
received from the termination of the proposed acquisition of Hi-Lo Automotive,
Inc., less related expenses.

<PAGE> 20

Interest expense for fiscal 1998 was $10.2 million as compared to $6.1
million for fiscal 1997. The increase for fiscal 1998 was primarily the result
of increased borrowings associated with new store growth, the expansion of the
Company's existing distribution center, and the September 1997 funding of the
amounts due pursuant to the terms of the settlement agreement with Airgas.

The Company's effective tax rate for both fiscal 1998 and fiscal 1997 was
38.5%.

Primarily as a result of the foregoing, net income for fiscal 1998 was
$27.2 million or $1.63 per diluted share as compared to $12.7 million or $.77
per diluted share reported for fiscal 1997.

FISCAL 1997 COMPARED TO FISCAL 1996

Net sales for the fifty-three week period ended June 3, 1997 increased
$97.7 million, or 31.8%, over net sales for the fifty-two week period ended May
28, 1996. Commercial sales of R-12 freon represented approximately $32.7
million or 8.1% of the total sales for fiscal 1997. Net sales for the
fifty-three weeks ended June 3, 1997 from the Company's core retail store
operations increased $67.7 million or 22.2% over the fifty-two week period
ended May 28,1996. Comparable store sales from the Company's core retail store
operations decreased by .6% for fiscal 1997 on a comparable week basis, when
excluding commercial sales of R-12 freon. When including such sales, comparable
store sales increased 9.7% for fiscal 1997 on a comparable week basis as
compared to fiscal 1996. The remaining increase in net sales from the Company's
core operations was attributable to approximately $84.0 million in sales from
new stores opened since the beginning of fiscal 1996. As of June 3, 1997, the
Company had 400 stores in operation compared to 314 at the end of fiscal 1996.

Gross profit for the fifty-three week period ended June 3, 1997 was $148.5
million, or 36.7% of net sales compared with $120.6 million, or 39.2% of net
sales for fiscal 1996. The lower gross profit percentage for fiscal 1997 was
primarily the result of increased revenues associated with commercial sales of
R-12 freon in fiscal 1997, which generally tend to have lower gross margins due
to the product's commodity nature. Excluding the impact of commercial freon
sales in fiscal 1997, the gross margin would have been 38.0% for fiscal 1997.
The reduction in fiscal 1997 traditional DIY gross margin was primarily the
result of the continuing effects of the decrease in retail pricing which
occurred late in the fourth quarter of fiscal 1996 and higher promotional
markdowns which resulted from increased advertising efforts in the second half
of fiscal 1997.

SG&A expenses for fiscal 1997 increased by $21.2 million over such
expenses for fiscal 1996, and decreased as a percentage of net sales to 25.0%
from 26.0%. This decrease was primarily the result of the impact of the higher
levels of commercial sales of R-12 freon in fiscal 1997, which had relatively
low SG&A expenses. The decrease was offset in part by an increase in net
advertising expense.

Other income primarily includes gains and losses on real estate disposals
and interest income. The decrease in fiscal 1997 in other income is primarily
attributable to the lower amount of net real estate gains of approximately
$100,000 in fiscal 1997 as compared to $1.5 million of net real estate gains in
fiscal 1996.

<PAGE> 21

Interest expense for fiscal 1997 was $6.1 million as compared to $5.1
million for fiscal 1996. The increase for fiscal 1997 was primarily the result
of increased average borrowings associated with new store growth.

The Company's effective tax rate for fiscal 1997 was 38.5% as compared
with 38.6% in fiscal 1996.

After reflecting the charge associated with the Airgas litigation
settlement, net income for fiscal 1997 was $12.7 million or $.77 per diluted
share as compared to $22.5 million or $1.44 per diluted share reported for
fiscal 1996. Excluding the impact of the litigation settlement and all related
expenses, net income would have been $25.6 million or $1.54 per diluted share
for fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $14.5 million in fiscal
1998, $8.7 million in fiscal 1997 and $22.8 million in fiscal 1996. The overall
decrease in net cash provided by operating activities in fiscal 1998 as
compared to net cash provided by operating activities in fiscal 1996 was
primarily the result of the funding of the Airgas settlement in fiscal 1998.
The increase in fiscal 1998 as compared to fiscal 1997 was principally the
result of an increase in net income, substantial deferred income tax expense in
fiscal 1998 as compared to a deferred income tax benefit in fiscal 1997,
inventory growth in fiscal 1998 at a level substantially less than in fiscal
1997, an increase in the amount of depreciation and an increase in current
liabilities, offset in part by the funding of the Airgas settlement, a decrease
in the amount of increase in accounts payable and additional increases in the
amounts of prepaid expenses and other current assets.

Capital expenditures for fiscal 1998 were $64.6 million as compared to
$70.2 million in fiscal 1997 and $52.2 million in fiscal 1996. The majority of
the fiscal 1998 capital expenditures related to the 53 new stores opened during
that period and costs associated with a major expansion of the Company's
distribution center, which involves an increase of the Company's existing
distribution center from approximately 300,000 square feet to approximately
600,000 square feet. Most of the expansion project has been completed and the
balance of the project is principally a significant addition of office space.
The total cost of the expansion is estimated to be approximately $20 to $22
million. Through June 2, 1998 the Company has spent approximately $12.0 million
on the distribution center expansion project.

The Company also began the rollout of a commercial delivery service in the
third quarter of fiscal 1998. The Company's commercial delivery service
consists of a program whereby commercial customers (such as auto service
centers, commercial mechanics, garages and the like) establish commercial
accounts with the Company and order automotive parts from the Company with such
parts being delivered from, or picked up from, nearby Discount Auto Parts
stores. During fiscal 1998, the Company's entry into the commercial delivery
market involved total capital expenditures of approximately $3.6 million. In
addition, the commercial delivery program has required, and can be expected to
continue to require, the Company to extend trade credit to certain of the
commercial account customers in the ordinary course of business. The extension
of such trade credit increases the capital requirements associated with the
rollout of the program and exposes the Company to credit risk and the
associated loss attributable to uncollectible accounts. The Company has
established systems to manage and control such credit risk. The amount of
capital that is needed for extension of trade credit will be dependent in large
part upon the success of the commercial delivery service roll-out and how
quickly the commercial business develops. Because this is a relatively new
aspect of the auto parts supply business for the Company, there are risks
associated with the Company's entry into this new aspect of the business and
there can be no assurance as to if and/or when the commercial delivery service
business will be profitable or as to whether the Company will experience any
financial or other challenges in managing and controlling the credit risk.

<PAGE> 22

The Company anticipates that total capital expenditures for fiscal 1999,
including the costs associated with the addition of approximately 75 new
stores, the distribution center expansion and the working capital costs
associated with the roll-out of the commercial delivery service, will be in the
range of $70 million to $80 million.

The Company's credit facilities are disclosed in Note 3 of the Notes to
Consolidated Financial Statements. As of June 2, 1998, the Company had $71.5
million of additional availability under its existing revolving credit
agreement with a syndicate of banks.

The Company has historically been able to finance most of its new store
growth through unsecured lines of credit and medium and longer term mortgage
financing provided by banks and other institutional lenders, and through cash
flow from operations. Consistent with its historical practice, the Company
expects to finance both its short and long-term liquidity needs for new store
growth, as to land and buildings, primarily through these lines of credit and
mortgage financing (renewals and replacements thereof), and as to equipment and
fixtures, primarily through cash flow from operations.

The Company's new store development program also requires significant
working capital, principally for inventories. The Company has historically used
trade credit to partially finance new store inventories and has been successful
in negotiating extended payment terms and incentives from many suppliers
through volume purchases. The Company believes that it will be able to continue
financing some of its inventory growth through the extension of favorable
payment terms and incentives from its vendors, but there can be no assurance
that the Company will be successful in doing so. The additional funding for
inventory expansion has been provided in large part from cash flow from
operations.

As of June 2, 1998, 36 or 8.0% of the Company's stores were leased.
Although the Company generally anticipates a similar own/lease percentage
relationship for new stores in the future, the Company may explore
opportunities which could lead to increases in this percentage.

The Company believes that the expected cash flows from operations,
available bank borrowings and trade credit, will be sufficient to fund both
short term and long term capital and liquidity needs of the Company.

INFLATION AND SEASONALITY

The Company does not believe its operations have been materially affected
by inflation. The Company has been successful, in many cases, in reducing the
effects of merchandise cost increases principally by taking advantage of vendor
incentive programs, economies of scale resulting from increased volumes of
purchases, and selective forward buying.

Although sales have historically been somewhat higher in the Company's
fourth quarter (March through May), the Company does not consider its business
to be seasonal.

YEAR 2000

Management has developed a plan to modify the Company's information
technology to recognize the year 2000 and has begun converting critical data
processing systems. The Company's Year 2000 initiative is being managed by a
team of internal staff and management. Management currently expects the project
to be substantially complete by early 1999 and that the cost of the Year 2000
initiative, principally including internal costs, will not be material to the
Company's results of operations or financial position. Furthermore, this
project is not expected to have a significant effect on operations.

<PAGE> 23

FORWARD LOOKING STATEMENTS

The Management's Discussion and Analysis of Financial Condition and
Results of Operations discussion contains forward looking statements which
reflect the current views of the Company with respect to certain events that
could have an effect on the Company's future financial performance. These
statements include the words "anticipates", "expects", "expected", and
"believes", variations of such words and similar expressions which are intended
to identify such forward looking statements. Any such forward-looking
statements are subject to various risks and uncertainties that could cause
actual results to differ materially from historical results or those currently
anticipated.

The future operating results of the Company may be affected by a number of
factors, including without limitation the following:

COMPETITION: The Company operates in a highly competitive marketplace
(particularly in Florida), in which it competes primarily with national and
regional auto parts chains, wholesalers or jobber stores (some of which are
associated with national auto parts distributors or associations), automobile
dealers and mass merchandisers that carry automotive replacement parts,
products and accessories. Some of the Company's current and potential
competitors are larger and have greater financial resources than the Company.

STORE GROWTH: An important part of the Company's business plan is an
aggressive store growth strategy. There can be no assurance that the Company
will be able to identify, lease and/or acquire favorable store sites, hire and
train team members, and adapt its management and operational systems to the
extent necessary to fulfill its expansion plans. The failure to open new stores
in accordance with its growth plans could have an adverse impact on the
Company's future performance.

EARNINGS GROWTH: The Company has experienced, and may experience in the
future, fluctuations in its quarterly operating results. Moreover, there can be
no assurance that Discount Auto Parts will be able to realize sales and
earnings growth in any particular quarter consistent with its past performance
or with investors' expectations. Factors such as the number of new store
openings, extent of the market demand for auto parts, availability of inventory
supply, propriety of inventory mix, adequacy and perception of customer
service, product quality and defect experience, availability of and ability to
take advantage of vendor pricing programs and incentives, rate of new store
openings, cannibalization of store sites, mix of types of merchandise sold,
governmental regulation, new store development, performance of information
systems, effectiveness of deliveries from the distribution center, ability to
hire, train and retain qualified team members, availability of quality store
sites, ability to complete timely expansion of the distribution center, ability
to successfully roll-out the commercial delivery service, credit risk
associated with the commercial delivery service, environmental risks,
availability of expanded and extended credit facilities, legal expenses
associated with material matters and disputes, expenses associated with
investigations concerning freon matters, potential for liability with respect
to these matters and other risks could contribute to this quarterly
variability.

EFFECTIVE UPGRADING OF SYSTEMS: The growth in the Company's business has
placed significant demand on the management and operational systems of the
Company. To manage its growth effectively, the Company will be required to
continue to upgrade its operational and financial systems, expand its
management team and increase and manage its team members. There can be no
assurance that such upgrades and expansions will be effectuated successfully,
on a timely basis and/or without disruption.

<PAGE> 24

DISPUTES AND INVESTIGATIONS: In the normal course of business, the Company
is subject to regulations, proceedings, lawsuits, claims and other matters,
including matters under laws and regulations related to the environment and
health and safety, among others. In particular, certain federal investigations
are currently ongoing with respect to the matters which were the subject of the
Company's settlement with Airgas and certain Airgas affiliates. These matters
and any other matters that may be pending or may arise in the future are
subject to the resolution of many uncertainties, and accordingly, outcomes are
not predictable with any assurance. Although the Company believes that amounts
provided in its financial statements and its reserves are currently adequate in
light of the probable and estimable liabilities, there can be no assurance that
the amounts required to discharge alleged liabilities from lawsuits, claims and
other legal proceedings will not materially impact future operating results.

VENDOR RELATIONSHIPS: The Company's business is dependent upon close
relationships with its vendors at favorable prices and on favorable terms,
including those offered through financial incentives such as cooperative
advertising arrangements and other marketing incentive programs and
non-financial benefits such as improved packaging and distribution
accommodations. A disruption of these vendor relationships could adversely
affect the Company's business.

LIQUIDITY: The Company's business continues to be capital intensive. It
continues to be the Company's preference to own rather than lease store
locations. Additionally, the expansion of the Company's headquarters and main
distribution facility, its entrance into the commercial delivery market, and
the continued plans for upgrading its information systems to more efficiently
run the business will continue to require capital. Accordingly, the Company
will require substantial capital expenditures to fund these items during the
next several years in order to achieve its operating and expansion plans.
Although the Company believes that its existing credit facilities coupled with
anticipated cash flow from operations will be sufficient to fund the Company'
anticipated capital expenditures over the next several years, there can be no
assurance that such amounts will be sufficient or that the Company will be able
to obtain additional financing on acceptable terms.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements of Discount Auto Parts, Inc. together with the
report thereon of Ernst & Young LLP, appearing on pages 20 through 33 and page
35 of the Company's 1998 Annual Report to Stockholders is incorporated herein
by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information contained under the captions "Election of Directors" and
"Executive Officers" on page 2 and page 9 of the Company's Proxy Statement for
the 1998 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information contained under the caption "Executive Compensation" on pages
10 through 11 of the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders is incorporated herein by reference.

<PAGE> 25

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained under the caption "Security Ownership" on pages
13 through 15 of the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Relationships and Related
Transactions" on pages 11 through 12 of the Company's Proxy Statement for its
1998 Annual Meeting of Stockholders is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) The following financial statements of Discount Auto Parts, Inc.
and the report thereon of Ernst & Young LLP dated July 6, 1998 which
are included in the Company's 1998 Annual Report to Stockholders for
the year ended June 2, 1998, pages 20 through 33, and page 35, are
incorporated herein by reference.

Consolidated Statements of Income for the years ended June 2, 1998,
June 3, 1997, and May 28, 1996.

Consolidated Balance Sheets as of June 2, 1998 and June 3, 1997.

Consolidated Statements of Stockholders' Equity for the years ended
June 2, 1998, June 3, 1997, and May 28, 1996.

Consolidated Statements of Cash Flows for the years ended June 2,
1998, June 3, 1997, and May 28, 1996.

Notes to Consolidated Financial Statements.

Report of Independent Certified Public Accountants.

(2) The following Financial Statements Schedules are included herein:

None.

No schedules are submitted because none are applicable or required or
because the required information is included in the financial
statements or the notes thereto.

(3) The following exhibits are filed as part of this report (exhibits
marked with an asterisk have been previously filed with the
Commission as indicated and are incorporated herein by this
reference):

<PAGE> 26

2.1* Agreement and Plan of Recapitalization dated August 20, 1992 (Filed
as Exhibit 10.21 to the Company's Form 10-Q for the quarter ended
September 1, 1992, as filed with the SEC on October 15, 1992).

3.1* Amended and Restated Articles of Incorporation (Filed as Exhibit 3.2
to the Company's Form 10-Q for the quarter ended September 1, 1992,
as filed with the SEC on October 15, 1992).

3.2* Amended and Restated Bylaws (Filed as Exhibit 3.4 to the Company's
Form 10-Q for the quarter ended September 1, 1992, as filed with the
SEC on October 15, 1992).

4.1* Amended and Restated Articles of Incorporation (Filed as Exhibit 3.2
to the Company's Form 10-Q for the quarter ended September 1, 1992,
as filed with the SEC on October 15, 1992).

4.2* Amended and Restated Bylaws (Filed as Exhibit 3.4 to the Company's
Form 10-Q for the quarter ended September 1, 1992, as filed with the
SEC on October 15, 1992).

4.3* Note Agreement dated as of December 15, 1987 between Discount Auto
Parts, Inc. and Massachusetts Mutual Life Insurance Company together
with amendment dated as of October 30, 1989 (Filed as Exhibit 10.1 to
the Company's Registration Statement on Form S-1 (No. 33-49400) as
filed with the SEC on July 8, 1992).

4.4* Second Amendment Agreement to Note Agreement effective as of August
26, 1992 between Discount Auto Parts, Inc. and Massachusetts Mutual
Life Insurance Company. (Filed as Exhibit 4.4 to the Company's Form
10-K for the year ended May 30, 1995, as filed with the SEC on August
16, 1996).

4.5* Note Agreement dated as of October 30, 1989 between Discount Auto
Parts, Inc. and Massachusetts Mutual Life Insurance Company (Filed as
Exhibit 10.2 to the Company's Registration Statement on Form S-1 (No.
33-49400) as filed with the SEC on July 8, 1992).

4.6* Amendment Agreement to Note Agreement effective as of August 26, 1992
between Discount Auto Parts, Inc. and Massachusetts Mutual Life
Insurance Company. (Filed as Exhibit 4.4 to the Company's Form 10-K
for the year ended May 30, 1995, as filed with the SEC on August 16,
1996).

4.7* Note Purchase Agreement dated as of July 15, 1997 between Discount
Auto Parts, Inc. and the Identified Purchasers (Filed as Exhibit 4.7
to the Company's Form 10-K for the year ended June 3, 1997, as filed
with the SEC on September 2, 1997).

<PAGE> 27

10.1* Revolving Credit Agreement dated as of July 16, 1997 by and among
Discount Auto Parts, Inc. and SunTrust Bank, Central Florida,
National Association, individually and as Agent, Amsouth Bank,
Barnett Bank, N.A., First Union National Bank and The Fuji Bank and
Trust Company (Filed as Exhibit 10.4 to the Company's Form 10-K for
the year ended June 3, 1997, as filed with the SEC on September 2,
1997).

10.2* Amendment and Restatement of the Discount Auto Parts Team Members'
Profit Sharing Plan and Trust dated May 31, 1994 (Filed as Exhibit
10.12 to the Company's Form 10-K for the fiscal year ended May 31,
1994, as filed with the SEC on August 29, 1994).

10.3* Discount Auto Parts, Inc. Supplemental Executive Profit Sharing Plan
(Filed as Exhibit 10.5 to the Company's Form 10-K for the year ended
May 30, 1995, as filed with the SEC on August 26, 1995).

10.4* Incentive compensation plan's for Peter J. Fontaine and William C.
Perkins. (Filed as Exhibit 10.7 to the Company's Form 10-K for the
year ended June 3, 1997, as filed with the SEC on September 2, 1997).

10.5* Discount Auto Parts, Inc. 1992 Stock Option Plan (Filed as Exhibit
10.16 to the Company's Form 10-Q for the quarter ended September 1,
1992, as filed with the SEC on October 15, 1992).

10.6* Discount Auto Parts, Inc. Amended and Restated 1992 Team Member Stock
Purchase Plan. (Filed as Exhibit 10.9 to the Company's Form 10-K for
the year ended June 3, 1997, as filed with the SEC on September 2,
1997).

10.7* Discount Auto Parts, Inc. Non-Employee Directors' Stock Option Plan
(Filed as Exhibit 4.1 to the Company's Registration Statement on Form
S-8 (No. 33-84058) as filed with the SEC on September 16, 1994).

10.8* Discount Auto Parts, Inc. Amended and Restated 1995 Stock Option
Plan. (Filed as Exhibit 10.12 to the Company's Form 10-K for the year
ended June 3, 1997, as filed with the SEC on September 2, 1997).

10.9* Indemnification Agreements for Peter J. Fontaine, Warren Shatzer,
William C. Perkins, E.E. Wardlow and A Gordon Tunstall (Filed as
Exhibit 10.18 to the Company's Form 10-Q for the quarter ended
September 1, 1992, as filed with the SEC on October 15, 1992).

10.10* Indemnification Agreement for C. Michael Moore. (Filed as Exhibit
10.14 to the Company's Form 10-K for the year ended June 3, 1997, as
filed with the SEC on September 2, 1997).

10.11* Indemnification Agreement for David P. Walling. (Filed as Exhibit
10.15 to the Company's Form 10-K for the year ended June 3, 1997, as
filed with the SEC on September 2, 1997).

<PAGE> 28

10.12* Master Joint Business Agreement of Q Lube, Inc. and Discount Auto
Parts, Inc. dated as of January 1, 1997 (Filed as Exhibit 10.16 to
the Company's Form 10-Q for the quarter ended March 4, 1997, as filed
with the SEC on April 17, 1997).

10.13* General Partnership Agreement of DAP/LUBECO Partnership. (Filed as
Exhibit 10.17 to the Company's Form 10-K for the year ended June 3,
1997, as filed with the SEC on September 2, 1997).

10.14 First Amendment and Restatement of the Discount Auto Parts, Inc.
Supplemental Executive Profit Sharing Plan.

13 Annual Report to Stockholders for the year ended June 2, 1998.

21 Subsidiaries of the Registrant

23 Consent of Ernst & Young LLP

27 Financial Data Schedule

(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
fiscal 1998.

<PAGE> 29

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.

DISCOUNT AUTO PARTS, INC.

<TABLE>
<S> <C>
/s/ Peter J. Fontaine August 28, 1998
- ----------------------------------------------- ----------------
PETER J. FONTAINE, Chief Executive Officer, Date
Director, (principal executive officer)
</TABLE>

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.

<TABLE>
<S> <C>
/s/ Peter J. Fontaine August 28, 1998
- ----------------------------------------------- ---------------
PETER J. FONTAINE, Chief Executive Officer, Date
Director, (principal executive officer)

/s/ C. Michael Moore August 28, 1998
- ----------------------------------------------- ---------------
C. MICHAEL MOORE, Chief Financial Officer, Date
Secretary (principal financial and accounting
officer)

/s/ William C. Perkins August 28, 1998
- ----------------------------------------------- ---------------
WILLIAM C. PERKINS, President, Date
Chief Operating Officer, Director

/s/ Warren Shatzer August 28, 1998
- ----------------------------------------------- ---------------
WARREN SHATZER, Director Date

/s/ E.E. Wardlow August 28, 1998
- ----------------------------------------------- ---------------
E.E. WARDLOW, Director Date

/s/ A Gordon Tunstall August 28, 1998
- ----------------------------------------------- ---------------
A GORDON TUNSTALL, Director Date

/s/ David P. Walling August 28, 1998
- ----------------------------------------------- ---------------
DAVID P. WALLING, Director Date
</TABLE>

<PAGE> 1
EXHIBIT 10.14

FIRST
AMENDMENT AND RESTATEMENT
OF THE
DISCOUNT AUTO PARTS, INC.
SUPPLEMENTAL EXECUTIVE PROFIT SHARING PLAN

(ORIGINAL PLAN EFFECTIVE AS OF MAY 30, 1995;
FIRST AMENDMENT AND RESTATEMENT EFFECTIVE AS OF JUNE 3, 1997)

<PAGE> 2

FIRST
AMENDMENT AND RESTATEMENT
OF THE
DISCOUNT AUTO PARTS, INC.
SUPPLEMENTAL EXECUTIVE PROFIT SHARING PLAN

(ORIGINAL PLAN EFFECTIVE AS OF MAY 30, 1995;
FIRST AMENDMENT AND RESTATEMENT EFFECTIVE AS OF JUNE 3, 1997)

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1. ESTABLISHMENT AND PURPOSE ................. 1
1.1 Adoption .................................. 1
1.2 Purposes .................................. 1

ARTICLE 2. DEFINITIONS ............................... 2
2.1 Definitions ............................... 2
2.2 Gender and Number ......................... 4

ARTICLE 3. PARTICIPATION ............................. 4
3.1 Eligibility for Participation ............. 4
3.2 Duration .................................. 4

ARTICLE 4. BENEFITS .................................. 4
4.1 Deferred Profit Sharing Awards ............ 4
4.2 Establishment of Accounts, Crediting Income 5
4.3 Vesting ................................... 5
4.4 Notice of Awards .......................... 6
4.5 Payment of Benefits ....................... 6
4.6 Forfeiture of Nonvested Accounts .......... 7
4.7 Death Benefits ............................ 7

ARTICLE 5. FINANCING ................................. 7
5.1 Payment from Company's General Assets ..... 7
5.2 No Trust Created .......................... 7
5.3 Unsecured Interest ........................ 7
5.4 "Rabbi" Trust ............................. 7

ARTICLE 6. ADMINISTRATION ............................ 7
6.1 Administration ............................ 7
6.2 Liability of Committee and Board;
Indemnification ........................... 8
6.3 Expenses .................................. 8
6.4 Tax Withholding ........................... 8

</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
ARTICLE 7. MISCELLANEOUS ............................. 8
7.1 Nontransferability ........................ 8
7.2 Amendment or Termination .................. 8
7.3 Employment by Company ..................... 9
7.4 Applicable Law ............................ 9

</TABLE>

<PAGE> 4

FIRST
AMENDMENT AND RESTATEMENT
OF THE
DISCOUNT AUTO PARTS, INC.
SUPPLEMENTAL EXECUTIVE PROFIT SHARING PLAN

This Amendment and Restatement of the Discount Auto Parts, Inc.
Supplemental Executive Profit Sharing Plan is made and entered into this 19th
day of January, 1998, but is effective for all purposes as of June 3, 1997,
except as may be otherwise noted herein, by Discount Auto Parts, Inc. (the
"Company").

W I T N E S S E T H

WHEREAS, the Company has previously adopted the Discount Auto Parts, Inc.
Supplemental Executive Profit Sharing Plan (the "Original Plan"), effective as
of May 30, 1995; and

WHEREAS, pursuant to the terms of the Original Plan, the Company is
authorized and empowered to amend the Original Plan; and

WHEREAS, the Company deems it advisable and in the best interest of the
Participants to amend the Original Plan to allow the Committee to establish
from time to time the specified percentage of Compensation applicable to each
Participant for each Plan Year; to limit the term "Compensation" to mean only
regular salary and wages, overtime pay, and bonuses; and make other desired
changes.

NOW, THEREFORE, the Original Plan is hereby amended and restated in its
entirety to read as follows:

ARTICLE 1. ESTABLISHMENT AND PURPOSE

1.1 ADOPTION. Effective as of June 3, 1997, the Company hereby amends,
restates and reestablishes, in accordance with the terms hereof, an unfunded
plan of deferred compensation for certain of its officers and other key
management personnel and their beneficiaries as described herein, which plan
shall continue to be known as the "Discount Auto Parts, Inc. Supplemental
Executive Profit Sharing Plan" (the "Plan").

1.2 PURPOSES. The purposes of this Plan are to provide additional
retirement benefits to a select group of officers and other key management
personnel, upon whom major responsibilities for the successful operation,
administration, and management of the Company rest and whose present and
potential contributions are important to the continued success of the Company,
and to enable the Company to attract and retain in its employ highly qualified
persons for the successful conduct of its business. It is intended that these
purposes will be assisted through the granting of annual Deferred Profit
Sharing Awards.

<PAGE> 5
ARTICLE 2. DEFINITIONS

2.1 DEFINITIONS. Whenever used hereinafter, the following terms shall
have the meaning set forth below.

(a) "ACCOUNT" means the account to which a Participant's
Deferred Profit Sharing Awards are credited as set forth herein.

(b) "BOARD OF DIRECTORS" and "BOARD" means the board of
directors of the Company.

(1) a change in control of the Company of a nature
that is required, pursuant to the Securities Exchange Act of
1934 (the "1934 Act"), to be reported in response to (i) Item
1(a) of a Current Report on Form 8-K or (ii) Item 6(e) of
Schedule 14A, in each case as such requirements are in effect
on May 30, 1995;

(2) the adoption by the Company of a plan of
dissolution or liquidation;

(3) the closing of a sale of all or substantially
all of the assets of the Company;

(4) the closing of a merger, reorganization or
similar transaction (a "Transaction") involving the Company
in which the Company is not the surviving corporation or, if
the Company is the surviving corporation, immediately
following the closing of the Transaction, persons who were
shareholders of the Company immediately prior to the
Transaction own less than 50% of the combined voting power of
the surviving corporation's voting securities;

(5) the acquisition of "Beneficial Ownership" (as
defined in Rule 13d-3 under the 1934 Act) of the Company's
securities comprising 30% or more of the combined voting
power of the Company's outstanding securities by any "person"
(as that term is used in Sections 13(d) and 14(d)(2) of the
1934 Act and the rules and regulations promulgated
thereunder, but not including any trustee or fiduciary acting
in that capacity for an employee benefit plan sponsored by
the Company) and such person's "affiliates" and "associates"
(as those terms are defined under the 1934 Act);

(6) the failure of the "Incumbent Directors" (as
defined below) to constitute at least a majority of all
directors of the Company (for these purposes, "Incumbent
Directors" means individuals who were the directors of the
Company on May 30, 1995, and, after his election, any
individual becoming a director subsequent to May 30, 1995,
whose election, or nomination for election by the Company's
shareholders, is approved by a vote of at least two-thirds of
the directors then comprising the

<PAGE> 6

Incumbent Directors, except that no individual shall be
considered an Incumbent Director whose initial assumption
of office as a director is in connection with an actual or
threatened "election contest" relating to the "election of
directors" of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the 1934 Act).

Notwithstanding any provision above to the contrary, no Change in
Control shall be deemed to have occurred with respect to any
particular Participant by virtue of a transaction, or series of
transactions, that results in the Participant, or a group of persons
that includes the Participant, acquiring the Beneficial Ownership of
more than 30% of the combined voting power of the Company's
outstanding securities.

(d) "COMMITTEE" means: (1) as to any matter involving the
participation or benefits under this Plan for any member of the
Executive Committee, the Compensation Committee of the Board, and (2)
as to any other matter, the Executive Committee of the Board.

(e) "COMPANY" means Discount Auto Parts, Inc., or any
successor entity. To the extent required, the term "Company" may
include any subsidiary of the Company or any other affiliated
corporation that has adopted this Plan and that employs a Participant.

(f) "COMPENSATION" means a Participant's regular salary and
wages, overtime pay, and bonuses paid by the Company and taxable to
the Participant; provided, however, that no Compensation in excess of
$150,000 (or such greater amount as is taken into account for each
employee of the Company under the Company's plan maintained pursuant
to Section 401(k) of the Internal Revenue Code) shall be taken into
account for any Participant.

(g) "CONTROL DATE" means the date on which a Change in
Control occurs.

(h) "DEFERRED PROFIT SHARING AWARDS" are rights to receive,
without payment to the Company, certain amounts as hereinafter
determined.

(i) "DISABILITY" means the total and permanent disability
of a Participant by reason of sickness or injury to perform all of the
duties assigned to him by the Company, with the existence of a
Disability to be determined by the Committee in its sole discretion.

(j) "NORMAL RETIREMENT AGE" means the Participant's 65th
birthday.

(k) "PARTICIPANT" means any officer or other management
employee of the Company who meets the eligibility requirements of the
Plan, as set forth in Article 3 hereof, to be and become a
Participant, and who continues to meet such requirements. For purposes
of maintaining Participants' Accounts and distributing benefits, the
term "Participant" shall also include any former employee of the
Company who became a Participant under the Plan and who still has a
balance in an Account under the Plan.

3.
<PAGE> 7
(l) "PLAN" means the Discount Auto Parts, Inc. Supplemental
Profit Sharing Plan, as it is set forth herein and as it may be amended
from time to time.

(m) "PLAN YEAR" means the 52/53-week period ending on the
Tuesday nearest May 31.

(n) "YEAR OF EMPLOYMENT" means a Plan Year on or after June
1, 1988 beginning in which a Participant completes at least 1,000
hours of service. For these purposes, hours of service shall be
computed by the Committee in its sole discretion using substantially
the same rules provided under Section 410 of the Internal Revenue
Code. The determination of the Committee in this regard shall be final
and conclusive as to all parties.

2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
any masculine terminology when used in the Plan shall also include the feminine
gender, and the definition of any term herein in the singular shall also include
the plural.

ARTICLE 3. PARTICIPATION

3.1 ELIGIBILITY FOR PARTICIPATION. The Committee shall have the
exclusive right to designate which officers or other management employees of the
Company shall be eligible to participate in this Plan. Participation shall be
limited to a select group of management or highly compensated employees and is
subject to change by the Committee from time to time. No such employee shall be
eligible to be so designated by the Committee unless such employee has completed
at least one year of continuous service with the Company as of the date
specified by the Committee as the effective date that such employee is to be
considered to have entered the Plan.

3.2 DURATION. An officer or other management employee who becomes a
Participant shall continue to be a Participant until the earlier of (a) the
date he or she is no longer employed by the Company or (b) the effective date
of a determination by the Committee that he or she shall not accrue additional
benefits under this Plan; provided, in either case, that if a Participant is
then vested in benefits under the Plan, he or she shall continue as a
Participant (even though not accruing additional benefits) for the purpose of
receiving his or her then accrued vested benefits pursuant to the provisions of
this Plan.

ARTICLE 4. BENEFITS

4.1 DEFERRED PROFIT SHARING AWARDS. The Committee may elect to make a
Deferred Profit Sharing Award to each Participant who is employed by the Company
on the last day of the Plan Year. Deferred Profit Sharing Awards shall be
discretionary in nature, shall be equal to a specified percentage of a
Participant's Compensation for the Plan Year and, if an election is made to make
a Deferred Profit Sharing Award for a particular Participant, the Committee
shall establish the specified percentage of Compensation applicable to each
Participant for the Plan Year. The Committee shall

<PAGE> 8
establish the specified percentage of Compensation applicable to each
Participant for the Plan Year not later than August 15th following the Plan Year
for which Deferred Profit Sharing Awards are granted. The specified percentage
of Compensation applicable to Participants, at the election of the Committee,
may be the same for all Participants or may be different based upon
Participants' positions with the Company.

4.2 ESTABLISHMENT OF ACCOUNTS, CREDITING INCOME. The Company shall cause
a Deferred Profit Sharing Award account ("Account") to be established and
maintained in the name of each Participant.

(a) The Participant's Account shall be credited, as of the
last day of a Plan Year, with the amount of the Deferred Profit
Sharing Award made to the Participant for such Plan Year.

(b) The Participant's Account shall be credited, as of the
last day of a Plan Year, with accrued interest income on the
aggregate balance of such Participant's Account (including any
accrued interest added to such balance with respect to prior Plan
Years) as of the last day of the Plan Year (but determined prior to
the crediting of any Deferred Profit Sharing Award, if any, made to
the Participant for such Plan Year), at a rate for such Plan Year
equal to the greater of (i) the arithmetic average of the respective
prime rates of the Company's principal bank as established by such
bank and in effect on the last day of each fiscal quarter of such
Plan Year or (ii) the arithmetic average of the respective interest
rates as established and in effect as of the last day of each fiscal
quarter of such Plan Year under the MetLife Guaranteed Fixed Income
Account provided for pursuant to the Company's Team Members' Profit
Sharing Plan. For example, if with respect to a particular Plan Year
the applicable prime rate is 9% at the end of the first quarter,
8.5% at the end of the second quarter, 8% at the end of the third
quarter and 8.25% at the end of the fourth quarter, the average
prime rate would be 8.4375%; furthermore if with respect to such
Plan Year the applicable interest rate under the MetLife Guaranteed
Fixed Income Account is 8.25% at the end of each of the four
quarters of the Plan Year, the average interest rate would also be
8.25%; and thus the interest rate applicable for such Plan Year
would be 8.4375%.

(c) The Participant's Account shall be charged with the
amount of any benefit paid to the Participant or his beneficiary
during the Plan Year to the extent such benefit is attributable to
such Participant's Account.

4.3 Vesting. Each Participant shall become vested in the balance of his
Account based upon the Employee's aggregate Years of Employment with the
Company, as follows:

Years of Employment Vested Interest
------------------- ---------------
<S> <C>
Less than 3 years 0%
3 years, but less than 4 years 20%
4 years, but less than 5 years 40%
5 years, but less than 6 years 60%
6 years, but less than 7 years 80%
7 years or more 100%
</TABLE>

<PAGE> 9

Notwithstanding the preceding provisions of this Section 4.3, a Participant
shall become 100% vested in the balance of his Account:

(a) upon the Participant's attainment of his Normal
Retirement Age; or

(b) in the event of the Participant's death or Disability,
provided such Participant was employed by the Company on the day prior to such
death or Disability; or

4.4 NOTICE OF AWARDS. Each Participant shall be provided with notice of
his Deferred Profit Sharing Award in such form as the Committee shall approve
from time to time. Each notice shall specify (1) the value of the Deferred
Profit Sharing Award made to the Participant for the Plan Year, (2) the
aggregate value of his Account as of the end of the Plan Year, (3) the
Participant's vested interest in his Account, and (4) such other terms and
provisions not inconsistent with the Plan as the Committee shall deem
necessary, proper, appropriate or advisable.

4.5 PAYMENT OF BENEFITS.

(a) Upon a Participant's termination of employment with
the Company, or, if earlier, upon such Participant's attainment of Normal
Retirement Age, such Participant shall become entitled to receive payment of
such Participant's vested interest in the balance of such Participant's Account
determined as of the date of such event. Payment of such benefit shall be made
in a lump sum within 120 days after the occurrence of the event giving rise to
the Participant's right to receive payment. If the date of such event occurs
prior to the end of a Plan Year but the payment is not made until after the end
of such Plan Year, then interest for such Plan Year shall be credited to such
Participant's Account as of the last day of the Plan Year and the payment of
such benefit shall include the interest so credited; provided however that
under such circumstances the Participant shall not be entitled to be awarded a
Deferred Profit Sharing Award for such Plan Year, no further adjustment,
including the crediting of interest, shall be made to such Participant's
Account and the vested percentage shall still be determined as of the date of
the event triggering such Participant's right to receive payment.

(b) A Participant who attains Normal Retirement Age and
receives a distribution of the balance of such Participant's Account but who
continues his employment with the Company and continues to be designated as a
Participant in the Plan shall subsequently be entitled to receive annual
distributions of any additional amounts credited to such Participant's Account.
Payment of such additional amounts (without any further adjustment) shall be
made in a lump sum within 120 days after each such additional amount is
credited to such Participant's Account.

<PAGE> 10

4.6 FORFEITURE OF NONVESTED ACCOUNTS. Upon the termination of the
employment of a Participant prior to the vesting of the entire balance of his
Account, the Participant shall have no right to receive any payment with
respect to any nonvested interest in his Account, and such nonvested interest
shall, thereupon, and without further action, be forfeited by and not payable
to such Participant; also, such forfeited interest shall not be payable to or
allocated to the Account of any other Participant under the Plan.

4.7 DEATH BENEFITS. In the event of the Participant's death before his
separation from service or in the event of the Participant's separation from
service which is followed by the Participant's death prior to payment of the
benefit, the Participant's interest in his Account shall be paid to the person
named as beneficiary in a writing delivered to the Company prior to the
Participant's death. If a Participant has not designated a beneficiary, or if
no designated beneficiary is living on the date of distribution, such amounts
shall be distributed to the Participant's estate.

ARTICLE 5. FINANCING

5.1 PAYMENT FROM COMPANY'S GENERAL ASSETS. Payment to a Participant or his
beneficiaries hereunder shall be made from assets which shall continue, for all
purposes, to be part of the general assets of the Company, and no person, other
than the Company, shall have, by virtue of the provisions of this Plan or any
agreement made pursuant to this Plan, any interest in such assets.

5.2 NO TRUST CREATED. Nothing contained in this Plan, and no action taken
pursuant to the provisions of this Plan, shall create or be construed to create
a trust of any kind or a fiduciary relationship between the Company and any
Participant, his spouse or any other person.

5.3 UNSECURED INTEREST. No Participant hereunder shall have any interest
whatsoever in any specific asset of the Company. To the extent that any person
acquires a right to receive payments under this Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company.

5.4 "RABBI" TRUST. Notwithstanding the foregoing provisions of this
Article 5, the Company reserves the right to create and contribute funds to a
"Rabbi" trust for the purpose of paying some or all of the benefits provided
under this Plan, but the existence of any such trust shall not in any way alter
the relationship among the Company and a Participant as described in this
Article 5.

ARTICLE 6. ADMINISTRATION

6.1 Administration. The Committee shall have complete control over
the administration of the Plan, with all powers necessary to enable it to carry
out its duties in that respect. In connection with its administration of the
Plan, the Committee shall be empowered to exercise discretion, including with
respect to the interpretation of the terms of the Plan and in the determination
of eligibility for benefits and the amounts thereof; such discretionary
determinations and interpretations shall be binding

<PAGE> 11

upon all Participants and others hereunder. Without limitation on the
foregoing, the Committee shall be authorized to construe and interpret all of
the provisions of the Plan, to adopt rules and practices concerning the
administration of the same, and to make any determination necessary hereunder,
all of which shall be binding and conclusive on all parties.

6.2 LIABILITY OF COMMITTEE AND BOARD; INDEMNIFICATION. To the extent
permitted by law, no member of the Committee or of the Board shall be liable to
any person for any action taken or omitted in connection with the
interpretation and administration of this Plan unless attributable to his own
gross negligence, fraud or bad faith. The Company shall indemnify the members
of the Committee and of the Board against any and all claims, losses, damages
and expenses, including counsel fees, incurred by them, and any liability,
including any amounts paid in settlement with their approval, arising from
their action or failure to act, except when the same is determined to be
attributable to their gross negligence, fraud or bad faith. The provisions of
this Section 6.2 are not intended to be exclusive, and nothing contained in
this Section 6.2 shall in any way limit indemnification provided members of the
Committee and/or members of the Board under the by-laws of the Company, by
contract, by statute or otherwise.

6.3 EXPENSES. The cost of payment from this Plan and the expenses of
administering the Plan shall be borne by the Company.

6.4 TAX WITHHOLDING. The Company may withhold, or require the
withholding of, from any payment which it is required to make, any federal,
state or local taxes required by law to be withheld with respect to such payment
and such sum as the Company may reasonably estimate as necessary to cover any
taxes for which the Company may be liable and which may be assessed with regard
to such payment. Upon discharge or settlement of such tax liability, the Company
shall distribute the balance of such sum, if any, to the Participant from whose
payment it was withheld, or if such Participant is then deceased, to the
beneficiary of such Participant. Prior to making any payment hereunder, the
Company may require such documents from any taxing authority, or may require
such indemnities or surety bond, as the Company shall reasonably deem necessary
for its protection.

ARTICLE 7. MISCELLANEOUS

7.1 NONTRANSFERABILITY. In no event shall the Company make any payment
under this Plan to any assignee or creditor of a Participant or of a
beneficiary. Prior to the time of a payment hereunder, a Participant or a
beneficiary shall have no rights by way of anticipation or otherwise to assign
(including without limitation in connection with a divorce) or otherwise
dispose of any interest under this Plan nor shall rights be assigned or
transferred by operation of law.

7.2 AMENDMENT OR TERMINATION.

(a) Except as provided to the contrary in subsection (b)
below, any provision of the Plan and any benefit payable under the
Plan may be amended or terminated at any time

8.
<PAGE> 12
by the Board, and no Participant or beneficiary of a deceased
Participant shall have a right to receive future benefits under the
Plan at any time. Notice of any such amendment or termination shall
be given in writing to each Participant and beneficiary of a
deceased Participant having an interest in the Plan.

(b) No amendment or termination of the Plan shall decrease
or otherwise adversely affect the payment of any amount (without any
further adjustment) as to which a Participant is vested prior to the
amendment or termination; and without limitation on the foregoing,
no amendment or termination of the Plan shall stop, decrease or
otherwise adversely affect the payment of any benefit then paid or
to be payable in the future to any Participant whose employment with
the Company had terminated prior to such amendment or termination.

7.3 EMPLOYMENT BY COMPANY. Nothing in this Plan shall confer upon the
participant any right to any particular amount of compensation or any right to
continue in the employ of the Company, or shall interfere in any way with the
right of the Company to terminate such participant's employment at any time.

7.4 APPLICABLE LAW. This instrument shall be construed in accordance
with and governed by the laws of the State of Florida, to the extent not
superseded by the laws of the United States.

<PAGE> 1
EXHIBIT 13

DISCOUNT AUTO PARTS, INC.
1998 ANNUAL REPORT

DRIVEN TO WIN
<PAGE> 2

(YEARLY GROWTH BAR GRAPHS)
<PAGE> 3

TABLE OF CONTENTS

DISCOUNT AUTO PARTS, INC. IS ONE OF THE SOUTHEAST'S LEADING
SPECIALTY RETAILERS OF AUTOMOTIVE REPLACEMENT PARTS, MAINTENANCE
ITEMS AND ACCESSORIES FOR THE DO-IT-YOURSELF ("DIY") CONSUMER. AS OF
AUGUST 12, 1998, DISCOUNT AUTO PARTS OPERATED 467 STORES LOCATED
THROUGHOUT FLORIDA, GEORGIA, ALABAMA, MISSISSIPPI, SOUTH CAROLINA
AND LOUISIANA.

<TABLE>
<S> <C>
LETTER TO SHAREHOLDERS AND TEAM 2

BUILDING THE BUSINESS 4

SELECTED FINANCIAL DATA 13

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 14

CONSOLIDATED STATEMENTS OF INCOME 20

CONSOLIDATED BALANCE SHEETS 21

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 22

CONSOLIDATED STATEMENTS OF CASH FLOWS 23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24

REPORT OF MANAGEMENT 34

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 35

CORPORATE INFORMATION 36
</TABLE>

1
<PAGE> 4
TO OUR SHAREHOLDERS AND TEAM:

We're pleased to report another strong fiscal year, with do-it-yourself
("DIY") sales up 23 percent, a 32 percent increase in profits from our core
business, and ending our fourth quarter with some of the highest gross margins
in our history - 40 percent. These strong results continue to give us confidence
that our team is highly motivated and passionate about serving our customers for
a lifetime and developing ideas to better develop our team and serve our
customers. In short, we have the team that is "Driven to Win."

At fiscal year-end our store count totaled 452, and our Team began to serve
customers in the exciting aftermarket parts markets of Atlanta, Georgia (17
stores) and Mississippi (20 stores), as well as continued expansion in our
existing markets. During July 1998, we also opened our first stores in the State
of Louisiana.

Our goal is to be the dominant auto parts supplier in every market we
serve. We're the clear leader in Florida, and we continue to cement that top
position by executing what we call our "scorch the earth" strategy. Florida is
one of the fastest growing states, with a total available parts aftermarket of
approximately $4 billion and a ideal climate for year round auto repair work. It
ranks third in the number of registered vehicles, has a median income of $25,255
and is the fourth most populated state in the nation. And most important,
there's still room for us to expand our DIY market dominance in Florida by
continuing to open more stores in the state while continuing to position
Discount Auto Parts to be the aftermarket parts supplier to the vast amount of
commercial installer customers we will be serving. With nearly a quarter of our
stores outside the state of Florida, we believe we have built the same
foundation to "scorch the earth" in every market we serve. We're focused, we're
confident, and we're in motion.

We doubled the size of our distribution center this year. This will allow
us to expand our total SKU count availability, as well as better serve our DIY
and commercial installer customers. With a higher percentage of products in
stock, customers rarely have to wait for special orders. In fact, our
distribution center filled, on average, approximately 97 percent of all orders
requested by our stores. Our expanded 600,000 square foot distribution center
will also allow Discount Auto Parts to serve more stores with greater
efficiency. This will provide our Express Warehouses with daily delivery of
thousands of new part numbers. Our Express Warehouse, a mini-distribution
center, was introduced this year and we currently have four opened with four
more under development for fiscal 1999. These sites are designed to provide
tremendous parts availability to our DIY and commercial customers.

Like many industries, ours is consolidating, with significant mergers and
acquisitions by and among many of the top companies. According to the magazine
Automotive Marketing (July 1998), the top 10 national chains now account for 70
percent of all stores on the Top 100. It can be expected that the top tier
companies, like Discount Auto Parts, will use their strengths - experienced
teams, capital resources and strategic advantages - to continue to capture even
greater market share. We believe the industry will continue to consolidate and
that there continue to be opportunities to expand. One only needs to consider
that the top 10 automotive parts retailers only account for approximately 14% of
the estimated $70 billion parts market.

As you'll note further on in this Annual Report, our management team has
deep experience in the automotive parts market. With an average of over 12 years
in the business, many starting at the store level, they know the industry and
are well-equipped to lead our charge into new markets and new ventures.
Providing our Team opportunity to grow into anything they dream they can be is a
strategic advantage that has helped us meet every challenge we've faced so far.
We are certain that our Team will carry us ably into the future.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 5

This year, Warren Shatzer, our executive vice president of merchandising
retired. The team he's coached and prepared over the years is confidently taking
over where he left off. Warren continues to serve our Company as a director but
we must thank him for his many years of exceptional service as an officer of
Discount Auto Parts. We wish him well in his retirement.

Our entry this year into the commercial market has allowed us to leverage
our retail capabilities and pursue part of what is believed to be a $45 billion
nationwide market. Careful to protect our core business of retail auto parts,
we've set up a separate business unit to handle the special needs of commercial
installers. You'll read more about this later in this Annual Report.

[PICTURE OF CEO & PRESIDENT]

We also believe involvement in our communities is important for our team.
Many of our team members are involved in community service, such as youth sport
teams, civic clubs and other activities that help improve their communities. We
support these efforts wholeheartedly. In fact, our team members throughout the
Company raised more than $100,000 for the Children's Miracle Network this year,
on top of participating in the Hope Worldwide toy drive, the Juvenile Diabetes
Foundation, and many other worthy charities.

As usual, it has been an exciting year. But as exciting as this past year
has been we believe it is simply a stepping stone and outstanding bridge for the
robust times ahead for our Team, our Customers and our Company. History always
identifies moments of great change and we believe fiscal 1998 will be identified
as one of those moments as it relates to Discount Auto Parts. Our commitment to
our Team, our Customers and the numerous new Ideas to operating more efficiently
gives us confidence to march forward toward our goals and continue to be the low
cost provider for our Customers.

We thank our over 4,300 team members, our Customers and our shareholders
for their support this past year, and look forward to an exciting and
challenging future for Discount Auto Parts.

/s/ Peter J. Fontaine /s/ William C. Perkins
Peter J. Fontaine William C. Perkins
Chairman & CEO President & COO

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 6

BUILDING THE BUSINESS

"There is only one way to build a business. First you build the team,
and then the team builds the business. There is no other way."
Herman and Denis Fontaine
Discount Auto Parts Co-Founders

At Discount Auto Parts, we believe that a company's business strategy is
only as good as the people who execute it. Our 27-year success story can be
credited to the hard work and devotion of our Team, and they are playing a
pivotal role as we move forward with new products into new markets, new ventures
and new opportunities. Our Team is "Driven to Win."

Our business strategy is driven by what we call the three "P"s: People,
Parts and Profit. People-our Team-are the linchpin of our success. Our expanded
product offering, the second "P", is an important way we can provide our
customers with what they want when they want it. And profit is really what it
all adds up to. It's the yardstick of our success.

We learned long ago that if we give our Team the tools and skills they need
to succeed, they will. Combine a committed, focused Team with a customer-focused
business strategy, and the result is a win for everyone. Just look at our solid
financial performance for the past five years: sales have grown at 21 percent
annually; operating income has grown at a rate of 19 percent annually; and our
five-year adjusted annual growth in net income has been at a 19 percent rate.

A CUSTOMER-DRIVEN BUSINESS STRATEGY

It all begins with knowing the customer. The "do-it-yourself" customer has
very specific needs. When he or she is looking for an auto part, it's usually
because the car is either broken down, or needs work then and now. A convenient,
neighborhood store with convenient store hours is appreciated, and appreciated
even more is the ability to find the right part in stock. In the store, the
customer wants to be assisted by a knowledgeable and courteous store
representative. And price is paramount: our customers are looking for
affordability and that means we need to deliver low cost.

[TEAM MEMBER BEHIND COUNTER HELPING CUSTOMER]

Discount Auto Parts' success is built on our ability to provide customers
with exactly what they want: convenience, availability, customer service and low
cost. That's the formula for our success.

[DISCOUNT AUTO PARTS LOGO]

<PAGE> 7

IT BEGINS WITH THE TEAM

A key component of our business strategy is our investment in the training
and development of our Team. We've learned that if the Team understands our core
values, our business strategies and what our customers need, they're better
prepared to execute our plan. Every team member receives not only technical
training, but continual training on the Company's operations, goals and
objectives. The Company's commitment to customer service and low cost is
ingrained in every team member and becomes the guidepost for his or her daily
work.

The entire Team is tenacious about cost savings-because they understand the
connection between company costs and our ability to provide our customers with
low prices. This company-wide focus on cost control allows us to remain a
low-cost provider in our business-yet still be profitable. We work hard to make
sure that Discount Auto Parts has some of the highest operating margins in the
business.

Our profitability allows us to open more stores, providing customers with
the convenience they seek and building our revenue and bottom line income in the
process. It also allows us to invest in systems and inventory to ensure parts
are available when customers need them. And, the Team's focus on customer
service builds repeat business, adding even further to our bottom line.

We're proud to have one of the highest team member retention rates in our
industry. That means our staffing and turnover costs tend to be lower than
others in our industry, which plays a key role in the company's cost-efficiency.

ACHIEVING MARKET DOMINANCE

Our goal is market dominance and our customer-driven business strategy is a
reliable formula for getting us there. We've proved it in Florida, where we're
number one in almost every market we serve, and we're on our way to proving it
in other states. Starting from our strong base in Florida, we've been
geographically and strategically expanding our presence through the south. We're
now in six states and growing.

Over the years, we've refined and tested our market strategy so that today,
we have a proven formula for how to enter a market and succeed. Our strategy is
built around the tried and tested concept of store saturation.

[GRAPH]

[DISCOUNT AUTO PARTS LOGO]

<PAGE> 8
STORE SATURATION

We're often asked why we place Discount Auto Parts stores so close
together. Doesn't the opening of a new Company store reduce sales from the
adjacent store?

Experience has taught us that immediately after we open a new store in
close proximity to an existing Discount Auto Parts store, we usually see an
overall increase in sales for the entire area. Besides increased total sales,
this store saturation strategy allows us to leverage advertising, distribution
and other costs, helping keep our retail prices low. In addition, we believe
this strategy helps us to attack new markets successfully.

[STORE EXTERIOR]

If the strategy sounds familiar, it's the same one that's been used
successfully by the retail fast food industry, which shares a focus on customer
convenience. Clustering stores works. We may not have invented it, but we've
certainly refined it.

We took this strategy to a new level in 1991, when we opened our first
"Discount Auto Parts Depot" store. A depot store is larger than our standard
store, offers a wider assortment of parts and is usually located in a highly
populated urban area. It serves as a sort of hub, surrounded by our standard
mini-depot stores, and not only serves customers, but supports the surrounding
stores with additional parts. We have 23 Discount Auto Parts Depots now, each
carrying an average of 20,000 SKUs.

COMMERCIAL INSTALLERS: NEW SALES OPPORTUNITIES

For some time, we've been looking at the feasibility of applying our
formula for success to a new, even bigger and faster-growing market: commercial
installers. This market, which is estimated to be over $45 billion in size,
offers us the opportunity for additional sales growth, at a lower capital cost,
since we can leverage our current real estate, systems, and to a great extent,
our inventory.

Our research told us that this commercial customer wanted access to a large
inventory of high quality parts, a fast delivery system, knowledgeable service
and competitive prices. We knew we had the ability to service each one of those
needs.

After more than a year of study and test, we began to roll out our
commercial business plan in the third quarter of fiscal 1998, with plans to
expand the roll-out chain-wide over the next 18 to 24 months. When complete we
expect that commercial delivery will be provided from approximately two-thirds
of our store base. Our aim has been to prudently enter this market, adding
incremental sales while taking care to not dilute our retail business, and so
far we've been able to do just that.

PRO 2 CALL
Auto Parts for Professionals

[DISCOUNT AUTO PARTS LOGO]

<PAGE> 9

Using our existing infrastructure, we established "Pro2Call", our
commercial business unit, and staffed it with a team of highly qualified,
dedicated professionals trained to respond to the issues important to commercial
installers. The commercial team operates separately from our retail-focused
team, so that our retail business can continue its own focus without disruption.

The commercial business actually leverages our existing retail
capabilities. It was fairly simple to expand our Express Warehouse concept to
serve the commercial market. This mini-distribution center concept was
originally intended to provide our retail customer with quick access to an
expanded product line. Usually attached to the depot store in a major
metropolitan market, the Express Warehouse stocks tens of thousands of
additional parts and can serve up to 80 stores in a geographic area.

We have been able to leverage the Express Warehouse to efficiently service
our commercial customers as well, allowing us to utilize fixed assets-our land
and buildings-more efficiently. We operate four Express Warehouses today and
expect to open another four in the coming fiscal year. Our stores stock
thousands of SKU's and are positioned to serve the retail and commercial
customers' needs. The infrequent times we are unable to serve our customers
needs from our retail store location, the parts can usually be quickly accessed
from our Express Warehouse inventory.

MORE PRODUCTS MEANS BETTER CUSTOMER SERVICE

It's important that customers find the parts they need quickly and easily,
and to that end, we've expanded our product line extensively through the Depot
and Express Warehouse concepts. After nearly three decades of experience, we
have learned to examine emerging trends in the automotive industry (such as the
increasing proliferation of trucks and sports-utility vehicles) and data on the
popularity of parts to come up with the right mix to serve customer needs.

[STORE INTERIOR]
7

[DISCOUNT AUTO PARTS LOGO]

<PAGE> 10
Further, we've worked hard to increase margins on parts without sacrificing
our base as a low-cost provider through such mechanisms as premium product
categories.

The right mix of products is an ever changing challenge, but we believe
we're getting closer every day. Our DIY comparable store sales increase of 7.7%
for fiscal 1998 would appear to be proof positive.

MEET THE SENIOR MANAGEMENT TEAM

When all is said and done, it's the Team that makes it all happen. We'd
like you to meet some of the men and women who lead our Discount Auto Parts
Team. Our senior management team is experienced, committed, and motivated-and
most important-they're able to motivate and inspire the more than 4,300 Team
Members they lead.

[MEMBERS OF SENIOR MANAGEMENT TEAM: VP - MARKETING, VP - REAL ESTATE,
DIRECTOR - ADMINISTRATION AND INVESTOR RELATIONS, VP - MIS,
VP - HUMAN RESOURCES, DIRECTOR - COMMERCIAL SALES AND CFO]

BILL PERKINS: From Store Clerk to Company President

When a new team member asks about opportunities to succeed, he or she need
look for inspiration no further than Discount Auto Parts President Bill Perkins.

In 1983, Bill worked behind the counter at Store #2 on Memorial Boulevard
in Lakeland, Florida. He received his first promotion to team leader in a few
months. Then, in 1985 he was named manager of another Florida store, in 1986 was
promoted to a Training Manager, in 1987 received a promotion to Key Manager and
by 1988 he transferred to corporate headquarters and was placed in charge of
inventory valuation. Just four years later he was named chief financial officer.
In 1994 he took charge of operations and, in 1997, he took the reins as company
president.

During that same period, Discount Auto Parts grew from less than 50 stores
and $50 million in revenue to 452 stores and $447.5 million in revenue at the
end of fiscal year 1998. Bill Perkins' success story epitomizes the Company's
belief that if you build the team, the team builds the business. And he's not
alone. The depth of experience in the entire senior management team inspires
young team members to believe that old-fashioned hard work and commitment pay
off and that they, too, can build long, successful careers at Discount Auto
Parts.

Operations

STEVE BAIR, vice president-operations, is a 20-year company veteran who is
directly responsible for day-to-day operation of our stores, and, in fact, Steve
started his career in the stores too. He eventually became a store manager, then
served as division manager and regional manager. His deep experience in our
retail operations has served him well in his senior management role.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 11
"I've held just about every position in retail, which gives me a unique
understanding of customer needs, as well as what the team needs to support our
customers. I believe it's important to stay abreast of current management
practices, so I've taken numerous management seminars, Dale Carnegie programs,
the Covey Leadership Conference, as well as others."

Commercial Sales

JIM MULLIGAN, director-commercial sales, also began his career with
Discount Auto Parts in our stores. During his 12 years at the company, he worked
his way up to division manager and then moved to our corporate headquarters as
merchandising manager. Jim was chosen to head up our entry into the important
commercial market based on his ability to meet head-on every challenge he's been
given.

"One thing I learned early in my career at Discount Auto Parts: a team
member is given as much responsibility as he or she is capable of and willing to
take on. There's no end to the opportunities available. This year, I've enjoyed
building a new team of capable professionals for our entry into the commercial
market."

Human Resources

CLEMENT BOTTINO, vice president-human resources, will celebrate his 20th
anniversary with the company next year. His responsibilities include all
staffing and benefits programs, as well as team training and development. Like
so many other senior managers, Clement began his career at the store level and
worked his way up through store and division management positions. This unique
blend of skills and experience makes him a more effective human resources
professional.

"I was a teacher for a year after college, and coached basketball and
football, and I've called on those skills many times in working with our team.
Executives from other companies have told me they admire our team's performance,
and I tell them the key is training, development and coaching."

[MEMBERS OF SENIOR MANAGEMENT TEAM: DIRECTOR - MERCHANDISING, DISTRIBUTION
CENTER MANAGER, DISTRIBUTION CENTER - GENERAL MANAGER, VP - PURCHASING,
VP - OPERATIONS & DIRECTOR - PURCHASING]

Distribution

ROSS MULLIS, general manager-distribution, came to Discount Auto Parts in
1990, working in the shipping department and as a part-time driver. He was
promoted to shipping supervisor and gained experience managing all aspects of
the distribution center. Today, Ross is responsible for the distribution
center's current expansion program and its long-term vision.

"Planning future distribution needs can be a formidable task, but
fortunately, we have a good handle on where the company is going long-term, and
a good grasp of what's needed by our stores to serve our customers even better."

[DISCOUNT AUTO PARTS LOGO]

<PAGE> 12

RUSSELL MORRISON, distribution center manager, is a 12-year Discount Auto
Parts veteran, having begun in the distribution center and having run every one
of its departments. Today, he manages our Lakeland distribution center team and
its operations.

"I work with more than 400 team members and am responsible for our entire
distribution budget. It's a big job-and it gets bigger every year as we continue
to expand through the Southeast. Expansion can only mean more opportunities for
our company and the team. It's an exciting time to be at Discount Auto Parts."

Purchasing

DAVE VIELE, vice president-purchasing, is a 22-year Discount Auto Parts
veteran with extensive experience in all facets of supply chain management. Dave
began his career loading trucks in the distribution center, and moved up in the
organization over the years, learning all aspects of both distribution and the
buying systems. His natural talent for negotiation has led Dave to his present
position, where he's responsible for inventory performance, profitability and
key vendor negotiations and relationships.

"I've seen many similarities between my tenure in the U.S. Navy and my
career at Discount Auto Parts. Team work and effective leadership are key in
both organizations. A team needs to work together to accomplish extraordinary
things, and it's not uncommon for our team to exceed expectations. That's what
it's all about at Discount Auto Parts."

[26 DIVISION MANAGERS]

ROB WILLIS, director-purchasing, has served the company for more than 13
years. He, too, started in our stores, and worked his way up to division
manager. Rob was one of our first Depot store managers, where he developed
expertise in product selection and the testing of new products. He's drawing on
that experience today, in his responsibility for the day to day operations of
the purchasing department, as well as the management and development of our
buyers.

"The diversity of my job keeps me interested and challenged every day. I
work with talented buyers and get to assist them in selecting new products for
our customers. It's a stimulating environment in which every day brings a new
opportunity and a new test of our skills."

[DISCOUNT AUTO PARTS LOGO]

<PAGE> 13

Merchandising

TOM MERK, director-merchandising, joined the company in 1989 as a store
manager, and has held several senior management positions and played a major
role in our success in the highly competitive Jacksonville, Florida market. Tom
was experienced in our industry when he joined us: for 15 years he had owned and
operated multiple auto parts stores in New York.

[EIGHT DISTRIBUTION CENTER MANAGERS]

"As I look back over the past 25 years I can see many changes in the
automotive aftermarket. But one thing hasn't changed, and that's the requirement
to understand the customer's needs- and then be responsive to them. Discount
Auto Parts shares that philosophy, and that's why I came to work here."

Marketing

STEVE JOINER, vice president-marketing, started work at Discount Auto Parts
in 1983 as an advertising professional, after beginning his career in a Florida
advertising agency. At the time, the company had 32 stores, and Steve was called
on to create its advertising and marketing strategy from scratch. As the company
grew and evolved, so did Steve's job, and he is now responsible for an extensive
marketing and advertising program to support and grow sales.

"When I received my degree in marketing and journalism I never thought it
would lead to what is now a 15-year career in retail marketing. Advertising is a
key marketing tactic in any retail business, and we're no different. We use it
to prove to our customers daily that we're the low-cost provider of auto parts
in their community."

Real Estate

CLIFF WILEY, vice president-real estate, began his career in commercial
real estate and joined the Company 14 years ago in the real estate department.
Cliff worked directly for and learned from Co-founder Denis Fontaine, who seemed
to know how to select exactly the right store location. Over the years Cliff has
continued to hone his research and analytical skills.

"Sometimes I'm asked how my accounting degree has helped me select property
for new stores. Actually, the analytical skills I learned in college have helped
me develop a means of weighing the many factors that go into site selection. We
look at traffic patterns, population, competition, neighborhood demographics-
all sorts of data that must be factored in to come up with the perfect site for
a new store."

Systems

HANK HARRAH, vice president-information systems, came to the company in
1992, after a more than 20-year career in data processing and information
systems. He leads the company's ongoing efforts to achieve economies through
more effective use of technology and computer systems and has played a key role
in setting up the company's management information systems.

[DISCOUNT AUTO PARTS LOGO]

<PAGE> 14

"The technology changes that have taken place since my college days have
been enormous. Today, technology means more than a mainframe at corporate
headquarters processing historical data. Technology has an impact on all aspects
of our business. It's especially exciting to use technology to better serve our
customers and team and keep us on the cutting edge of our industry".

Finance

MIKE MOORE, chief financial officer and a CPA, came to Discount Auto Parts
in 1996 after a 15-year career in public accounting with Ernst & Young LLP. In
fact, Discount Auto Parts was his client for many years, giving him a unique,
below-the-surface perspective on the Company. He brings to his position superb
financial management skills.

"While my career at Ernst & Young focused on the retail sector, I also
worked in numerous other industry sectors with clients ranging from millions of
dollars in revenues to billions of dollars. Everyday I draw from those
experiences to assist Discount Auto Parts in its growth and market expansion."

Administration / Investor Relations

KRISTI MULLIS, director-administration and investor relations, joined the
Company's finance department in 1990 after over a decade in the banking
industry. She left banking management to come to Discount Auto Parts and, never
shying from a challenge, has been able to use that experience to help lend shape
and order to several Company programs which included the creation of the
investor relations department when the Company went public in 1992.

"Talking with our shareholders and working with Wall Street gives me a
broad perspective on our Company and our industry and also generates new ideas
about how we can continue to improve communications with our shareholders and
those who follow our stock. My separate role in risk management affords me the
challenge of identifying, analyzing and correcting potential areas of risk to
the company."

Other Key Management

While we have separately listed certain key members of management herein,
those individuals are also backed and supported by the Company's 26 Division
Managers ( "DM's"). On average, our DM's have over 12 years of experience with
Discount Auto Parts and are on average 35 years old. These are the members of
management that ensure our over 4,300 team members and our 467-plus stores
perform consistently every day.

In addition to the DM's, the Company has a distribution center management
team that has on average over 12 years experience with Discount Auto Parts. The
distribution management team oversees our newly expanded 600,000 square foot
distribution center and its approximately 450 team members. Their experience has
helped keep our distribution costs among the lowest in our industry.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 15

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------
JUNE 2 JUNE 3 MAY 28 MAY 30 MAY 31
1998 1997(1) 1996 1995 1994
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND SELECTED
OPERATING DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales $447,491 $405,186 $307,476 $253,700 $207,569
Cost of sales, including distribution costs 271,404 256,646 186,917 158,710 131,469
-------- -------- -------- -------- --------
Gross profit 176,087 148,540 120,559 94,990 76,100
Selling, general and administrative expenses 124,125 101,336 80,090 64,081 49,985
-------- -------- -------- -------- --------
Income from operations 51,962 47,204 40,469 30,909 26,115
Litigation settlement -- (20,545) -- -- --
Other income 2,434 187 1,164 1,133 799
Gain on life insurance proceeds -- -- -- 4,836 --
Interest expense (10,203) (6,125) (5,078) (6,295) (3,635)
-------- -------- -------- -------- --------
Income before income taxes 44,193 20,721 36,555 30,583 23,279
Income taxes 17,013 7,980 14,092 10,020 8,962
-------- -------- -------- -------- --------
Net income $ 27,180 $ 12,741 $ 22,463 $ 20,563 $ 14,317
======== ======== ======== ======== ========
Basic net income per common share $ 1.64 $ .77 $ 1.44 $ 1.48 $ 1.03
======== ======== ======== ======== ========
Diluted net income per common share $ 1.63 $ .77 $ 1.41 $ 1.47 $ 1.02
======== ======== ======== ======== ========
Weighted average common shares outstanding 16,604 16,581 15,647 13,907 13,954

SELECTED OPERATING DATA
NUMBER OF STORES AT YEAR END 452 400 314 248 208
TOTAL STORE SQUARE FOOTAGE AT YEAR END (IN
THOUSANDS)(2) 2,007 1,836 1,610 1,405 1,197
AVERAGE NET SALES PER STORE (IN THOUSANDS)(3)(4) $ 1,050 $ 1,023 $ 1,094 $ 1,113 $ 1,084
AVERAGE NET SALES PER SQUARE FOOT(3)(4) $ 233 $ 212 $ 204 $ 195 $ 195
PERCENTAGE INCREASE (DECREASE) IN COMPARABLE STORE NET
SALES(4)(5) 7.7% (.6)% 4.9% 5.8% 4.0%
TEAM MEMBERS 4,350 3,677 3,148 2,826 2,172

BALANCE SHEET DATA
INVENTORIES $172,027 $151,644 $111,408 $ 91,187 $ 59,581
WORKING CAPITAL 105,662 80,573 59,801 46,420 34,055
PROPERTY AND EQUIPMENT, NET 314,519 265,589 208,094 166,169 131,893
TOTAL ASSETS 511,735 443,066 338,263 270,832 213,174
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES 160,695 114,117 50,400 94,550 70,118
STOCKHOLDERS' EQUITY 256,885 229,061 216,046 117,895 97,214
</TABLE>

- ---------------

(1) FISCAL YEAR 1997 CONSISTED OF 53 WEEKS; ALL OTHER YEARS REPORTED CONSISTED
OF 52 WEEKS.
(2) STORE SQUARE FOOTAGE INCLUDES ONLY SELLING AND MERCHANDISING SPACE.
(3) AVERAGE NET SALES PER STORE AND AVERAGE NET SALES PER SQUARE FOOT ARE BASED
ON THE AVERAGE OF BEGINNING AND ENDING NUMBER OF STORES AND STORE SQUARE
FOOTAGE FOR THE RESPECTIVE PERIOD. FOR FISCAL 1997, AVERAGE NET SALES PER
STORE AND AVERAGE NET SALES PER SQUARE FOOT HAVE BEEN ADJUSTED TO EXCLUDE
THE EFFECT OF THE FIFTY-THIRD WEEK.
(4) THE AMOUNTS SHOWN FOR FISCAL 1997 EXCLUDE COMMERCIAL SALES OF AIR
CONDITIONING PRODUCTS, SUCH AS FREON. IF THESE COMMERCIAL SALES OF FREON
WERE TO HAVE BEEN INCLUDED, THE AVERAGE NET SALES PER STORE, AVERAGE NET
SALES PER SQUARE FOOT AND THE INCREASE IN COMPARABLE STORE SALES FOR FISCAL
1997 WOULD HAVE BEEN $1,115,000, $231 AND 9.7%, RESPECTIVELY.
(5) COMPARABLE STORE NET SALES DATA ARE CALCULATED BASED ON THE CHANGE IN NET
SALES OF ALL STORES OPEN AT THE BEGINNING OF THE PRECEDING FISCAL YEAR. THE
DECREASE FOR FISCAL 1997 HAS BEEN ADJUSTED TO EXCLUDE THE EFFECT OF THE
FIFTY-THIRD WEEK.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

THE FOLLOWING TABLE SETS FORTH, FOR THE PERIODS INDICATED, THE INCOME
STATEMENT DATA AND THE PERCENTAGE OF THE COMPANY'S NET SALES REPRESENTED BY EACH
LINE ITEM PRESENTED:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------
JUNE 2 JUNE 3 MAY 28
1998 % 1997 % 1996 %
-------- ----- -------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales $447,491 100.0% $405,186 100.0% $307,476 100.0%
Cost of sales, including distribution
costs 271,404 60.7 256,646 63.3 186,917 60.8
-------- ----- -------- ----- -------- -----
Gross profit 176,087 39.3 148,540 36.7 120,559 39.2
Selling, general and administrative
expenses 124,125 27.7 101,336 25.0 80,090 26.0
-------- ----- -------- ----- -------- -----
Income from operations 51,962 11.6 47,204 11.7 40,469 13.2
Litigation settlement -- -- (20,545) (5.1) -- --
Other income, net 2,434 .6 187 -- 1,164 .4
Interest expense (10,203) (2.3) (6,125) (1.5) (5,078) (1.7)
-------- ----- -------- ----- -------- -----
Income before income taxes 44,193 9.9 20,721 5.1 36,555 11.9
Income taxes 17,013 3.8 7,980 2.0 14,092 4.6
-------- ----- -------- ----- -------- -----
Net income $ 27,180 6.1% $ 12,741 3.1% $ 22,463 7.3%
======== ===== ======== ===== ======== =====
</TABLE>

FISCAL 1998 COMPARED TO FISCAL 1997

NET SALES FOR THE FIFTY-TWO WEEK PERIOD ENDED JUNE 2, 1998 INCREASED $42.3
MILLION, OR 10.4%, OVER NET SALES FOR THE FIFTY-THREE WEEK PERIOD ENDED JUNE 3,
1997. COMMERCIAL SALES OF R-12 FREON REPRESENTED APPROXIMATELY $32.7 MILLION OR
8.1% OF THE TOTAL SALES FOR FISCAL 1997. SUCH COMMERCIAL SALES WERE NEGLIGIBLE
FOR FISCAL 1998. EXCLUDING THE IMPACT OF SUCH COMMERCIAL SALES AND THE EXTRA
WEEK IN FISCAL 1997, TRADITIONAL DIY RETAIL SALES FOR FISCAL 1998 INCREASED
22.5% OVER THE COMPARABLE FISCAL 1997 PERIOD. TRADITIONAL DIY COMPARABLE STORE
SALES INCREASED 7.7% FOR FISCAL 1998 AS COMPARED TO FISCAL 1997, AFTER EXCLUDING
THE EFFECT OF THE EXTRA WEEK. WHEN INCLUDING COMMERCIAL SALES OF FREON IN
COMPARABLE STORE SALES FOR FISCAL 1997, COMPARABLE STORE SALES WOULD HAVE
REFLECTED A DECREASE OF 1.9% FOR FISCAL 1998. THE REMAINING INCREASE IN NET
SALES FROM THE COMPANY'S CORE OPERATIONS WAS ATTRIBUTABLE TO APPROXIMATELY $83.1
MILLION IN SALES FROM NEW STORES OPENED SINCE THE BEGINNING OF FISCAL 1997. AS
OF JUNE 2, 1998, THE COMPANY HAD 452 STORES IN OPERATION COMPARED TO 400 AT THE
END OF FISCAL 1997.

GROSS PROFIT FOR THE FIFTY-TWO WEEK PERIOD ENDED JUNE 2, 1998 WAS $176.1
MILLION, OR 39.3% OF NET SALES, COMPARED WITH $148.5 MILLION, OR 36.7% FOR
FISCAL 1997. THE IMPROVEMENT IN GROSS MARGINS FOR FISCAL 1998 WAS DUE IN PART TO
THE HIGHER LEVEL OF COMMERCIAL SALES OF R-12 FREON IN THE FISCAL 1997 COMPARABLE
PERIOD, WHICH GENERALLY HAD LOWER GROSS MARGINS DUE TO THE PRODUCT'S COMMODITY
NATURE. EXCLUDING THE IMPACT OF COMMERCIAL FREON SALES IN FISCAL 1997, THE GROSS
MARGIN WOULD HAVE BEEN 38.0% FOR FISCAL 1997. THE REMAINING

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 17

IMPROVEMENT IN GROSS MARGIN FOR FISCAL 1998 WAS PRIMARILY ATTRIBUTABLE TO LOWER
PRODUCT COSTS AND MODIFICATIONS TO THE COMPANY'S MERCHANDISING STRATEGY.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES FOR FISCAL 1998
INCREASED BY $22.8 MILLION OVER SUCH EXPENSES FOR FISCAL 1997, AND INCREASED AS
A PERCENTAGE OF NET SALES FROM 25.0% IN FISCAL 1997 TO 27.7% IN FISCAL 1998. THE
INCREASE WAS PRIMARILY THE RESULT OF HIGHER LEVELS OF COMMERCIAL SALES OF R-12
FREON IN FISCAL 1997. SUCH COMMERCIAL SALES GENERALLY HAD VERY LIMITED
ASSOCIATED SG&A EXPENSES. EXCLUDING THE COMMERCIAL SALES OF R-12 FREON, SG&A
EXPENSES AS A PERCENTAGE OF SALES FOR FISCAL 1997 WOULD HAVE BEEN 27.2%. AFTER
THE EXCLUSION OF SUCH SALES, THE INCREASE IN SG&A EXPENSE AS A PERCENTAGE OF
SALES FOR FISCAL 1998 WAS PRIMARILY ATTRIBUTABLE TO EXPENSES INCURRED IN THE
DEVELOPMENT AND ROLLOUT OF THE COMPANY'S COMMERCIAL DELIVERY PROGRAM.

INCOME FROM OPERATIONS FOR FISCAL 1998 INCREASED 10.1% TO $52.0 MILLION AS
COMPARED TO $47.2 MILLION FOR FISCAL 1997. INCOME FROM OPERATIONS FOR FISCAL
1997 INCLUDE EARNINGS ASSOCIATED WITH COMMERCIAL SALES OF FREON WHILE SIMILAR
SALES GENERALLY WERE NOT MADE IN FISCAL 1998. THE FISCAL 1997 INCOME FROM
OPERATIONS ALSO REFLECTS AN EXTRA WEEK OF RESULTS. WHEN EXCLUDING THE IMPACT OF
SUCH COMMERCIAL SALES AND THE EFFECTS OF THE EXTRA WEEK OF OPERATIONS IN THE
FISCAL 1997 PERIOD, TRADITIONAL DIY OPERATING INCOME (WHICH REFLECTS OPERATING
INCOME EXCLUSIVE OF COMMERCIAL FREON SALES AND ASSOCIATED COST OF SALES)
INCREASED 31.6% FOR FISCAL 1998 OVER THE FISCAL 1997 RESULTS.

AS FURTHER DISCUSSED IN NOTE 9 OF THE NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS, THE COMPANY REACHED AN AGREEMENT IN JULY 1997 TO SETTLE A LAWSUIT
BROUGHT BY AIRGAS, INC. AND CERTAIN AIRGAS AFFILIATES AGAINST SEVERAL
DEFENDANTS, INCLUDING THE COMPANY AND ONE OF ITS EMPLOYEES. AS A RESULT OF THE
SETTLEMENT, THE COMPANY RECORDED A PRE-TAX CHARGE OF $20.5 MILLION IN THE FOURTH
QUARTER OF FISCAL 1997. THE CHARGE REFLECTS THE PAYMENTS MADE PURSUANT TO THE
TERMS OF THE ACTUAL SETTLEMENT PLUS ASSOCIATED LEGAL AND PROFESSIONAL FEES.

OTHER INCOME FOR FISCAL 1998 PRIMARILY INCLUDES A $4.0 MILLION FEE RECEIVED
FROM THE TERMINATION OF THE PROPOSED ACQUISITION OF HI-LO AUTOMOTIVE, INC., LESS
RELATED EXPENSES.

INTEREST EXPENSE FOR FISCAL 1998 WAS $10.2 MILLION AS COMPARED TO $6.1 MILLION
FOR FISCAL 1997. THE INCREASE FOR FISCAL 1998 WAS PRIMARILY THE RESULT OF
INCREASED BORROWINGS ASSOCIATED WITH NEW STORE GROWTH, THE EXPANSION OF THE
COMPANY'S EXISTING DISTRIBUTION CENTER, AND THE SEPTEMBER 1997 FUNDING OF THE
AMOUNTS DUE PURSUANT TO THE TERMS OF THE SETTLEMENT AGREEMENT WITH AIRGAS.

THE COMPANY'S EFFECTIVE TAX RATE FOR BOTH FISCAL 1998 AND FISCAL 1997 WAS
38.5%.

PRIMARILY AS A RESULT OF THE FOREGOING, NET INCOME FOR FISCAL 1998 WAS $27.2
MILLION OR $1.63 PER DILUTED SHARE AS COMPARED TO $12.7 MILLION OR $.77 PER
DILUTED SHARE REPORTED FOR FISCAL 1997.

FISCAL 1997 COMPARED TO FISCAL 1996

NET SALES FOR THE FIFTY-THREE WEEK PERIOD ENDED JUNE 3, 1997 INCREASED $97.7
MILLION, OR 31.8%, OVER NET SALES FOR THE FIFTY-TWO WEEK PERIOD ENDED MAY 28,
1996. COMMERCIAL SALES OF R-12 FREON REPRESENTED APPROXIMATELY $32.7 MILLION OR
8.1% OF THE TOTAL SALES FOR FISCAL 1997. NET SALES FOR THE FIFTY-THREE WEEKS
ENDED JUNE 3, 1997 FROM THE COMPANY'S CORE RETAIL STORE OPERATIONS INCREASED
$67.7 MILLION OR 22.2% OVER THE FIFTY-TWO WEEK PERIOD ENDED MAY 28, 1996.
COMPARABLE STORE SALES FROM THE COMPANY'S CORE RETAIL STORE OPERATIONS

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 18

DECREASED BY .6% FOR FISCAL 1997 ON A COMPARABLE WEEK BASIS, WHEN EXCLUDING
COMMERCIAL SALES OF R-12 FREON. WHEN INCLUDING SUCH SALES, COMPARABLE STORE
SALES INCREASED 9.7% FOR FISCAL 1997 ON A COMPARABLE WEEK BASIS AS COMPARED TO
FISCAL 1996. THE REMAINING INCREASE IN NET SALES FROM THE COMPANY'S CORE
OPERATIONS WAS ATTRIBUTABLE TO APPROXIMATELY $84.0 MILLION IN SALES FROM NEW
STORES OPENED SINCE THE BEGINNING OF FISCAL 1996. AS OF JUNE 3, 1997, THE
COMPANY HAD 400 STORES IN OPERATION COMPARED TO 314 AT THE END OF FISCAL 1996.

GROSS PROFIT FOR THE FIFTY-THREE WEEK PERIOD ENDED JUNE 3, 1997 WAS $148.5
MILLION, OR 36.7% OF NET SALES COMPARED WITH $120.6 MILLION, OR 39.2% OF NET
SALES FOR FISCAL 1996. THE LOWER GROSS PROFIT PERCENTAGE FOR FISCAL 1997 WAS
PRIMARILY THE RESULT OF INCREASED REVENUES ASSOCIATED WITH COMMERCIAL SALES OF
R-12 FREON IN FISCAL 1997, WHICH GENERALLY TEND TO HAVE LOWER GROSS MARGINS DUE
TO THE PRODUCT'S COMMODITY NATURE. EXCLUDING THE IMPACT OF COMMERCIAL FREON
SALES IN FISCAL 1997, THE GROSS MARGIN WOULD HAVE BEEN 38.0% FOR FISCAL 1997.
THE REDUCTION IN FISCAL 1997 TRADITIONAL DIY GROSS MARGIN WAS PRIMARILY THE
RESULT OF THE CONTINUING EFFECTS OF THE DECREASE IN RETAIL PRICING WHICH
OCCURRED LATE IN THE FOURTH QUARTER OF FISCAL 1996 AND HIGHER PROMOTIONAL
MARKDOWNS WHICH RESULTED FROM INCREASED ADVERTISING EFFORTS IN THE SECOND HALF
OF FISCAL 1997.

SG&A EXPENSES FOR FISCAL 1997 INCREASED BY $21.2 MILLION OVER SUCH EXPENSES
FOR FISCAL 1996, AND DECREASED AS A PERCENTAGE OF NET SALES TO 25.0% FROM 26.0%.
THIS DECREASE WAS PRIMARILY THE RESULT OF THE IMPACT OF THE HIGHER LEVELS OF
COMMERCIAL SALES OF R-12 FREON IN FISCAL 1997, WHICH HAD RELATIVELY LOW SG&A
EXPENSES. THE DECREASE WAS OFFSET IN PART BY AN INCREASE IN NET ADVERTISING
EXPENSE.

OTHER INCOME PRIMARILY INCLUDES GAINS AND LOSSES ON REAL ESTATE DISPOSALS AND
INTEREST INCOME. THE DECREASE IN FISCAL 1997 IN OTHER INCOME IS PRIMARILY
ATTRIBUTABLE TO THE LOWER AMOUNT OF NET REAL ESTATE GAINS OF APPROXIMATELY
$100,000 IN FISCAL 1997 AS COMPARED TO $1.5 MILLION OF NET REAL ESTATE GAINS IN
FISCAL 1996.

INTEREST EXPENSE FOR FISCAL 1997 WAS $6.1 MILLION AS COMPARED TO $5.1 MILLION
FOR FISCAL 1996. THE INCREASE FOR FISCAL 1997 WAS PRIMARILY THE RESULT OF
INCREASED AVERAGE BORROWINGS ASSOCIATED WITH NEW STORE GROWTH.

THE COMPANY'S EFFECTIVE TAX RATE FOR FISCAL 1997 WAS 38.5% AS COMPARED WITH
38.6% IN FISCAL 1996.

AFTER REFLECTING THE CHARGE ASSOCIATED WITH THE AIRGAS LITIGATION SETTLEMENT,
NET INCOME FOR FISCAL 1997 WAS $12.7 MILLION OR $.77 PER DILUTED SHARE AS
COMPARED TO $22.5 MILLION OR $1.44 PER DILUTED SHARE REPORTED FOR FISCAL 1996.
EXCLUDING THE IMPACT OF THE LITIGATION SETTLEMENT AND ALL RELATED EXPENSES, NET
INCOME WOULD HAVE BEEN $25.6 MILLION OR $1.54 PER DILUTED SHARE FOR FISCAL 1997.

LIQUIDITY AND CAPITAL RESOURCES

NET CASH PROVIDED BY OPERATING ACTIVITIES WAS $14.5 MILLION IN FISCAL 1998,
$8.7 MILLION IN FISCAL 1997 AND $22.8 MILLION IN FISCAL 1996. THE OVERALL
DECREASE IN NET CASH PROVIDED BY OPERATING ACTIVITIES IN FISCAL 1998 AS COMPARED
TO NET CASH PROVIDED BY OPERATING ACTIVITIES IN FISCAL 1996 WAS PRIMARILY THE
RESULT OF THE FUNDING OF THE AIRGAS SETTLEMENT IN FISCAL 1998. THE INCREASE IN
FISCAL 1998 AS COMPARED TO FISCAL 1997 WAS PRINCIPALLY THE

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 19

RESULT OF AN INCREASE IN NET INCOME, SUBSTANTIAL DEFERRED INCOME TAX EXPENSE IN
FISCAL 1998 AS COMPARED TO A DEFERRED INCOME TAX BENEFIT IN FISCAL 1997,
INVENTORY GROWTH IN FISCAL 1998 AT A LEVEL SUBSTANTIALLY LESS THAN IN FISCAL
1997, AN INCREASE IN THE AMOUNT OF DEPRECIATION AND AN INCREASE IN CURRENT
LIABILITIES, OFFSET IN PART BY THE FUNDING OF THE AIRGAS SETTLEMENT, A DECREASE
IN THE AMOUNT OF INCREASE IN ACCOUNTS PAYABLE AND ADDITIONAL INCREASES IN THE
AMOUNTS OF PREPAID EXPENSES AND OTHER CURRENT ASSETS.

CAPITAL EXPENDITURES FOR FISCAL 1998 WERE $64.6 MILLION AS COMPARED TO $70.2
MILLION IN FISCAL 1997 AND $52.2 MILLION IN FISCAL 1996. THE MAJORITY OF THE
FISCAL 1998 CAPITAL EXPENDITURES RELATED TO THE 53 NEW STORES OPENED DURING THAT
PERIOD AND COSTS ASSOCIATED WITH A MAJOR EXPANSION OF THE COMPANY'S DISTRIBUTION
CENTER, WHICH INVOLVES AN INCREASE OF THE COMPANY'S EXISTING DISTRIBUTION CENTER
FROM APPROXIMATELY 300,000 SQUARE FEET TO APPROXIMATELY 600,000 SQUARE FEET.
MOST OF THE EXPANSION PROJECT HAS BEEN COMPLETED AND THE BALANCE OF THE PROJECT
IS PRINCIPALLY A SIGNIFICANT ADDITION OF OFFICE SPACE. THE TOTAL COST OF THE
EXPANSION IS ESTIMATED TO BE APPROXIMATELY $20 TO $22 MILLION. THROUGH JUNE 2,
1998, THE COMPANY HAS SPENT APPROXIMATELY $12.0 MILLION ON THE DISTRIBUTION
CENTER EXPANSION PROJECT.

THE COMPANY ALSO BEGAN THE ROLLOUT OF A COMMERCIAL DELIVERY SERVICE IN THE
THIRD QUARTER OF FISCAL 1998. THE COMPANY'S COMMERCIAL DELIVERY SERVICE CONSISTS
OF A PROGRAM WHEREBY COMMERCIAL CUSTOMERS (SUCH AS AUTO SERVICE CENTERS,
COMMERCIAL MECHANICS, GARAGES AND THE LIKE) ESTABLISH COMMERCIAL ACCOUNTS WITH
THE COMPANY AND ORDER AUTOMOTIVE PARTS FROM THE COMPANY WITH SUCH PARTS BEING
DELIVERED FROM, OR PICKED UP FROM, NEARBY DISCOUNT AUTO PARTS STORES. DURING
FISCAL 1998, THE COMPANY'S ENTRY INTO THE COMMERCIAL DELIVERY MARKET INVOLVED
TOTAL CAPITAL EXPENDITURES OF APPROXIMATELY $3.6 MILLION. IN ADDITION, THE
COMMERCIAL DELIVERY PROGRAM HAS REQUIRED, AND CAN BE EXPECTED TO CONTINUE TO
REQUIRE, THE COMPANY TO EXTEND TRADE CREDIT TO CERTAIN OF THE COMMERCIAL ACCOUNT
CUSTOMERS IN THE ORDINARY COURSE OF BUSINESS. THE EXTENSION OF SUCH TRADE CREDIT
INCREASES THE CAPITAL REQUIREMENTS ASSOCIATED WITH THE ROLLOUT OF THE PROGRAM
AND EXPOSES THE COMPANY TO CREDIT RISK AND THE ASSOCIATED LOSS ATTRIBUTABLE TO
UNCOLLECTIBLE ACCOUNTS. THE COMPANY HAS ESTABLISHED SYSTEMS TO MANAGE AND
CONTROL SUCH CREDIT RISK. THE AMOUNT OF CAPITAL THAT IS NEEDED FOR EXTENSION OF
TRADE CREDIT WILL BE DEPENDENT IN LARGE PART UPON THE SUCCESS OF THE COMMERCIAL
DELIVERY SERVICE ROLL-OUT AND HOW QUICKLY THE COMMERCIAL BUSINESS DEVELOPS.
BECAUSE THIS IS A RELATIVELY NEW ASPECT OF THE AUTO PARTS SUPPLY BUSINESS FOR
THE COMPANY, THERE ARE RISKS ASSOCIATED WITH THE COMPANY'S ENTRY INTO THIS NEW
ASPECT OF THE BUSINESS AND THERE CAN BE NO ASSURANCE AS TO IF AND/OR WHEN THE
COMMERCIAL DELIVERY SERVICE BUSINESS WILL BE PROFITABLE OR AS TO WHETHER THE
COMPANY WILL EXPERIENCE ANY FINANCIAL OR OTHER CHALLENGES IN MANAGING AND
CONTROLLING THE CREDIT RISK.

THE COMPANY ANTICIPATES THAT TOTAL CAPITAL EXPENDITURES FOR FISCAL 1999,
INCLUDING THE COSTS ASSOCIATED WITH THE ADDITION OF APPROXIMATELY 75 NEW STORES,
THE DISTRIBUTION CENTER EXPANSION AND THE WORKING CAPITAL COSTS ASSOCIATED WITH
THE ROLL-OUT OF THE COMMERCIAL DELIVERY SERVICE, WILL BE IN THE RANGE OF $70
MILLION TO $80 MILLION.

THE COMPANY'S CREDIT FACILITIES ARE DISCLOSED IN NOTE 3 OF THE NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS. AS OF JUNE 2, 1998, THE COMPANY HAD $71.5
MILLION OF ADDITIONAL AVAILABILITY UNDER ITS EXISTING REVOLVING CREDIT AGREEMENT
WITH A SYNDICATE OF BANKS.

THE COMPANY HAS HISTORICALLY BEEN ABLE TO FINANCE MOST OF ITS NEW STORE GROWTH
THROUGH UNSECURED LINES OF CREDIT AND MEDIUM AND LONGER TERM MORTGAGE FINANCING
PROVIDED BY BANKS AND OTHER INSTITUTIONAL LENDERS, AND THROUGH CASH FLOW FROM
OPERATIONS. CONSISTENT WITH ITS HISTORICAL PRACTICE, THE COMPANY EXPECTS

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 20

TO FINANCE BOTH ITS SHORT AND LONG-TERM LIQUIDITY NEEDS FOR NEW STORE GROWTH, AS
TO LAND AND BUILDINGS, PRIMARILY THROUGH THESE LINES OF CREDIT AND MORTGAGE
FINANCING (RENEWALS AND REPLACEMENTS THEREOF), AND AS TO EQUIPMENT AND FIXTURES,
PRIMARILY THROUGH CASH FLOW FROM OPERATIONS.

THE COMPANY'S NEW STORE DEVELOPMENT PROGRAM ALSO REQUIRES SIGNIFICANT WORKING
CAPITAL, PRINCIPALLY FOR INVENTORIES. THE COMPANY HAS HISTORICALLY USED TRADE
CREDIT TO PARTIALLY FINANCE NEW STORE INVENTORIES AND HAS BEEN SUCCESSFUL IN
NEGOTIATING EXTENDED PAYMENT TERMS AND INCENTIVES FROM MANY SUPPLIERS THROUGH
VOLUME PURCHASES. THE COMPANY BELIEVES THAT IT WILL BE ABLE TO CONTINUE
FINANCING SOME OF ITS INVENTORY GROWTH THROUGH THE EXTENSION OF FAVORABLE
PAYMENT TERMS AND INCENTIVES FROM ITS VENDORS, BUT THERE CAN BE NO ASSURANCE
THAT THE COMPANY WILL BE SUCCESSFUL IN DOING SO. THE ADDITIONAL FUNDING FOR
INVENTORY EXPANSION HAS BEEN PROVIDED IN LARGE PART FROM CASH FLOW FROM
OPERATIONS.

AS OF JUNE 2, 1998, 36 OR 8.0% OF THE COMPANY'S STORES WERE LEASED. ALTHOUGH
THE COMPANY GENERALLY ANTICIPATES A SIMILAR OWN/LEASE PERCENTAGE RELATIONSHIP
FOR NEW STORES IN THE FUTURE, THE COMPANY MAY EXPLORE OPPORTUNITIES WHICH COULD
LEAD TO INCREASES IN THIS PERCENTAGE.

THE COMPANY BELIEVES THAT THE EXPECTED CASH FLOWS FROM OPERATIONS, AVAILABLE
BANK BORROWINGS AND TRADE CREDIT, WILL BE SUFFICIENT TO FUND BOTH SHORT TERM AND
LONG TERM CAPITAL AND LIQUIDITY NEEDS OF THE COMPANY.

INFLATION AND SEASONALITY

THE COMPANY DOES NOT BELIEVE ITS OPERATIONS HAVE BEEN MATERIALLY AFFECTED BY
INFLATION. THE COMPANY HAS BEEN SUCCESSFUL, IN MANY CASES, IN REDUCING THE
EFFECTS OF MERCHANDISE COST INCREASES PRINCIPALLY BY TAKING ADVANTAGE OF VENDOR
INCENTIVE PROGRAMS, ECONOMIES OF SCALE RESULTING FROM INCREASED VOLUMES OF
PURCHASES, AND SELECTIVE FORWARD BUYING.

ALTHOUGH SALES HAVE HISTORICALLY BEEN SOMEWHAT HIGHER IN THE COMPANY'S FOURTH
QUARTER (MARCH THROUGH MAY), THE COMPANY DOES NOT CONSIDER ITS BUSINESS TO BE
SEASONAL.

YEAR 2000

MANAGEMENT HAS DEVELOPED A PLAN TO MODIFY THE COMPANY'S INFORMATION TECHNOLOGY
TO RECOGNIZE THE YEAR 2000 AND HAS BEGUN CONVERTING CRITICAL DATA PROCESSING
SYSTEMS. THE COMPANY'S YEAR 2000 INITIATIVE IS BEING MANAGED BY A TEAM OF
INTERNAL STAFF AND MANAGEMENT. MANAGEMENT CURRENTLY EXPECTS THE PROJECT TO BE
SUBSTANTIALLY COMPLETE BY EARLY 1999 AND THAT THE COST OF THE YEAR 2000
INITIATIVE, PRINCIPALLY INCLUDING INTERNAL COSTS, WILL NOT BE MATERIAL TO THE
COMPANY'S RESULTS OF OPERATIONS OR FINANCIAL POSITION. FURTHERMORE, THIS PROJECT
IS NOT EXPECTED TO HAVE A SIGNIFICANT EFFECT ON OPERATIONS.

FORWARD LOOKING STATEMENTS

THE MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AND OTHER SECTIONS OF THIS ANNUAL REPORT CONTAIN FORWARD LOOKING
STATEMENTS THAT ARE BASED ON THE CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS
ABOUT THE INDUSTRY IN WHICH THE COMPANY OPERATES, MANAGEMENT'S

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 21

BELIEFS AND THE ASSUMPTIONS MADE BY MANAGEMENT. THESE STATEMENTS INCLUDE THE
WORDS "ANTICIPATES", "EXPECTS", "EXPECTED" AND "BELIEVES", VARIATIONS OF SUCH
WORDS, AND SIMILAR EXPRESSIONS WHICH ARE INTENDED TO IDENTIFY SUCH FORWARD
LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE SUBJECT TO POTENTIAL
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM HISTORICAL RESULTS OR THOSE CURRENTLY ANTICIPATED.

THESE POTENTIAL RISKS AND UNCERTAINTIES INCLUDE INCREASED COMPETITION, EXTENT
OF THE MARKET DEMAND FOR AUTO PARTS, AVAILABILITY OF INVENTORY SUPPLY, PROPRIETY
OF INVENTORY MIX, ADEQUACY AND PERCEPTION OF CUSTOMER SERVICE, PRODUCT QUALITY
AND DEFECT EXPERIENCE, AVAILABILITY OF AND ABILITY TO TAKE ADVANTAGE OF VENDOR
PRICING PROGRAMS AND INCENTIVES, SOURCING AVAILABILITY, RATE OF NEW STORE
OPENINGS, CANNIBALIZATION OF STORE SITES, MIX AND TYPES OF MERCHANDISE SOLD,
GOVERNMENTAL REGULATION OF PRODUCTS, NEW STORE DEVELOPMENT AND THE LIKE,
PERFORMANCE OF INFORMATION SYSTEMS, EFFECTIVENESS OF DELIVERIES FROM THE
DISTRIBUTION CENTER, ABILITY TO HIRE, TRAIN AND RETAIN QUALIFIED TEAM MEMBERS,
AVAILABILITY OF QUALITY STORE SITES, ABILITY TO COMPLETE TIMELY EXPANSION OF THE
DISTRIBUTION CENTER, ABILITY TO SUCCESSFULLY ROLL-OUT THE COMMERCIAL DELIVERY
SERVICE, CREDIT RISK ASSOCIATED WITH THE COMMERCIAL DELIVERY SERVICE,
ENVIRONMENTAL RISKS, AVAILABILITY OF EXPANDED AND EXTENDED CREDIT FACILITIES,
LEGAL EXPENSES ASSOCIATED WITH DISPUTES AND INVESTIGATIONS CONCERNING FREON
MATTERS, POTENTIAL FOR LIABILITY WITH RESPECT TO THESE MATTERS AND OTHER FACTORS
DISCUSSED IN THE REPORTS -- INCLUDING FORM 10-K -- FILED FROM TIME TO TIME BY
THE COMPANY WITH THE SEC.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 22

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JUNE 2 JUNE 3 MAY 28
1998 1997 1996
---------- ------------ ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales $447,491 $405,186 $307,476
Cost of sales, including distribution costs 271,404 256,646 186,917
-------- -------- --------
Gross profit 176,087 148,540 120,559
Selling, general and administrative expenses 124,125 101,336 80,090
-------- -------- --------
Income from operations 51,962 47,204 40,469
Litigation settlement -- (20,545) --
Other income, net 2,434 187 1,164
Interest expense (10,203) (6,125) (5,078)
-------- -------- --------
Income before income taxes 44,193 20,721 36,555
Income taxes 17,013 7,980 14,092
-------- -------- --------
Net income $ 27,180 $ 12,741 $ 22,463
======== ======== ========
Net income per share:
Basic net income per common share $ 1.64 $ 0.77 $ 1.44
======== ======== ========
Diluted net income per common share $ 1.63 $ 0.77 $ 1.41
======== ======== ========
Average common shares outstanding 16,604 16,581 15,647
Dilutive effect of stock options 111 73 257
-------- -------- --------
Average common shares outstanding -- assuming dilution 16,715 16,654 15,904
======== ======== ========
</TABLE>

SEE ACCOMPANYING NOTES.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 23

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 2 JUNE 3
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 5,064 $ 6,409
Inventories 172,027 151,644
Prepaid expenses and other current assets 17,657 12,332
Deferred income taxes -- 6,312
-------- --------
Total current assets 194,748 176,697
Property and equipment 379,991 316,315
Less allowances for depreciation and amortization (65,472) (50,726)
-------- --------
314,519 265,589
Other assets 2,468 780
-------- --------
Total assets $511,735 $443,066
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 67,083 $ 63,753
Accrued salaries, wages and benefits 7,317 6,035
Litigation settlement -- 20,400
Deferred income taxes 1,101 --
Other current liabilities 11,185 3,536
Current maturities of long-term debt 2,400 2,400
-------- --------
Total current liabilities 89,086 96,124
Deferred income taxes 5,069 3,764
Long-term debt 160,695 114,117

Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares
authorized, none issued or outstanding -- --
Common Stock, $.01 par value, 50,000 shares
authorized, 16,630 and 16,594 shares issued and
outstanding at June 2, 1998 and June 3, 1997,
respectively 166 166
Additional paid-in capital 141,163 140,519
Retained earnings 115,556 88,376
-------- --------
Total stockholders' equity 256,885 229,061
-------- --------
Total liabilities and stockholders' equity $511,735 $443,066
======== ========
</TABLE>

SEE ACCOMPANYING NOTES.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 24

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
PREFERRED --------------- PAID-IN RETAINED
STOCK SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ ------ ---------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at May 30, 1995 $ -- 13,912 $139 $ 64,584 $ 53,172 $117,895
Stock issued under stock purchase and stock
option plans 13 -- 273 -- 273
Stock issued in secondary stock offering 2,650 27 75,388 -- 75,415
Net income 22,463 22,463
------- ------ ---- -------- -------- --------
Balance at May 28, 1996 -- 16,575 166 140,245 75,635 216,046
Stock issued under stock purchase and stock
option plans 19 -- 274 -- 274
Net income 12,741 12,741
------- ------ ---- -------- -------- --------
Balance at June 3, 1997 -- 16,594 166 140,519 88,376 229,061
Stock issued under stock purchase and stock
option plans 36 -- 644 -- 644
Net income 27,180 27,180
------- ------ ---- -------- -------- --------
Balance at June 2, 1998 $ -- 16,630 $166 $141,163 $115,556 $256,885
======= ====== ==== ======== ======== ========
</TABLE>

SEE ACCOMPANYING NOTES.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 25

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------
JUNE 2 JUNE 3 MAY 28
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income $ 27,180 $ 12,741 $ 22,463
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 15,011 12,490 9,936
Deferred income tax expense (benefit) 8,718 (6,344) 1,696
Gain on disposals of property and equipment (783) (92) (1,452)
Changes in operating assets and liabilities:
(Increase) in inventories (20,383) (40,236) (20,221)
(Increase) in prepaid expenses and other current assets (5,325) (3,135) (2,099)
(Increase) decrease in other assets (1,819) 130 (85)
Increase in trade accounts payable 3,330 10,698 11,749
Increase in accrued salaries, wages and benefits 1,282 1,773 543
(Decrease) increase in accrued litigation settlement (20,400) 20,400 --
Increase in other current liabilities 7,649 232 232
-------- -------- --------
Net cash provided by operating activities 14,460 8,657 22,762

Investing activities
Proceeds from sales of property and equipment 1,614 397 1,896
Purchases of property and equipment (64,641) (70,187) (52,185)
-------- -------- --------
Net cash used in investing activities (63,027) (69,790) (50,289)

Financing activities
Proceeds from short-term borrowings and long-term debt 148,971 89,023 34,000
Payments of short-term borrowings and long-term debt (102,393) (30,306) (78,940)
Net proceeds from secondary offering of common stock -- -- 75,415
Proceeds from other issuances of common stock 644 274 273
-------- -------- --------
Net cash provided by financing activities 47,222 58,991 30,748

Net (decrease) increase in cash (1,345) (2,142) 3,221
Cash at beginning of year 6,409 8,551 5,330
-------- -------- --------
Cash at end of year $ 5,064 $ 6,409 $ 8,551
======== ======== ========
</TABLE>

SEE ACCOMPANYING NOTES.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 26

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 2, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

DISCOUNT AUTO PARTS, INC. IS A SPECIALTY RETAILER OF AUTOMOTIVE REPLACEMENT
PARTS, MAINTENANCE ITEMS AND ACCESSORIES FOR THE "DO-IT-YOURSELF" CONSUMER.
DURING THE THIRD QUARTER OF FISCAL 1998, THE COMPANY ALSO BEGAN SERVICING THE
COMMERCIAL INSTALLER MARKET THROUGH THE ROLLOUT OF ITS COMMERCIAL DELIVERY
PROGRAM. AS OF JUNE 2, 1998, JUNE 3, 1997, AND MAY 28, 1996, THE COMPANY
OPERATED A CHAIN OF 452, 400, AND 314 STORES, RESPECTIVELY. AS OF JUNE 2, 1998,
351 OF THE STORES WERE LOCATED IN FLORIDA, 61 WERE LOCATED IN GEORGIA, 20 IN
MISSISSIPPI, 16 IN ALABAMA, AND FOUR IN SOUTH CAROLINA.

FISCAL YEAR END

THE COMPANY'S FISCAL YEAR CONSISTS OF 52 OR 53 WEEKS ENDING ON THE TUESDAY
CLOSEST TO MAY 31. THE YEARS ENDED JUNE 2, 1998 AND MAY 28, 1996 CONSISTED OF 52
WEEKS. THE YEAR ENDED JUNE 3, 1997 CONSISTED OF 53 WEEKS.

PRINCIPLES OF CONSOLIDATION

THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE ACCOUNTS OF DISCOUNT AUTO
PARTS, INC. AND ITS SUBSIDIARIES (THE "COMPANY"). ALL SIGNIFICANT INTERCOMPANY
ACCOUNTS AND TRANSACTIONS HAVE BEEN ELIMINATED IN CONSOLIDATION.

INVENTORIES

INVENTORIES ARE REPORTED AT THE LOWER OF COST OR MARKET USING THE FIRST-IN,
FIRST-OUT (FIFO) METHOD.

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT IS STATED AT COST. DEPRECIATION IS PROVIDED USING
ACCELERATED AND STRAIGHT-LINE METHODS OVER PERIODS THAT APPROXIMATE THE ASSETS'
ESTIMATED USEFUL LIVES. MAINTENANCE AND REPAIRS ARE CHARGED AGAINST OPERATIONS
AS INCURRED.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS PRINCIPALLY INCLUDE AMOUNTS DUE FROM
VENDORS RELATED TO COOPERATIVE ADVERTISING AND VARIOUS INCENTIVE PROGRAMS.

PRE-OPENING COSTS

COSTS ASSOCIATED WITH THE OPENING OF NEW STORES, WHICH PRIMARILY CONSISTS OF
PAYROLL AND OCCUPANCY COSTS, ARE CHARGED AGAINST OPERATIONS AS INCURRED.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 27

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ADVERTISING COSTS

THE COMPANY EXPENSES ITS SHARE OF ALL ADVERTISING COSTS AS SUCH COSTS ARE
INCURRED. THE PORTION OF ADVERTISING EXPENDITURES, WHICH ARE TO BE RECOVERED
THROUGH VENDOR COOPERATIVE ADVERTISING AND OTHER SIMILAR PROGRAMS, ARE RECORDED
AS RECEIVABLES. ADVERTISING EXPENSE, NET OF VENDOR REBATES, WAS APPROXIMATELY
$2.3 MILLION FOR FISCAL 1998, $2.1 MILLION FOR FISCAL 1997 AND WAS INSIGNIFICANT
FOR FISCAL 1996.

INCOME TAXES

THE COMPANY ACCOUNTS FOR INCOME TAXES UNDER THE LIABILITY METHOD. UNDER THIS
METHOD, DEFERRED TAX ASSETS AND LIABILITIES ARE DETERMINED BASED ON DIFFERENCES
BETWEEN FINANCIAL REPORTING AND TAX BASES OF ASSETS AND LIABILITIES.

STOCK OPTION PLANS

THE COMPANY HAS ELECTED TO FOLLOW ACCOUNTING PRINCIPLES BOARD OPINION NO. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) AND RELATED INTERPRETATIONS IN
ACCOUNTING FOR ITS EMPLOYEE STOCK OPTIONS AND PRESENTS DISCLOSURES REQUIRED
UNDER STATEMENT OF FINANCIAL ACCOUNTING STANDARDS STATEMENT NO. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION. UNDER APB 25, BECAUSE THE EXERCISE PRICE OF THE
COMPANY'S STOCK OPTIONS EQUALS THE MARKET PRICE OF THE UNDERLYING STOCK ON THE
DATE OF GRANT, NO COMPENSATION EXPENSE IS RECOGNIZED.

EARNINGS PER SHARE

IN 1997, THE FINANCIAL ACCOUNTING STANDARDS BOARD ISSUED STATEMENT NO. 128,
EARNINGS PER SHARE. STATEMENT 128 REPLACED THE CALCULATION OF PRIMARY AND FULLY
DILUTED EARNINGS PER SHARE WITH BASIC AND DILUTED EARNINGS PER SHARE. BASIC
EARNINGS PER SHARE IS COMPUTED BY DIVIDING NET INCOME BY THE WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING DURING THE YEAR. THE COMPUTATION OF DILUTED
EARNINGS PER SHARE INCLUDES THE DILUTIVE EFFECT OF STOCK OPTIONS. ALL EARNINGS
PER SHARE AMOUNTS FOR ALL PERIODS HAVE BEEN PRESENTED, AND WHERE APPROPRIATE,
RESTATED TO CONFORM TO THE REQUIREMENTS OF STATEMENT 128.

FAIR VALUES OF FINANCIAL INSTRUMENTS

THE COMPANY'S FINANCIAL INSTRUMENTS CONSIST OF CASH, ACCOUNTS PAYABLE AND
LONG-TERM DEBT. THE CARRYING VALUE OF CASH AND ACCOUNTS PAYABLE APPROXIMATE
THEIR FAIR MARKET VALUES. THE CARRYING AMOUNT OF LONG-TERM DEBT APPROXIMATES
FAIR MARKET VALUE BASED ON CURRENT INTEREST RATES.

USE OF ESTIMATES

THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND ASSUMPTIONS THAT
AFFECT THE AMOUNTS REPORTED IN THE FINANCIAL STATEMENTS AND ACCOMPANYING NOTES.
ACTUAL RESULTS COULD DIFFER FROM THOSE ESTIMATES.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 28

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NEW ACCOUNTING STANDARDS

IN 1997, THE FINANCIAL ACCOUNTING STANDARDS BOARD ISSUED STATEMENT NO. 130,
REPORTING COMPREHENSIVE INCOME AND NO. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. THESE STATEMENTS, WHICH ARE EFFECTIVE FOR
FISCAL YEARS BEGINNING AFTER DECEMBER 15, 1997, EXPAND OR MODIFY DISCLOSURES AND
ARE NOT EXPECTED TO HAVE AN IMPACT ON THE COMPANY'S CONSOLIDATED FINANCIAL
POSITION, RESULTS OF OPERATIONS OR CASH FLOWS.

2. PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT CONSISTS OF THE FOLLOWING (DOLLARS IN THOUSANDS):

<TABLE>
<CAPTION>
JUNE 2, 1998 JUNE 3, 1997 LIFE (YEARS)
------------ ------------ ------------
<S> <C> <C> <C>
LAND $134,582 $104,103
BUILDINGS 138,338 132,540 5 -- 31.5
FURNITURE, FIXTURES AND EQUIPMENT 73,762 61,581 5 -- 7
BUILDING AND LEASEHOLD IMPROVEMENTS 3,102 3,021 5 -- 31.5
AUTOMOTIVE EQUIPMENT 3,741 3,725 3 -- 7
CONSTRUCTION IN PROGRESS 26,466 11,345
-------- --------
$379,991 $316,315
======== ========
</TABLE>

DEPRECIATION EXPENSE TOTALED APPROXIMATELY $14,880,000, $12,387,000, AND
$9,815,000 FOR FISCAL YEARS 1998, 1997 AND 1996, RESPECTIVELY.

3. LONG-TERM DEBT

LONG-TERM DEBT CONSISTS OF THE FOLLOWING (IN THOUSANDS):

<TABLE>
<CAPTION>
JUNE 2, 1998 JUNE 3, 1997
------------ ------------
<S> <C> <C>
REVOLVING LOAN $ -- $ 12,500
REAL ESTATE ACQUISITION AND CONSTRUCTION LINES OF CREDIT -- 92,017
REVOLVING CREDIT AGREEMENT 103,495 --
SENIOR TERM NOTES 50,000 --
SENIOR SECURED NOTES 9,600 12,000
-------- --------
163,095 116,517
LESS CURRENT MATURITIES (2,400) (2,400)
-------- --------
$160,695 $114,117
======== ========
</TABLE>

AS OF JUNE 3, 1997, THE COMPANY HAD AN UNSECURED REVOLVING LOAN AGREEMENT WITH
A BANK. THE AGREEMENT PROVIDED FOR MAXIMUM BORROWINGS OF $20 MILLION, INCLUDING
UP TO $1 MILLION FOR LETTERS OF CREDIT. INTEREST WAS PAYABLE MONTHLY AND WAS A
FUNCTION OF THE PRIME RATE OR THE LONDON INTERBANK OFFERED RATE (LIBOR).

THE COMPANY'S REAL ESTATE ACQUISITION AND CONSTRUCTION LINES OF CREDIT
PROVIDED FOR MAXIMUM AGGREGATE BORROWINGS OF $130 MILLION FOR THE ACQUISITION
AND CONSTRUCTION OF PROPERTIES. INTEREST WAS PAYABLE MONTHLY AND WAS A FUNCTION
OF THE PRIME RATE OR LIBOR. THE FACILITIES WERE PROVIDED BY TWO SEPARATE BANKS.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 29

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EFFECTIVE JULY 16, 1997, THE COMPANY REPLACED ITS AFOREMENTIONED CREDIT
FACILITIES WITH A NEW THREE YEAR $175 MILLION UNSECURED REVOLVING CREDIT
AGREEMENT (THE "REVOLVER") DUE IN FISCAL YEAR 2001. THE RATE OF INTEREST PAYABLE
UNDER THE REVOLVER IS A FUNCTION OF LIBOR OR THE PRIME RATE OF THE LEAD AGENT
BANK, AT THE OPTION OF THE COMPANY. THE COMPANY MAY INCREASE THE AMOUNT OF THE
FACILITY TO $200 MILLION WITH THE CONSENT OF THE SYNDICATE OF BANKS. DURING THE
TERM OF THE REVOLVER, THE COMPANY IS OBLIGATED TO PAY A FEE OF .125% PER ANNUM
FOR THE UNUSED PORTION OF THE REVOLVER.

EFFECTIVE AUGUST 8, 1997, THE COMPANY ISSUED $50 MILLION OF SENIOR TERM NOTES
(THE "NOTES"). THE NOTES PROVIDE FOR INTEREST AT A FIXED RATE OF 7.46%, PAYABLE
SEMI-ANNUALLY, WITH SEMI-ANNUAL PRINCIPAL PAYMENTS OF $7.1 MILLION, BEGINNING
JULY 15, 2004. THE NET PROCEEDS FROM THE NOTES WERE USED TO REDUCE THE COMPANY'S
INDEBTEDNESS UNDER THE REVOLVER.

AT JUNE 2, 1998 AND JUNE 3, 1997, THE COMPANY'S WEIGHTED AVERAGE INTEREST RATE
ON ITS BORROWINGS UNDER THE REVOLVER, THE REVOLVING LOAN, AND THE REAL ESTATE
ACQUISITION AND CONSTRUCTION LINES OF CREDIT WERE 6.0% AND 6.2%, RESPECTIVELY.

AS OF JUNE 2, 1998, THE COMPANY HAD APPROXIMATELY $71.5 MILLION OF AVAILABLE
BORROWINGS UNDER THE REVOLVER.

THE COMPANY HAS ISSUED TWO SENIOR SECURED NOTES, EACH FOR AN ORIGINAL
PRINCIPAL OF $12 MILLION, TO AN INSURANCE COMPANY. THE NOTES ARE COLLATERALIZED
BY A FIRST MORTGAGE ON CERTAIN STORE PROPERTIES, EQUIPMENT AND FIXTURES. THE
AGREEMENTS PROVIDE FOR INTEREST AT FIXED RATES OF 10.11% AND 9.8%, PAYABLE
QUARTERLY, WITH ANNUAL PRINCIPAL PAYMENTS OF $1.2 MILLION EACH DUE ON DECEMBER
15 AND MAY 31.

THE CARRYING VALUE OF ALL ASSETS MORTGAGED OR OTHERWISE SUBJECT TO LIEN
TOTALED APPROXIMATELY $17.9 MILLION AT JUNE 2, 1998.

THE COMPANY'S DEBT AGREEMENTS CONTAIN VARIOUS RESTRICTIONS, INCLUDING THE
MAINTENANCE OF CERTAIN FINANCIAL RATIOS AND RESTRICTIONS ON DIVIDENDS, WITH
WHICH THE COMPANY IS IN COMPLIANCE. BASED ON THE TERMS OF THE REVOLVER AND THE
NOTES, AS OF JUNE 2, 1998, APPROXIMATELY $36.9 MILLION OF RETAINED EARNINGS WAS
AVAILABLE FOR DIVIDEND DISTRIBUTION.

ANNUAL MATURITIES, AS OF JUNE 2, 1998, OF ALL LONG-TERM DEBT FOR THE NEXT FIVE
YEARS ARE AS FOLLOWS (IN THOUSANDS):

<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ----------- ------
<S> <C>
1999 $2,400
2000 2,400
2001 2,400
2002 1,200
2003 1,200
</TABLE>

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 30

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

THE AMOUNTS EXCLUDE AMOUNTS DUE IN FISCAL YEAR 2001 UNDER THE REVOLVER
DESCRIBED ABOVE, BECAUSE MANAGEMENT BELIEVES BASED UPON HISTORICAL PERFORMANCE
THAT THE AGREEMENT WILL BE RENEWED OR REPLACED PRIOR TO ITS EXPIRATION.

TOTAL INTEREST PAID DURING FISCAL YEARS 1998, 1997 AND 1996 WAS APPROXIMATELY
$8,402,000, $6,287,000, AND $5,518,000, RESPECTIVELY, NET OF CAPITALIZED
INTEREST. CAPITALIZED INTEREST FOR FISCAL YEARS 1998, 1997 AND 1996 TOTALED
APPROXIMATELY $384,000, $281,000 AND $118,000, RESPECTIVELY.

4. STOCKHOLDERS' EQUITY

IN OCTOBER 1995, THE COMPANY CONSUMMATED A SECONDARY PUBLIC OFFERING OF
APPROXIMATELY 2,650,000 SHARES OF ITS COMMON STOCK. FROM THE OFFERING, THE
COMPANY REALIZED NET PROCEEDS OF APPROXIMATELY $75.4 MILLION. PROCEEDS FROM THE
OFFERING WERE USED TO REPAY CERTAIN INDEBTEDNESS OF APPROXIMATELY $71.1 MILLION.
THE BALANCE OF THE NET PROCEEDS WERE USED FOR GENERAL CORPORATE PURPOSES.

THE BOARD OF DIRECTORS IS AUTHORIZED, WITHOUT FURTHER STOCKHOLDER ACTION, TO
DIVIDE ANY OR ALL SHARES OF THE AUTHORIZED PREFERRED STOCK INTO SERIES AND TO
FIX AND DETERMINE THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTION OR OTHER SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS
THEREON, OF ANY SERIES SO ESTABLISHED, INCLUDING VOTING POWERS, DIVIDEND RIGHTS,
LIQUIDATION PREFERENCES, REDEMPTION RIGHTS AND CONVERSION PRIVILEGES. AS OF JUNE
2, 1998, THE BOARD HAD NOT AUTHORIZED ANY SERIES OF PREFERRED STOCK AND THERE
ARE NO PLANS, AGREEMENTS OR UNDERSTANDINGS FOR THE AUTHORIZATION OR ISSUANCE OF
ANY SHARES OF PREFERRED STOCK.

5. LEASES

CERTAIN OF THE COMPANY'S RETAIL STORES AND EQUIPMENT ARE LEASED UNDER
NONCANCELABLE OPERATING LEASES. THE MAJORITY OF THE RETAIL STORE LEASES INCLUDE
OPTIONS TO PURCHASE AND PROVISIONS FOR RENTAL INCREASES BASED ON THE CONSUMER
PRICE INDEX.

FUTURE MINIMUM ANNUAL RENTAL COMMITMENTS UNDER NONCANCELABLE OPERATING LEASES
WITH INITIAL OR REMAINING TERMS OF ONE YEAR OR MORE ARE AS FOLLOWS (IN
THOUSANDS):

<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ----------- ------
<S> <C>
1999 $1,810
2000 1,433
2001 1,214
2002 788
2003 and thereafter 380
------
$5,625
======
</TABLE>

RENTAL EXPENSE FOR FISCAL YEARS 1998, 1997 AND 1996 TOTALED APPROXIMATELY
$1,987,000, $1,815,000 AND $1,625,000, RESPECTIVELY. RENTAL EXPENSE IN EACH OF
THE FISCAL YEARS INCLUDES APPROXIMATELY $127,000 OF RENT PAID TO A PARTNERSHIP
WHICH INCLUDED THE COMPANY'S TWO MAJORITY STOCKHOLDERS.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 31

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

THE COMPANY ALSO LEASES CERTAIN PORTIONS OF ITS OWNED FACILITIES TO OUTSIDE
PARTIES. RENTAL INCOME FOR FISCAL YEARS 1998, 1997 AND 1996 TOTALED
APPROXIMATELY $492,000, $328,000 AND $366,000, RESPECTIVELY.

6. BENEFIT PLANS

THE COMPANY HAS A 401(K) PROFIT-SHARING PLAN COVERING SUBSTANTIALLY ALL OF ITS
TEAM MEMBERS (EMPLOYEES) WHO HAVE AT LEAST ONE YEAR OF SERVICE AND WORK MORE
THAN 1,000 HOURS PER YEAR. TEAM MEMBERS MAY CONTRIBUTE UP TO 15% OF THEIR ANNUAL
COMPENSATION SUBJECT TO INTERNAL REVENUE CODE MAXIMUM LIMITATIONS. THE COMPANY
HAS AGREED TO MAKE MATCHING CONTRIBUTIONS, BASED UPON THE TEAM MEMBER'S FIRST
SIX PERCENT OF COMPENSATION, RANGING FROM 25% TO 100% OF THE TEAM MEMBER'S
CONTRIBUTION DEPENDING ON THE TEAM MEMBER'S YEARS OF SERVICE. AFTER THREE YEARS
OF SERVICE, COMPANY CONTRIBUTIONS AND EARNINGS THEREON VEST AT THE RATE OF 20%
PER YEAR OF SERVICE WITH THE COMPANY. COSTS UNDER THIS PLAN FOR FISCAL YEARS
1998, 1997 AND 1996 WERE APPROXIMATELY $864,000, $547,000 AND $449,000,
RESPECTIVELY.

EFFECTIVE MAY 30, 1995, THE COMPANY ADOPTED A SUPPLEMENTAL EXECUTIVE PROFIT
SHARING PLAN (THE "SEPS PLAN"). THE SEPS PLAN IS AN UNFUNDED DEFERRED
COMPENSATION PLAN COVERING CERTAIN KEY MEMBERS OF MANAGEMENT. THE AMOUNT OF
BENEFIT EACH PARTICIPANT IS ENTITLED TO IS ESTABLISHED ANNUALLY BY THE BOARD OF
DIRECTORS OR, IN CERTAIN CASES, BY A COMMITTEE OF THE BOARD OF DIRECTORS. EACH
PARTICIPANT'S ACCOUNT ACCRUES INTEREST ON UNPAID AWARDS AT A RATE DETERMINED
ANNUALLY AS DEFINED IN THE PLAN AGREEMENT. AS OF JUNE 2, 1998 AND JUNE 3, 1997,
THE COMPANY HAS ACCRUED APPROXIMATELY $880,000, AND $520,000, RESPECTIVELY, FOR
BENEFITS DUE UNDER THE SEPS PLAN.

THE BOARD OF DIRECTORS HAS ADOPTED A STOCK PURCHASE PLAN (THE "PURCHASE
PLAN"), WHICH INITIALLY RESERVED AN AGGREGATE OF 550,000 SHARES OF COMMON STOCK.
UNDER THE PURCHASE PLAN, ALL TEAM MEMBERS HAVE THE RIGHT TO PURCHASE SHARES OF
COMMON STOCK OF THE COMPANY AT A PRICE EQUAL TO 85% OF THE VALUE OF THE STOCK
IMMEDIATELY PRIOR TO THE BEGINNING OF EACH EXERCISE PERIOD. ALL TEAM MEMBERS ARE
ELIGIBLE TO PARTICIPATE EXCEPT FOR THOSE WHO HAVE BEEN EMPLOYED BY THE COMPANY
FOR LESS THAN ONE YEAR, TEAM MEMBERS WHO CUSTOMARILY WORK TWENTY HOURS OR LESS
PER WEEK, TEAM MEMBERS WHO CUSTOMARILY WORK FIVE MONTHS OR LESS IN ANY CALENDAR
YEAR, AND TEAM MEMBERS OWNING AT LEAST 5% OF THE COMPANY'S STOCK. DURING FISCAL
YEARS 1998, 1997 AND 1996, 9,740, 15,082, AND 7,165 SHARES, RESPECTIVELY, WERE
PURCHASED UNDER THE TERMS OF THE PURCHASE PLAN. AS OF JUNE 2, 1998, 486,760
SHARES OF COMMON STOCK WERE RESERVED FOR ISSUANCE UNDER THE PURCHASE PLAN.

7. STOCK OPTION PLANS

THE COMPANY HAS STOCK OPTION PLANS WHICH PROVIDES FOR THE GRANTING TO KEY TEAM
MEMBERS OPTIONS TO PURCHASE SHARES OF ITS COMMON STOCK. A TOTAL OF 1,700,000
SHARES OF COMMON STOCK WERE INITIALLY RESERVED FOR ISSUANCE UNDER THE PLANS AND,
AS OF JUNE 2, 1998, A TOTAL OF 1,663,787 SHARES OF COMMON STOCK REMAIN SO
RESERVED. THE PER SHARE EXERCISE PRICE OF EACH STOCK OPTION IS GENERALLY NOT
LESS THAN THE FAIR MARKET VALUE OF THE STOCK ON THE DATE OF THE GRANT OR, IN THE
CASE OF A TEAM MEMBER OWNING MORE THAN 10% OF THE OUTSTANDING STOCK OF THE
COMPANY, THE PRICE FOR INCENTIVE STOCK OPTIONS IS NOT LESS THAN 110% OF SUCH
FAIR MARKET VALUE.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 32

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A SUMMARY OF THE COMPANY'S STOCK OPTION ACTIVITY AND RELATED INFORMATION ARE
AS FOLLOWS (SHARES IN THOUSANDS):

<TABLE>
<CAPTION>
JUNE 2, 1998 JUNE 3, 1997 MAY 28, 1996
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........... 1,017 $21 955 $21 787 $20
Granted.................................... 218 19 117 22 198 28
Exercised.................................. (27) 24 (4) 18 (6) 18
Canceled................................... (81) 22 (51) 21 (24) 21
------ ------ ------
Outstanding at end of year................. 1,127 $21 1,017 $21 955 $21
====== ====== ======
Exercisable at end of year................. 289 $22 138 $21 34 $18
====== ====== ======
Weighted-average fair value of options
granted during the year.................. $ 9.98 $11.66 $14.59
====== ====== ======
Shares available for future grants......... 1,704 1,130 1,140
====== ====== ======
</TABLE>

EXERCISE PRICES FOR OPTIONS EXERCISED DURING 1998 RANGED FROM APPROXIMATELY
$16 TO $22. EXERCISE PRICES FOR OPTIONS OUTSTANDING AS OF JUNE 2, 1998 RANGED
FROM APPROXIMATELY $16 TO $31. THE WEIGHTED-AVERAGE REMAINING CONTRACTUAL LIFE
OF THOSE OPTIONS IS 7 YEARS.

ALL OPTIONS OUTSTANDING GENERALLY VEST BEGINNING AFTER THREE YEARS AND THEN
OVER A FOUR YEAR PERIOD AND HAVE A TEN YEAR DURATION.

IN MAY 1993, THE BOARD OF DIRECTORS ADOPTED THE DISCOUNT AUTO PARTS, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN. A TOTAL OF 40,000 SHARES ARE RESERVED
FOR FUTURE ISSUANCE UNDER THIS PLAN. AS OF JUNE 2, 1998, 12,000 OPTIONS HAD BEEN
GRANTED UNDER THIS PLAN AT AN AVERAGE PRICE OF $24.02. AS OF JUNE 2, 1998, 5,250
OF SUCH OPTIONS WERE EXERCISABLE.

PRO FORMA INFORMATION REGARDING NET INCOME AND EARNINGS PER SHARE IS REQUIRED
BY STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 ("SFAS 123"), AND HAS
BEEN DETERMINED AS IF THE COMPANY HAD ACCOUNTED FOR ITS EMPLOYEE AND
NON-EMPLOYEE DIRECTOR STOCK OPTIONS UNDER THE FAIR VALUE METHOD OF SFAS 123.

THE FAIR VALUES FOR THESE OPTIONS WERE ESTIMATED AT THE DATE OF GRANT USING A
BLACK-SCHOLES OPTION PRICING MODEL WITH THE FOLLOWING WEIGHTED-AVERAGE
ASSUMPTIONS: RISK-FREE INTEREST RATE OF RETURN OF 5.75% FOR 1998 AND 6.00% FOR
1997 AND 1996; VOLATILITY FACTOR OF .405 FOR 1998 AND .376 FOR 1997 AND 1996;
AND WEIGHTED AVERAGE EXPECTED OPTION LIFE OF SEVEN YEARS FOR ALL OPTIONS. THE
COMPANY ASSUMED THAT NO DIVIDENDS WOULD BE PAID OVER THE EXPECTED LIFE OF THE
OPTIONS.

THE BLACK-SCHOLES OPTION VALUATION MODEL WAS DEVELOPED FOR USE IN ESTIMATING
THE FAIR VALUE OF TRADED OPTIONS WHICH HAVE NO VESTING RESTRICTIONS AND ARE
FULLY TRANSFERABLE. IN ADDITION, OPTION VALUATION MODELS REQUIRE THE INPUT OF
HIGHLY SUBJECTIVE ASSUMPTIONS, INCLUDING THE EXPECTED STOCK PRICE VOLATILITY.
BECAUSE THE COMPANY'S STOCK OPTIONS HAVE CHARACTERISTICS SIGNIFICANTLY DIFFERENT
FROM THOSE OF TRADED OPTIONS AND BECAUSE CHANGES IN THE SUBJECTIVE INPUT
ASSUMPTIONS CAN MATERIALLY AFFECT THE FAIR VALUE ESTIMATE, IN

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 33

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MANAGEMENT'S OPINION, THE EXISTING MODEL DOES NOT NECESSARILY PROVIDE A RELIABLE
SINGLE MEASURE OF THE FAIR VALUE OF ITS EMPLOYEE STOCK OPTIONS. FOR PURPOSES OF
PRO FORMA DISCLOSURES, THE ESTIMATED FAIR VALUE OF THE OPTIONS IS AMORTIZED TO
EXPENSE OVER THE OPTIONS' VESTING PERIOD. THE EFFECTS OF APPLYING SFAS 123 FOR
PRO FORMA DISCLOSURES ARE NOT LIKELY TO BE REPRESENTATIVE OF THE EFFECTS ON
REPORTED NET INCOME OR LOSSES FOR FUTURE YEARS.

THE COMPANY'S PRO FORMA INFORMATION FOLLOWS (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS):

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Pro forma net income $26,680 $12,443 $22,341
Pro forma basic net income per common share $ 1.61 $ .75 $ 1.43
Pro forma diluted net income per common share $ 1.60 $ .75 $ 1.43
</TABLE>

8. INCOME TAXES

THE PROVISION FOR INCOME TAXES IS COMPRISED OF THE FOLLOWING (IN THOUSANDS):

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JUNE 2, 1998 JUNE 3, 1997 MAY 28, 1996
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal $ 7,442 $12,185 $ 10,782
State 853 2,139 1,614
------- ------- --------
8,295 14,324 12,396
Deferred:
Federal 7,468 (5,438) 1,456
State 1,250 (906) 240
------- ------- --------
8,718 (6,344) 1,696
------- ------- --------
$17,013 $ 7,980 $ 14,092
======= ======= ========
</TABLE>

A RECONCILIATION OF THE PROVISION FOR INCOME TAXES TO THE AMOUNTS COMPUTED AT
THE FEDERAL STATUTORY TAX RATE IS AS FOLLOWS (IN THOUSANDS):

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JUNE 2, 1998 JUNE 3, 1997 MAY 28, 1996
------------ ------------ ------------
<S> <C> <C>
Federal income taxes at statutory rate $15,468 $ 7,252 $ 12,794
State income taxes, net of federal tax benefit 1,367 801 1,205
Other items, net 178 (73) 93
------- ------- --------
$17,013 $ 7,980 $ 14,092
======= ======= ========
</TABLE>

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 34

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SIGNIFICANT COMPONENTS OF THE COMPANY'S DEFERRED TAX ASSETS AND LIABILITIES
ARE AS FOLLOWS (IN THOUSANDS):

<TABLE>
<CAPTION>
JUNE 2, 1998 JUNE 3, 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Litigation settlement $ - $ 7,224
Various accrued expenses 1,204 702
Other, net 274 117
------ -------
Total deferred tax assets 1,478 8,043
Deferred tax liabilities:
Depreciation 5,435 3,910
Accrued liabilities 866 746
Inventory related items 844 553
Other, net 503 286
------ -------
Total deferred tax liabilities 7,648 5,495
------ -------
Net deferred tax liability (asset) $6,170 $(2,548)
====== =======
</TABLE>

FOR FISCAL YEARS 1998, 1997 AND 1996, THE COMPANY PAID INCOME TAXES OF
APPROXIMATELY $6,723,000, $15,110,000 AND $12,962,000, RESPECTIVELY.

9. LITIGATION SETTLEMENT

IN FEBRUARY 1997, A COMPLAINT WAS FILED BY AIRGAS, INC. AND CERTAIN AIRGAS
AFFILIATES AGAINST SEVERAL DEFENDANTS, INCLUDING THE COMPANY AND ONE OF ITS
EMPLOYEES. THE COMPLAINT ALLEGED, AMONG OTHER THINGS, THAT THE COMPANY TOOK PART
IN A CONSPIRACY WITH OTHER COMPANIES AND INDIVIDUALS UNRELATED TO DISCOUNT AUTO
PARTS, INC. TO DEFRAUD AIRGAS IN CONNECTION WITH COMMERCIAL SALES OF REFRIGERANT
R-12 (FREON) AND SOUGHT COMPENSATORY DAMAGES IN EXCESS OF $20 MILLION, TREBLE
DAMAGES AND OTHER RELIEF TOTALING IN EXCESS OF $80 MILLION. THE TRIAL WAS
SCHEDULED TO BEGIN ON AUGUST 4, 1997.

EFFECTIVE JULY 26, 1997, THE COMPANY ENTERED INTO A COMPROMISE AND SETTLEMENT
AGREEMENT (THE "SETTLEMENT AGREEMENT") WITH AIRGAS AND ITS AFFILIATES, THE OTHER
DEFENDANTS, AND CERTAIN OTHER PARTIES. UNDER THE TERMS OF THE SETTLEMENT
AGREEMENT, THE COMPANY PURCHASED FROM AIRGAS SPECIALTY GASES, ON AN "AS IS,
WHERE IS" BASIS, APPROXIMATELY 6,500 CYLINDERS BELIEVED TO CONTAIN AN
ALTERNATIVE TO R-12 REFRIGERANT FOR AN AGGREGATE PRICE OF $4.0 MILLION, WHICH
REPRESENTED A PRICE THAT WAS BELIEVED BY THE COMPANY TO BE APPROXIMATELY $3.6
MILLION IN EXCESS OF THE CURRENT MARKET VALUE OF SUCH PRODUCT. IN ADDITION, THE
COMPANY AGREED TO PAY AN ADDITIONAL $13.0 MILLION TO AIRGAS SPECIALTY GASES.

AS A SEPARATE BUT RELATED PART OF THE SETTLEMENT AGREEMENT, THE COMPANY PAID
$500,000 TO THE BANKRUPTCY ESTATE OF REFRIGERATION STATION, INC. ("RSI") TO
SETTLE ANY CLAIMS, INCLUDING CLAIMS OF PREFERENCE, THAT THE RSI BANKRUPTCY
ESTATE MIGHT HAVE ASSERTED AGAINST THE COMPANY AND PURCHASED FROM THE BANKRUPTCY
ESTATE APPROXIMATELY 7,200 CYLINDERS OF MERCHANTABLE FREEZE 12 REFRIGERANT (AN
R-12 ALTERNATIVE), FOR AN ADDITIONAL $1.0 MILLION (BELIEVED TO HAVE A BULK SALE
VALUE OF APPROXIMATELY $600,000). DISCOUNT AUTO PARTS, INC., AIRGAS, THE RSI
BANKRUPTCY ESTATE, THE OTHER DEFENDANTS AND CERTAIN OTHER PARTIES HAVE EXCHANGED
MUTUAL RELEASES OF ALL CLAIMS AND ISSUES BETWEEN THEM. IN THE SETTLEMENT
AGREEMENT, THERE IS NO FINDING OR

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 35

DISCOUNT AUTO PARTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ADMISSION OF WRONGDOING ON THE PART OF DISCOUNT AUTO PARTS, INC. BASED ON THE
TERMS OF THE SETTLEMENT AGREEMENT, THE COMPANY RECORDED A CHARGE TO EARNINGS IN
THE FOURTH QUARTER OF FISCAL 1997 OF $20,545,000. THE CHARGE INCLUDED RELATED
LEGAL EXPENSES.

THE COMPANY IS PRESENTLY INVOLVED IN LITIGATION WITH ITS INSURANCE CARRIER
PURSUANT TO WHICH THE COMPANY IS SEEKING RECOVERY UNDER ITS INSURANCE POLICY OF
CERTAIN AMOUNTS INCURRED IN CONNECTION WITH THE AIRGAS LITIGATION AND THE
SETTLEMENT THEREOF. THE ULTIMATE OUTCOME OF SUCH LITIGATION OR AN ESTIMATE OF
THE AMOUNT OF POTENTIAL INSURANCE RECOVERIES, IF ANY, CANNOT BE DETERMINED AT
THIS TIME. NO BENEFIT FOR ANY RECOVERY WHICH MAY RESULT HAS BEEN REFLECTED IN
THE ACCOMPANYING FINANCIAL STATEMENTS.

10. COMMITMENTS AND CONTINGENCIES

EXCEPT AS DISCLOSED IN NOTE 9, THE COMPANY IS NOT A PARTY TO ANY OTHER LEGAL
PROCEEDINGS OTHER THAN VARIOUS CLAIMS AND LAWSUITS ARISING IN THE NORMAL COURSE
OF BUSINESS. MANAGEMENT OF THE COMPANY DOES NOT BELIEVE THAT ANY SUCH CLAIMS OR
LAWSUITS WILL HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S FINANCIAL
CONDITION OR RESULTS OF OPERATION.

AS OF JUNE 2, 1998, THE COMPANY'S COST TO COMPLETE CONSTRUCTION CONTRACTS IN
PROGRESS WAS APPROXIMATELY $12.4 MILLION.

11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

THE FOLLOWING QUARTERLY FINANCIAL DATA IS UNAUDITED, BUT IN THE OPINION OF
MANAGEMENT, ALL ADJUSTMENTS NECESSARY FOR A FAIR PRESENTATION OF THE SELECTED
DATA FOR THESE INTERIM PERIODS PRESENTED HAVE BEEN INCLUDED. THE FISCAL 1997 AND
FIRST TWO QUARTERS OF FISCAL 1998 EARNINGS PER SHARE AMOUNTS HAVE BEEN RESTATED,
WHERE NECESSARY, TO COMPLY WITH SFAS NO. 128, EARNINGS PER SHARE.

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER(1) QUARTER
-------- -------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Fiscal Year Ended June 2, 1998:
Net sales $109,737 $105,240 $110,329 $122,185
Gross profit 42,402 41,350 43,387 48,948
Net income 6,450 6,087 6,972 7,671
Basic net income per common share .39 .37 .42 .46
Diluted net income per common share .39 .37 .42 .46
Fiscal Year Ended June 3, 1997:
Net sales $ 90,101 $105,788 $101,876 $107,421
Gross profit 33,948 36,726 37,853 40,013
Net income (loss) 6,413 6,898 5,612 (6,182)(2)
BASIC NET INCOME (LOSS) PER COMMON SHARE .39 .42 .34 (.37)(2)
DILUTED NET INCOME (LOSS) PER COMMON SHARE .38 .42 .34 (.37)(2)
</TABLE>

- ---------------

(1) THE THIRD QUARTER OF FISCAL 1997 INCLUDES 14 WEEKS OF OPERATIONS AS COMPARED
TO 13 WEEKS OF OPERATIONS FOR ALL OTHER QUARTERS PRESENTED.
(2) INCLUDES A $12.6 MILLION, OR $.76 PER BASIC AND DILUTED INCOME PER COMMON
SHARE AFTER TAX IMPACT OF THE AIRGAS LITIGATION SETTLEMENT. SEE NOTE 9.
EXCLUDING THE IMPACT OF THE LITIGATION SETTLEMENT AND ALL RELATED EXPENSES,
THE COMPANY WOULD HAVE REPORTED NET INCOME OF $6.5 MILLION OR $.39 PER BASIC
AND DILUTED INCOME PER COMMON SHARE.

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 36

REPORT OF MANAGEMENT

DISCOUNT AUTO PARTS, INC.

WE HAVE PREPARED THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS AND
RELATED INFORMATION INCLUDED HEREIN FOR THE YEARS ENDED JUNE 2, 1998, JUNE 3,
1997 AND MAY 28, 1996. THE OPINION OF ERNST & YOUNG LLP, THE COMPANY'S
INDEPENDENT AUDITORS, ON THOSE FINANCIAL STATEMENTS IS INCLUDED HEREIN. THE
PRIMARY RESPONSIBILITY FOR THE INTEGRITY OF THE FINANCIAL INFORMATION INCLUDED
IN THIS ANNUAL REPORT RESTS WITH MANAGEMENT. SUCH INFORMATION WAS PREPARED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES APPROPRIATE IN THE
CIRCUMSTANCES BASED ON OUR BEST ESTIMATES AND JUDGMENTS AND GIVING DUE
CONSIDERATION TO MATERIALITY.

DISCOUNT AUTO PARTS MAINTAINS INTERNAL ACCOUNTING CONTROL SYSTEMS WHICH ARE
ADEQUATE TO PROVIDE REASONABLE ASSURANCE THAT ASSETS ARE SAFEGUARDED FROM LOSS
OR UNAUTHORIZED USE AND WHICH PRODUCE RECORDS ADEQUATE FOR PREPARATION OF
FINANCIAL INFORMATION. THE SYSTEM AND CONTROLS AND COMPLIANCE THEREWITH ARE
MONITORED, REVISED AND IMPROVED TO MEET CHANGING BUSINESS CONDITIONS, COMPANY
GROWTH, AND RECOMMENDATIONS MADE BY THE INDEPENDENT AUDITORS. THERE ARE LIMITS
INHERENT IN ALL SYSTEMS OF INTERNAL ACCOUNTING CONTROL BASED ON THE RECOGNITION
THAT THE COST OF SUCH A SYSTEM SHOULD NOT EXCEED THE BENEFITS TO BE DERIVED. WE
BELIEVE THE COMPANY'S SYSTEM PROVIDES THIS APPROPRIATE BALANCE.

THE AUDIT COMMITTEE OF DISCOUNT AUTO PARTS' BOARD OF DIRECTORS IS RESPONSIBLE
FOR REVIEWING AND MONITORING THE COMPANY'S FINANCIAL REPORTS AND ACCOUNTING
PRACTICES TO ASCERTAIN THAT THEY ARE WITHIN ACCEPTABLE LIMITS OF SOUND PRACTICE
IN SUCH MATTERS. THE MEMBERSHIP OF THE COMMITTEE CONSISTS OF NON-EMPLOYEE
DIRECTORS. AT PERIODIC MEETINGS, THE AUDIT COMMITTEE DISCUSSES AUDIT AND
FINANCIAL REPORTING MATTERS AND THE INTERNAL AUDIT FUNCTION WITH REPRESENTATIVES
OF FINANCIAL MANAGEMENT AND WITH REPRESENTATIVES FROM ERNST & YOUNG LLP.

/S/ PETER J. FONTAINE /S/ C. MICHAEL MOORE
PETER J. FONTAINE C. MICHAEL MOORE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
</TABLE>

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 37
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

BOARD OF DIRECTORS
DISCOUNT AUTO PARTS, INC.

WE HAVE AUDITED THE ACCOMPANYING CONSOLIDATED BALANCE SHEETS OF DISCOUNT AUTO
PARTS, INC. AS OF JUNE 2, 1998 AND JUNE 3, 1997, AND THE RELATED CONSOLIDATED
STATEMENTS OF INCOME, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED JUNE 2, 1998. 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 THE 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 CONSOLIDATED FINANCIAL STATEMENTS REFERRED TO ABOVE
PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE CONSOLIDATED FINANCIAL POSITION OF
DISCOUNT AUTO PARTS, INC. AT JUNE 2, 1998 AND JUNE 3, 1997 AND THE CONSOLIDATED
RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR EACH OF THE THREE YEARS IN THE
PERIOD ENDED JUNE 2, 1998, IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.

/S/ ERNST & YOUNG LLP

TAMPA, FLORIDA
JULY 6, 1998

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 38
CORPORATE INFORMATION

CORPORATE HEADQUARTERS
DISCOUNT AUTO PARTS, INC.
4900 FRONTAGE ROAD, SOUTH
LAKELAND, FLORIDA 33815
TELEPHONE: (941) 687-9226
WWW.DISCOUNTAUTOPARTS.NET

TRANSFER AGENT AND REGISTRAR
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
85 CHALLENGER ROAD
OVERPECK CENTRE
RIDGEFIELD PARK, NEW JERSEY 07660
WWW.CHASEMELLON.COM

INDEPENDENT AUDITORS
ERNST & YOUNG LLP
P.O. BOX 740
TAMPA, FLORIDA 33601

STOCK EXCHANGE LISTING
NEW YORK STOCK EXCHANGE
TRADING SYMBOL -- DAP

ANNUAL MEETING
THE ANNUAL MEETING OF THE STOCKHOLDERS WILL BE HELD AT 10:30 AM TUESDAY, OCTOBER
6, 1998 AT:
THE LAKELAND CENTER
700 WEST LEMON STREET
LAKELAND, FLORIDA 33801

NUMBER OF STOCKHOLDERS
AS OF AUGUST 10, 1998, THERE WERE APPROXIMATELY 630 STOCKHOLDERS OF RECORD.

FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
JUNE 2, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE SENT
TO ANY STOCKHOLDER UPON REQUEST IN WRITING TO:
INVESTOR RELATIONS
DISCOUNT AUTO PARTS, INC.
4900 FRONTAGE ROAD, SOUTH
LAKELAND, FLORIDA 33815

MARKET INFORMATION
THE COMPANY HAS NOT PAID OR DECLARED CASH DISTRIBUTIONS OR DIVIDENDS SINCE THE
CONSUMMATION OF ITS INITIAL PUBLIC OFFERING IN AUGUST 1992, AND DOES NOT INTEND
TO PAY CASH DIVIDENDS ON ITS COMMON STOCK IN THE FORESEEABLE FUTURE.

COMMON STOCK PRICE RANGE

<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
------------- -----------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
QTR 1 20 15/16 17 5/8 26 1/4 22 3/8
QTR 2 24 15/16 18 3/16 25 7/8 21 1/4
QTR 3 22 5/8 18 1/2 26 3/8 12 7/8
QTR 4 25 5/8 21 1/8 19 1/4 14 1/4
</TABLE>

OFFICERS AND DIRECTORS
PETER J. FONTAINE
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR

WILLIAM C. PERKINS
PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR

C. MICHAEL MOORE
CHIEF FINANCIAL OFFICER AND SECRETARY

WARREN SHATZER
DIRECTOR
FORMER EXECUTIVE VICE PRESIDENT -- MERCHANDISING,
DISCOUNT AUTO PARTS, INC.

E.E. WARDLOW
DIRECTOR
FORMER PRESIDENT AND CHIEF OPERATING OFFICER,
KMART CORPORATION

A GORDON TUNSTALL
DIRECTOR
PRESIDENT, TUNSTALL CONSULTING

DAVID P. WALLING
DIRECTOR
FORMER VICE PRESIDENT, GENERAL CONTROLLER,
KMART CORPORATION

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 39

STORES AS OF AUGUST 12, 1998

<TABLE>
<S> <C> <C>
STATE STORES

FLORIDA 354
GEORGIA 65
MISSISSIPPI 25
ALABAMA 17
SOUTH CAROLINA 4
LOUISIANA 2
</TABLE>

* DISTRIBUTION CENTER/
CORPORATE HEADQUARTERS

[MAP OF UNITED STATES]

[DISCOUNT AUTO PARTS LOGO]
<PAGE> 40

[DISCOUNT AUTO PARTS LOGO]

CORPORATE HEADQUARTERS
DISCOUNT AUTO PARTS, INC.
4900 FRONTAGE ROAD, SOUTH
LAKELAND, FLORIDA 33815
TELEPHONE: (941) 687-9226
WWW.DISCOUNTAUTOPARTS.NET

<PAGE> 1

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<S> <C>
NAME STATE OF INCORPORATION
- ---- ----------------------
DAP/LUBECO Corporation Nevada

DAP/LUBECO Partnership Corporation Nevada
</TABLE>

<PAGE> 1

EXHIBIT 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the incorporation by reference in this Annual Report (Form
10-K) of Discount Auto Parts, Inc. of our report dated July 6, 1998, included
in the 1998 Annual Report to stockholders of Discount Auto Parts, Inc.

We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-51244) pertaining to the Discount Auto Parts, Inc.
1992 Team Members Stock Purchase Plan, in the Registration Statement (Form S-8
No 33-55512) pertaining to the Discount Auto Parts, Inc. 1992 Stock Option
Plan, in the Registration Statement (Form S-8 No. 33-84058) pertaining to the
Discount Auto Parts, Inc. Non Employee Director Plan, and in the Registration
Statement (Form S-8 No. 33-96326) pertaining to the Discount Auto Parts, Inc.
1995 Stock Option Plan of our report dated August 8, 1997, with respect to the
financial statements incorporated by reference in the Annual Report (Form 10-K)
of Discount Auto Parts, Inc.

Ernst & Young LLP

Tampa, Florida
August 21, 1998

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-02-1998
<PERIOD-START> JUN-04-1997
<PERIOD-END> JUN-02-1998
<CASH> 5,064
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 172,027
<CURRENT-ASSETS> 194,748
<PP&E> 379,991
<DEPRECIATION> 65,472
<TOTAL-ASSETS> 511,735
<CURRENT-LIABILITIES> 89,086
<BONDS> 160,695
0
0
<COMMON> 166
<OTHER-SE> 256,719
<TOTAL-LIABILITY-AND-EQUITY> 511,735
<SALES> 447,491
<TOTAL-REVENUES> 447,491
<CGS> 271,404
<TOTAL-COSTS> 271,404
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,203
<INCOME-PRETAX> 44,193
<INCOME-TAX> 17,013
<INCOME-CONTINUING> 27,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,180
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.63

</TABLE>