TBC CORPORATION

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

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

COMMISSION FILE NUMBER 0-11579

TBC CORPORATION

(Exact name of registrant as specified in its charter)


DELAWARE		20-1888610

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


7111 Fairway Drive, Suite 201 Palm Beach Gardens, Florida		33418

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (561) 227-0955

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


Title of each class		Name of each exchange on which registered

None		None

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

COMMON STOCK

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

TABLE OF CONTENTS


	Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
	Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
	Item 9A. CONTROLS AND PROCEDURES
PART IV
	Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
INDEX TO EXHIBITS
EX-23.2 CONSENT OF PRICEWATERHOUSECOOPERS LLP
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

INDEX TO EXHIBITS at page 40 of this Report

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. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act):
Yes þ No o


Aggregate market value of outstanding shares of Common Stock, par value $.10, held by non-affiliates of the Company on December 31, 2004 (for purposes of this calculation, 1,647,867 shares beneficially owned by directors and executive officers of the Company were treated as being held by affiliates of the Company)		$ 574,469,125

Number of shares of Common Stock, par value $.10, outstanding at the close of business on December 31, 2004		22,312,224

DOCUMENT INCORPORATED BY REFERENCE

TBC Corporation’s Proxy Statement for its Annual Meeting of Stockholders to be held on June 7, 2005. Definitive copies of the Proxy Statement will be filed with the Commission within 120 days after the end of the Company’s fiscal year. Only such portions of the Proxy Statement as are specifically incorporated by reference under Part III of this Report shall be deemed filed as part of this Report.

PURPOSE OF THIS AMENDMENT

Because TBC Corporation (the “Company”) had not then completed management’s assessment of the Company’s internal control over financial reporting as of December 31, 2004, Item 9A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed on April 1, 2005, did not include management’s annual report on internal control over financial reporting required by Item 308(a) of Regulation S-K, or the related attestation report of the Company’s independent registered public accounting firm required by Item 308(b) of Regulation S-K. The Company is filing this Amendment No. 1 to its Annual Report on Form 10-K (the “Amendment”) to provide these reports, as well as various exhibits required to be filed with this Amendment. No other information is being amended by this Amendment.

In accordance with the rules and regulations of the Securities and Exchange Commission, Item 8 is being re-filed in its entirety because PricewaterhouseCoopers LLP (“PwC”), the Company’s registered public accounting firm, has issued its integrated report on the Company’s financial statements, the financial statement schedule, managements assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as part of Item 8 in this Form 10-K/A.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary financial information required by this Item 8 are included on the following 32 pages of this Report.


PRICEWATERHOUSECOOPERS
		PricewaterhouseCoopers LLP
		1000 Morgan Keegan Tower
		Fifty North Front Street
		Memphis, TN 38103
		Telephone (901) 522 2000
		Facsimile (901) 523 2045

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of TBC Corporation:

We have completed an integrated audit of TBC Corporation’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of TBC Corporation and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Memphis, Tennessee
April 27, 2005

TBC CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS


			RESTATED
			(See Note 3)
	December 31,		December 31,
	2004		2003
CURRENT ASSETS:

Cash and cash equivalents	$	2,832	$	2,645

Accounts and notes receivable, less allowance for doubtful accounts of $9,307 and $8,260 at December 31, 2004 and 2003, respectively.
Related parties		32,149		12,535
Other		117,812		109,962


Total accounts and notes receivable		149,961		122,497

Inventories		291,745		264,810
Refundable federal and state income taxes		—		296
Deferred income taxes		24,790		12,987
Other current assets		19,270		10,346


Total current assets		488,598		413,581


PROPERTY, PLANT AND EQUIPMENT, AT COST:

Land and improvements		10,400		12,100
Buildings and leasehold improvements		109,959		103,669
Furniture and equipment		105,232		93,710

		225,591		209,479

Less accumulated depreciation		73,418		56,618


Total property, plant and equipment		152,173		152,861


TRADEMARKS, NET		15,824		15,824


GOODWILL, NET		180,353		169,184


OTHER ASSETS		39,331		34,368


TOTAL ASSETS	$	876,279	$	785,818

The accompanying notes are an integral part of the consolidated financial statements.

TBC CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY


				RESTATED
				(See Note 3)
	December 31,			December 31,
	2004			2003
CURRENT LIABILITIES:

Outstanding checks, net	$	30,368		$	11,411

Accounts payable, trade		128,656			114,708

Notes payable to banks		41,013			29,100

Current portion of long-term debt and capital lease obligations		41,216			28,723

Federal and state income taxes payable		17,790			—

Warranty reserves		19,667			22,544

Other current liabilities		71,278			69,186


Total current liabilities		349,988			275,672


LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION		167,349			208,620


NONCURRENT LIABILITIES		43,320			30,528


DEFERRED INCOME TAXES		10,613			7,890


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY:
Common stock, $.10 par value, shares issued and outstanding - 22,312 and 21,905 on December 31, 2004 and 2003, respectively		2,231			2,190

Additional paid-in capital		28,882			23,898

Deferred Compensation		(789)			—

Accumulated other comprehensive loss		(1,570	)		(1,637	)

Retained earnings		276,255			238,657


Total stockholders’ equity		305,009			263,108


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	876,279		$	785,818

The accompanying notes are an integral part of the consolidated financial statements.

TBC CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)


	For the Years Ended December 31,
				RESTATED			RESTATED
				(See Note 3)			(See Note 3)
	2004			2003			2002
NET SALES*	$	1,855,418		$	1,318,531		$	1,109,663

COST OF SALES		1,160,624			884,645			809,381


GROSS PROFIT		694,794			433,886			300,282


EXPENSES:
Distribution expenses		74,284			61,356			53,136
Selling, administrative and retail store expenses		548,309			314,760			198,775
Interest expense - net		18,739			10,409			8,703
Other income		(4,722	)		(2,547	)		(2,411	)


Total expenses		636,610			383,978			258,203


INCOME BEFORE INCOME TAXES		58,184			49,908			42,079

PROVISION FOR INCOME TAXES		20,586			17,723			15,641


NET INCOME	$	37,598		$	32,185		$	26,438


EARNINGS PER SHARE -
Basic	$	1.69		$	1.49		$	1.25


Diluted	$	1.62		$	1.42		$	1.20


Weighted Average Common Shares Outstanding -
Outstanding -
Basic		22,190			21,649			21,191
Diluted		23,280			22,743			21,966

Including sales to related parties of $125,088, $82,010 and $100,406 in the years ended December 31, 2004, 2003 and 2002, respectively.

The accompanying notes are an integral part of the consolidated financial statements.

TBC CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)


										Accumulated
										Other
										Compre-
	Common Stock						Additional			hensive												Total
	Number of						Paid-In			Income			Deferred			Retained						Comprehensive
	Shares			Amount			Capital			(Loss)			Compensation			Earnings			Total			Income
BALANCE, JANUARY 1, 2002 AS PREVIOUSLY REPORTED		21,003		$	2,100		$	11,783		$	(713	)		—		$	181,149		$	194,319

Opening retained earnings change for restatement (See Note 3)		—			—			—			—			—			1,831			1,831
Net income for period		—			—			—			—			—			26,438			26,438
Issuance of common stock under stock option and incentive plans		519			52			4,084			—			—			—			4,136
Repurchase and retirement of common stock		(230	)		(23	)		(139	)		—			—			(2,946	)		(3,108	)
Tax benefit from exercise of stock options		—			—			959			—			—			—			959
Comprehensive income:
Net income		—			—			—			—			—			—			—		$	28,269
Interest rate swap agreements, net of tax		—			—			—			(177	)		—			—			(177	)		(177	)
Minimum pension liability adjustments, net of tax		—			—			—			(391	)		—			—			(391	)		(391	)

Other comprehensive income		—			—			—			—			—			—						(568	)

Total comprehensive income																						$	27,701




BALANCE, DECEMBER 31, 2002		21,292			2,129			16,687			(1,281	)		—			206,472			224,007

Net income for period		—			—			—			—			—			32,185			32,185
Issuance of common stock under stock option and incentive plans		613			61			5,391			—			—			—			5,452
Tax benefit from exercise of stock options		—			—			1,820			—			—			—			1,820
Comprehensive income:
Net income		—			—			—			—			—			—			—		$	32,185
Interest rate swap agreements, net of tax		—			—			—			331			—			—			331			331
Minimum pension liability adjustments, net of tax		—			—			—			(37	)		—			—			(37	)		(37	)
Foreign currency translation adjustment		—			—			—			(650	)		—			—			(650	)		(650	)

Other comprehensive income		—			—			—			—			—			—			—			(356	)

Total comprehensive income		—			—			—			—			—			—			—		$	31,829




BALANCE, DECEMBER 31, 2003		21,905			2,190			23,898			(1,637	)		—			238,657			263,108

Net income for period		—			—			—			—			—			37,598			37,598
Issuance of common stock under stock option and incentive plans		407			41			3,278			—			—			—			3,319
Tax benefit from exercise of stock options		—			—			1,706			—			—			—			1,706
Comprehensive income:
Deferred Compensation		—			—			—			—			(789	)		—			(789	)
Net income		—			—			—			—			—			—			—		$	37,598
Interest rate swap agreements, net of tax		—			—			—			327			—			—			327			327
Minimum pension liability adjustments, net of tax		—			—			—			(312	)		—			—			(312	)		(312	)
Foreign currency translation adjustment		—			—			—			52			—			—			52			52

Other comprehensive income		—			—			—			—			—			—			—			67

Total comprehensive income		—			—			—			—			—			—			—		$	37,665




BALANCE, DECEMBER 31, 2004		22,312		$	2,231		$	28,882		$	(1,570	)	$	(789	)	$	276,255		$	305,009

The accompanying notes are an integral part of the consolidated financial statements.

TBC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Years Ended December 31,
				RESTATED			RESTATED
	2004			2003			2002
Operating Activities:
Net income	$	37,598		$	32,185		$	26,438
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		27,470			18,159			12,665
Amortization of intangible assets		74			69			24
Amortization of deferred financing costs		1,967			617			446
Amortization of other comprehensive income		—			(309	)		83
Provision for doubtful accounts and notes		4,322			4,267			2,861
(Gain) loss on sale of fixed assets		(32	)		23			(14	)
Provision for deferred income taxes		(8,539	)		3,701			(448	)
Equity in net earnings from joint ventures		(2,164	)		196			24
Changes in operating assets and liabilities net of effect of assets acquired:
Receivables		(31,600	)		(5,847	)		(7,329	)
Inventories		(35,274	)		(40,382	)		4,899
Other current assets		(9,611	)		1,561			(426	)
Other assets		(580	)		1,240			1,874
Accounts payable, trade		13,588			14,283			(8,027	)
Federal and state income taxes refundable or payable		19,792			987			4,488
Other current liabilities		(5,417	)		4,393			5,301
Noncurrent liabilities		6,259			2,567			2,564

Net cash provided by operating activities		17,853			37,710			45,423


Investing Activities:
Purchase of property, plant and equipment		(25,506	)		(21,017	)		(15,155	)
Purchase of net assets of retail stores, net of cash acquired		—			—			(11,154	)
Acquisition of Merchant’s, Inc., net of cash acquired		—			(58,477	)		—
Purchase of NTW, Inc., net of cash acquired		—			(225,914	)		—
Proceeds from sale of Merchant’s Commercial Division		—			5,600			—
Proceeds from sale of real estate under operating leases, net		—			134,050			—
Investments in joint ventures, net of distributions received		(645	)		1,694			466
Net proceeds from asset dispositions		3,493			2,593			1,022

Net cash used in investing activities		(22,658	)		(161,471	)		(24,821	)


Financing Activities:
Net bank borrowings under short-term borrowing arrangements		11,913			(5,900	)		800
Increase (decrease) in outstanding checks, net		18,956			3,245			(1,707	)
Proceeds from long-term debt, net of financing costs		—			142,000			—
Payments of deferred financing costs		(17	)		(8,138	)		—
Payments of long-term debt and capital lease obligations		(28,778	)		(15,300	)		(20,533	)
Proceeds from capital leases from sale of real estate, net		—			3,594			—
Issuance of common stock under stock incentive plans		2,918			4,586			3,967
Repurchase and retirement of common stock		—			—			(3,108	)

Net cash provided by (used in) financing activities		4,992			124,087			(20,581	)


Increase in cash and cash equivalents		187			326			21
Cash and cash equivalents:
Balance — Beginning of period		2,645			2,319			2,298

Balance — End of period	$	2,832		$	2,645		$	2,319

(Continued)

TBC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)


	Years Ended December 31,
				RESTATED			RESTATED
	2004			2003			2002
Supplemental Disclosures of Cash Flow Information:
Cash paid for — Interest	$	16,801		$	9,920		$	8,589
Cash paid for — Income taxes		10,077			13,035			11,601

Supplemental Disclosures of Non-Cash Financing Activity:
Tax benefit from exercise of stock options	$	1,706		$	1,820		$	959
Issuance of restricted stock under stock incentive plan, net		401			866			169
Property, plant and equipment acquired under capital leases		—			3,923			1,200

Supplemental Disclosures of Non-Cash Investing Activity:

On October 28, 2004, the Company acquired the assets and certain liabilities of Southwest Tire and Supply for a purchase price of $4,474. The acquisition was accounted for under the purchase method, as follows:
Estimated fair value of assets acquired	$	2,765
Goodwill		1,769
Obligations satisfied		(4,474	)

Liabilities assumed	$	60


On April 1, 2003, the Company completed the acquisition of Merchant’s, Incorporated for a purchase price of $57,494, plus applicable closing costs of $983. The acquisition was accounted for under the purchase method, as follows:
Estimated fair value of assets acquired				$	53,956
Goodwill					49,645
Cash paid, net of assets acquired					(58,477	)

Liabilities assumed				$	45,124


On November 29, 2003, the Company completed the acquisition of NTW Incorporated for a purchase price of $225,000, plus applicable closing costs of $914. Contemporaneously with the closing of the acquisition, the Company sold and leased back 86 retail stores under operating leases and received net proceeds of $132,185. The transaction was accounted for under the purchase method, as follows:
Estimated fair value of assets acquired, including fees to be amortized, net of assets disposed of in sale leaseback transaction				$	104,016
Goodwill					60,652
Cash paid, net of assets acquired					(225,914	)
Cash received from sale and leaseback transactions, net of transaction costs					132,185

Liabilities assumed				$	70,939


In 2002, the Company purchased the net assets of certain retail tire stores at a combined cash purchase price of $11,154. The transaction was accounted for under the purchase method, as follows:
Estimated fair value of assets acquired							$	4,166
Goodwill								7,090
Cash paid, net of assets acquired								(11,154	)

Liabilities assumed							$	102

• During 2003, the Company acquired Merchant’s, Incorporated and NTW Incorporated (the “Purchased Companies”) and these acquisitions were accounted for under the purchase method. In connection with the Purchased Companies, the Company has adjusted the carrying value of certain balance sheet items to account for changes to their respective fair market values. During 2004, the Company increased goodwill by $9,358 comprised primarily of adjustments to the initial values assigned to inventory, property, plant and equipment, other assets and other accrued liabilities.

The accompanying notes are an integral part of the consolidated financial statements.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Operations

The Company is one of the nation’s largest independent marketers of tires for the automotive replacement market. The Company has determined that its operating activities consist of two reportable operating segments: the Company’s Retail Division and the Company’s Wholesale Division. The Company operates and acts as a franchisor of retail tire and automotive service centers throughout the entire United States under the trade names Tire Kingdom, Merchant’s Tire & Auto Centers, National Tire & Battery and Big O Tires. The Company’s wholesale customers include retailers and other wholesalers, primarily in the United States, Canada and Mexico. As of December 31, 2004, the Company had a total of 1,172 retail locations consisting of 605 Company-operated and 567 franchised stores.

Basis of Presentation

The consolidated financial statements have been restated, as described in Note 3 “Restatement” of this Form 10-K. Additionally, certain previously reported amounts have been reclassified to conform to the current financial statement presentation with no impact on previously reported net income or stockholders’ equity. The revised classification amounts were comprised of a change between noncurrent income tax payable and deferred income taxes and a change between noncurrent assets, building and leasehold improvements and non current liabilities as of December 31, 2003.

Significant Accounting Policies

Principles of consolidation - The accompanying financial statements include the accounts of TBC Corporation and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

Accounting estimates - The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. Actual results could differ from those estimates.

Equity investments - The Company has invested in certain tire distributors and independent tire dealers. The investments in these 50% or less-owned entities are accounted for using the equity method as appropriate and are included in other assets on the balance sheets. The carrying value of such equity investments totaled $13.8 million and $10.8 million at December 31, 2004 and 2003, respectively. For its share of earnings and losses from such equity investments, the Company recorded a net gain in other income of $2.2 million in 2004 and net losses of $0.2 million and $24,000 in 2003 and 2002, respectively. The net loss recorded during 2003 included a $0.7 million charge in connection with the Company’s exit from a joint venture.

Cash equivalents - Cash equivalents consist of short-term, highly liquid investments which are readily convertible into cash.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for doubtful accounts and notes - The Company maintains an allowance for doubtful accounts and notes for estimated losses resulting from the inability of its customers to make required payments. The allowance is based on review of the overall condition of receivable balances and review of significant past due accounts. The Company evaluated its allowance for doubtful account at December 31, 2004 and determined that such amount was adequate but not excessive, based on facts and conditions known at that time. If the financial condition of the Company’s customers were to deteriorate in such a way as to impair their ability to make payments, additional allowances may be required.

Inventories - Inventories, consisting of tires and other automotive products held for resale, are valued at the lower of cost or market. The Company historically used the last-in, first-out (“LIFO”) method for approximately 45% of its inventories, with the remaining inventories valued on a first-in, first-out (“FIFO”) basis.

Effective January 1, 2004, the Company changed its method of determining the cost of its LIFO inventories to the FIFO method. The Company has applied this change retroactively by restating its financial statements as required by Accounting Principles Board No. 20, “Accounting Changes,” and accordingly, previously reported retained earnings as of January 1, 2002 has been increased by $1.8 million. See Note 3 to the consolidated financial statements for information regarding the restatement.

Concentrations of credit risk - The Company performs ongoing credit evaluations of its franchisees and wholesale customers and typically requires some form of security, including collateral, guarantees or other documentation. The Company maintains allowances for potential credit losses. The Company maintains cash balances with financial institutions with high credit ratings. The Company has not experienced any losses with respect to bank balances in excess of government-provided insurance.

Property, plant and equipment - Depreciation is computed principally using the straight-line method, over the lesser of the useful life or lease term. Amounts expended for maintenance and repairs are charged to operations, and expenditures for major renewals and betterments are capitalized. When property, plant and equipment is retired or otherwise disposed of, the related gain or loss is included other income in the results of operations.

Acquisitions - The Company accounts for asset and business acquisitions using the purchase method, under the provisions of Statement of Financial Accounting Standards No. 141, “Business Combinations.” Assets acquired and liabilities assumed are recorded at their fair value on the date of purchase. Purchase cost in excess of the fair value of the net assets acquired is allocated to identifiable intangibles, to the extent of their fair value. Any remaining excess cost is allocated to goodwill.

Goodwill, Trademarks and Other Intangible Assets - Goodwill represents the excess of cost over the fair value of identifiable net assets acquired. Goodwill was recorded as a result of the Company’s acquisitions of Merchant’s and NTW in 2003, as well as the purchase of the net assets of certain other retail tire stores during 2002 and 2001. Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142). Under SFAS No. 142, goodwill and other indefinite-lived intangible assets are no longer amortized but are tested for impairment annually, with charges being recorded only if impairment is found to exist. The Company performs its annual impairment assessment in the first quarter of each fiscal year unless circumstances dictate more frequent assessments. SFAS No. 142 also requires the fair values of these intangible assets to be assigned to the Company’s “reporting units” and tested accordingly, with a reporting unit being defined as an operating segment or one level below a segment if discrete financial information is prepared and reviewed regularly by management. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is required to be recognized. Fair value is estimated using the discounted cash flow method. When available and as appropriate,

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

the Company uses comparative market multiples to corroborate discounted cash flow results. In applying this methodology, the Company relies on a number of factors, including actual operating results, future business plans, economic prospects and market data. No impairment to the recorded value of Company’s indefinite-lived assets was found to exist as a result of the required testing.

Long-lived assets - The Company periodically reviews the recoverability of intangible and other long-lived assets. If facts or circumstances support the possibility of impairment, the Company will prepare a projection of the undiscounted future cash flows of the specific assets and determine if the assigned value is recoverable or if an adjustment to the carrying value of the assets is necessary. The Company does not believe that there were any facts or circumstances which indicated an impairment of recorded assets as of December 31, 2004 or 2003.

Net sales - Net sales include revenues from sales of products and services, plus franchise and royalty fees charged to Big O franchisees, less estimated returns, allowances and customer rebates. Sales are recognized at the time products are shipped or services are rendered and the estimated costs of returns, allowances and rebates are accrued at the same time. Each Big O franchisee is required to pay an initial franchise fee as well as monthly royalty fees of 2% of gross sales. Initial franchise fees are deferred and recognized when all material services or conditions relating to the sale or transfer of the franchise have been substantially completed.

Warranty costs - The costs of anticipated adjustments for workmanship and materials that are the responsibility of the Company are estimated based on historical experience and charged against earnings currently. Management reviews these estimates on a regular basis and adjusts the warranty provisions as actual experience differs from historical estimates or other information becomes available. Reserves for future warranty claims and service, including those associated with acquired operations, totaled $25.7 million and $29.4 million at December 31, 2004 and 2003, respectively, of which $6.0 million and $6.9 million was classified as non-current liabilities at December 31, 2004 and 2003, respectively, in the balance sheets.

Interest on early payments to suppliers for product - Interest income associated with early payments to suppliers for product is recorded as a reduction to cost of sales in the statements of income. This interest income represented 0.7% of net sales in 2004, 0.9% during 2003 and 1.0% in 2002.

Self-Insured Reserves — The Company is self-insured for general and automobile liability, workers’ compensation and the health care claims, although the Company maintains stop-loss coverage with third-party insurers to limit its total liability exposure. A reserve for liabilities associated with these losses is established for claims filed and claims incurred but not yet reported based upon the Company’s estimate of ultimate cost, which is calculated using analyses of historical data, severity factors and valuations provided by third-party actuaries. The Company monitors new claims and claim development as well as negative trends related to the claims incurred but not reported in order to assess the adequacy of its insurance reserves. On an annual basis, the Company also reviews its assumptions with its third-party actuaries. While the Company does not expect the amounts ultimately paid to differ significantly from its estimates, the Company’s self-insurance reserves and corresponding selling, general and administrative expenses could be affected if future claim experience differs significantly from historical trends and actuarial assumptions.

Retirement plan obligations - The values of certain assets and liabilities associated with the Company’s retirement plan obligations are determined on an actuarial basis and include estimates and assumptions such as the expected return on plan assets and discount rates. Discount rates are determined based on rates of high quality, fixed income investments. Actual changes in the fair market value of plan assets, differences between the actual return and the expected return on plan assets and changes in the discount rate affect the amount of the pension expense recognized.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive income – Comprehensive income represents the change in stockholders’ equity from transactions and other events and circumstances arising from non-stockholder sources. Comprehensive income consists of net income, foreign currency translation adjustments, changes in minimum pension liabilities and elements of qualifying cash flow hedges, net of applicable taxes.

Shipping and Handling Costs – Income generated from shipping and handling fees is classified as revenues for all periods presented. Freight costs incurred to bring merchandise to retail stores and warehouses are included as a component of inventory and costs of goods sold. Freight costs incurred to ship merchandise to customers are recorded as a component of distribution expenses. Freights costs incurred to ship merchandise to customers totaled $19.5 million, $14.8 million and $12.7 million for 2004, 2003 and 2002, respectively.

Income Tax Accounting - We determine our income tax provision using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We also recognize future tax benefits associated with tax loss and credit carryforwards as deferred tax assets. Our deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We measure deferred tax assets and liabilities using enacted tax rates in effect for the year in which we expect to recover or settle the temporary differences. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted.

Earnings per share - Earnings per share have been calculated according to Statement of Financial Accounting Standards No. 128, “Earnings per share”. Basic earnings per share have been computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share have been computed by dividing net income by the weighted average number of common shares and equivalents outstanding. Common share equivalents represent shares issuable upon assumed exercise of stock options. Average common shares and equivalents outstanding were as follows (in thousands):


	2004		2003		2002
Weighted average common shares outstanding		22,190		21,649		21,191

Common share equivalents		1,090		1,094		775


Weighted average common shares and equivalents outstanding		23,280		22,743		21,966

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting for Stock-Based Compensation - The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” Accordingly, under APB No. 25 “Accounting for Stock Compensation”, no compensation expense has been recognized for the stock options granted in 2004, 2003 or 2002. Using fair value assumptions specified in SFAS No. 123, the weighted average per share value of options granted during 2004, 2003 and 2002 was $10.78, $4.80 and $5.16, respectively. Had compensation cost for such option grants been determined using such assumptions, results for the years ended December 31, 2004, 2003 and 2002 would have been as follows (in thousands):


	2004			2003			2002
Net income, as reported	$	37,598		$	32,185		$	26,438

Add: Stock-based compensation included in reported net income, net of tax effects		183			159			78

Less: Total stock-based compensation expense determined using fair value assumptions, net of tax effects		(3,070	)		(2,397	)		(1,949	)


Pro forma net income	$	34,711		$	29,947		$	24,567


Earnings per share:
Basic - as reported	$	1.69		$	1.49		$	1.25

- pro forma	$	1.56		$	1.38		$	1.16


Diluted - as reported	$	1.62		$	1.42		$	1.20

- pro forma	$	1.49		$	1.32		$	1.12

The Committee of the Board of Directors is authorized under the 1989 Plan to grant restricted stock awards to officers and other key employees. These awards are recorded in additional paid-in capital within an offset to deferred compensation when granted. Subsequently, an expense is recorded, on a straight-line basis, for these awards as a component of selling, administrative and retail store expenses based upon the applicable vesting period of the restricted stock ranging from three to ten years. Additionally, the 1989 Plan provides for the annual grant of restricted stock with a market value of $10,000 ($5,000 for years prior to 2003) to each non-employee director of the Company. The annual grant is initially recorded in additional pain-in capital with an offset to deferred compensation. Subsequently, the expense is recorded in selling, administrative and retail store expenses over the one-year service period. Each of these shares of restricted stock is accompanied by four tandem options, which are only exercisable under certain conditions and the exercise of which results in the forfeiture of the associated share of restricted stock. The options expire in one-third increments as the associated restricted stock vests. If the non-employee directory exercises the rights to the tandem options, an adjustment is recorded between common stock and additional paid-in capital for the forfeited restricted stock.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

2. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

In May 2004, the FASB issued FASB Staff Position, or FSP, 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” FSP 106-2 addresses the appropriate accounting and disclosure requirements for companies that sponsor a postretirement health care plan that provides prescription drug benefits. The new guidance was deemed necessary as a result of the 2003 Medicare prescription law which includes a federal subsidy for qualifying companies. The effective date of FSP 106-2 is the first interim or annual period beginning after June 15, 2004. The adoption of FSP 106-2 had no impact on the Company’s financial position, results of operations or related footnote disclosure.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs”. The new statement amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. This statement requires that those items be recognized as current-period charges and requires that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. This statement is effective for fiscal years beginning after June 15, 2005. We do not expect the adoption of this statement to have a material impact on the Company’s financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment”, or SFAS No. 123R. SFAS No. 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and subsequently issued stock option related guidance. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. Entities will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.

The Company is required to apply SFAS No. 123R to all awards granted, modified or settled as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The Company is also required to use either the modified-prospective method or modified-retrospective method. Under the modified-prospective method, we must recognize compensation cost for all awards subsequent to adopting the standard and for the unvested portion of previously granted awards outstanding upon adoption. Under the modified-retrospective method, the Company must restate its previously issued financial statements to recognize the amounts previously calculated and reported on a pro forma basis, as if the prior standard had been adopted. Under both methods, the Company is permitted to use either the straight line or an accelerated method to amortize the cost as an expense for awards with graded vesting. The standard permits and encourages early adoption.

The Company has commenced its analysis of the impact of SFAS No. 123R, but has not yet decided: (1) whether it will elect to early adopt, (2) if it will elect to early adopt, what date we would do so, (3) whether it will use the modified-prospective or modified-retrospective method, and (4) whether it will elect to use straight line or an accelerated method. Accordingly, the Company has not determined the impact that the adoption of SFAS No. 123R will have on the Company’s financial position or results of operations.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

3. RESTATEMENT

During the second quarter of 2004, but effective on January 1, 2004, the Company changed its inventory costing method from LIFO to FIFO. The method was changed to obtain a more current inventory valuation at period end, to achieve a better matching of revenues and expenses and to move to one method of inventory valuation on a Company-wide basis. In addition, since costing for retail inventories has historically been on the FIFO method, as this segment grows, continuing liquidation of LIFO layers would have resulted in any event. Principally, the Wholesale Segment historically used the last-in, first-out (“LIFO”) method for approximately 45% of the Company’s inventories, with the remaining inventories valued on a first-in, first-out (“FIFO”) basis. The Company has applied this change retroactively by restating its financial statements for 2003 and 2002 as required by Accounting Principles Board No. 20, “Accounting Changes,” and accordingly, previously reported retained earnings as of January 1, 2002 has been increased by $1.8 million. The effect of the change on the previously reported net income and earnings per share are reflected in the table below (in thousands):


	As
	Previously					As
	Reported		Adjustments			Restated
Net income
Year ended December 31, 2003	$	33,359	$	(1,174	)	$	32,185
Year ended December 31, 2002		27,382		(944	)		26,438

Basic earnings per share
Year ended December 31, 2003	$	1.54	$	(0.05	)	$	1.49
Year ended December 31, 2002		1.29		(0.04	)		1.25

Diluted earnings per share
Year ended December 31, 2003	$	1.47	$	(0.05	)	$	1.42
Year ended December 31, 2002		1.25		(0.05	)		1.20

4. TRANSACTIONS WITH RELATED PARTIES AND MAJOR CUSTOMERS

The Company’s operations are managed through its Board of Directors, members of which owned or are affiliated with companies which owned approximately 6.4% of the Company’s common stock at December 31, 2004. Sales to a distributor represented on the Board, including affiliates of that distributor, accounted for approximately 2% of the Company’s net sales during 2004, 3% during 2003 and 4% in 2002. One major customer, unaffiliated with the Board of Directors or the Company, accounted for approximately 2% of net sales in 2004, 3% of net sales in 2003, and 5% in 2002. Sales to joint ventures and entities in which the Company has an ownership interest accounted for approximately 5% of the Company’s net sales during 2004, 3% in 2003 and 5% in 2002. Accounts receivable resulting from transactions with related parties are presented separately in the balance sheets.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

5. ACQUISITIONS

On October 28, 2004, the Company acquired the assets and certain liabilities of a wholesale customer, Southwest Tire and Supply (“Southwest Tire”). The acquisition was made to satisfy outstanding obligations owed to the Company by Southwest Tire. The acquisition was accounted for as a purchase, with total consideration of $4,474,000 which represented the satisfaction of the outstanding obligations. The goodwill acquired with respect to Southwest Tire totaled $1,769,000. The goodwill is deductible for tax purposes pursuant to the provisions of Internal Revenue Code (“IRC”) section 197.

On April 1, 2003, the Company acquired all of the outstanding capital stock of Merchant’s, Incorporated (“Merchant’s”), which was a privately-owned company operating 112 retail tire centers in the Mid-Atlantic region of the United States. The acquisition was made to increase the size and geographic reach of TBC’s retail store network and to enhance TBC’s purchasing, distribution and marketing economies. The acquisition was accounted for as a purchase, with total consideration of $57,494,000 payable by TBC at closing plus up to $15 million payable in the future depending upon the performance of the existing Merchant’s retail stores during the five year period beginning January 1, 2004. For the year ended December 31, 2002, Merchant’s had sales of $174.2 million, of which $154.6 million related to its retail business. The remaining sales in 2002 were attributable to Merchant’s commercial and retreading business which TBC sold effective April 30, 2003 for a net price of $5.6 million, with no gain being recognized. Goodwill additions relating to Merchant’s at acquisition totaled $49,645,000. The goodwill for tax purposes is deductible under IRC section 197 due to the asset acquisition treatment of the transaction pursuant to the IRC section 338(h)(10) election executed by the parties.

On November 29, 2003, the Company acquired all of the outstanding capital stock of NTW Incorporated from Sears, Roebuck and Co. NTW was operated as a separate operating division by Sears under the name National Tire & Battery (NTB), with 225 retail tire and automotive centers in 20 states generating annual revenues in excess of $425 million. Like the Merchant’s acquisition, the NTW acquisition was made to increase the size and geographic reach of TBC’s retail store network and further enhance TBC’s purchasing, distribution and marketing economies. The acquisition was accounted for as a purchase, with total consideration of $225 million financed through debt and sale/leaseback arrangements. Contemporaneously with the closing of the acquisition, the Company sold and leased back 86 retail tire stores owned by NTW, with net proceeds from that transaction totaling approximately $132 million. Goodwill additions relating to NTW at acquisition totaled $60,652,000. The goodwill for tax purposes is deductible under IRS section 197 due to the asset acquisition treatment of the transaction pursuant to the IRC section 338(h)(10) election executed by the parties.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

The Company’s consolidated financial statements include the operating results of Merchant’s since April 1, 2003 and NTW since November 30, 2003. The following unaudited pro forma results were prepared as if the companies had been combined as of the beginning of each period presented and includes an after-tax charge of $53,978,000 in 2002 by NTW for the cumulative effect of a change in accounting for goodwill. Such pro forma results give no consideration to anticipated changes in the mix of products and services offered by the acquired stores and the favorable effect that such changes would be expected to have on gross profit. Thus, the pro forma results do not purport to present what actual results of operations would have been or to project results for any future period. Pro forma net sales were $1,754,874,000 in 2003 and $1,747,154,000 in 2002. Pro forma net income was $36,657,000 in 2003 and a pro forma net loss of $13,286,000 in 2002 and pro forma diluted earnings per share of $1.61 in 2003 and a pro forma diluted loss per share of $0.60 in 2002.

On March 20, 2002, the Company acquired primarily all of the assets of Mueller Tire and Brake, LLC and related entities (“Mueller”), which was a privately-owned company operating 19 retail tire centers in Ohio. The acquisition was made to increase the size and geographic reach of the Company’s retail store network. The acquisition was accounted for as an asset purchase, with total consideration of $11,154,000.

6. GOODWILL AND INTANGIBLE ASSETS

The component of Goodwill by segments are listed below (in thousands):


	December 31,		December 31,
	2004		2003
Goodwill Retail segment	$	174,827	$	165,426
Wholesale segment		5,526		3,758

Total goodwill	$	180,353	$	169,184

The net increase in goodwill reflects the following:

• An increase of $7.9 million pertaining to straight-line rent adjustments in order to properly reflect deferred rent liabilities in connection with the stores acquired for the NTW acquisition.

• An increase of $7.7 million pertaining changes in valuation estimates related to inventory acquired in conjunction with the NTW acquisition.

• A decrease of $6.2 million pertaining to the sale and leaseback transactions as described in Note 5 — Acquisitions.

• An increase of $1.8 million pertaining to the acquisition of the assets and certain liabilities of Southwest Tire as described in Note 5 — Acquisitions.

Indefinite-lived intangible assets were $0.5 million and $0.1 million at December 31, 2004 and 2003, respectively. Gross definite-lived intangible assets comprised of customer lists and non-compete agreements were $485,000 at December 31, 2004 and 2003 with related accumulated amortization of $139,000 and $65,000 at December 31, 2004 and 2003, respectively, were included in other assets in the Consolidated Balance Sheets. Amortization of definite-lived intangible assets was $74,000, $69,000 and $24,000 in 2004, 2003 and 2002, respectively. The estimated future amortization expense related to definite-lived intangible assets at December 31, 2004 is $74,000, $42,000, $37,000, $37,000 and $37,000 for 2005, 2006, 2007, 2008 and 2009, respectively.

7. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT

On March 31, 2003, the Company executed a new borrowing agreement with a group of 11 banks, which modified its existing bank borrowing facilities. The new agreement was amended and restated on November 29, 2003 to enable the Company to consummate its acquisition of NTW and again on November 19, 2004 to permit the Company to implement the holding company reorganization described in Item 1. The amended and restated agreement includes a term loan facility and a revolving loan facility, both of which mature on April 1, 2008. The revolving loan facility allows the Company to borrow up to $121.5 million, with the option to increase that amount by an additional $28.5 million. Interest under each of the new facilities is at the eurodollar rate plus a variable rate between 1.75% and 2.75% dependent on the Company’s leverage ratio. The bank credit facilities and the Senior Notes are collateralized by substantially all of the Company’s assets and contain cross-default provisions. The credit facilities require the payment of certain commitment and administrative fees which totaled $224,000 and $438,000 in 2004 and 2003, respectively, and contain certain financial covenants dealing with, among other things, the Company’s funded indebtedness, leverage, fixed charge coverage ratio, accounts receivable and inventories. The credit facilities also include certain restrictions which affect the Company’s ability to incur additional debt, acquire other companies, make certain investments, repurchase its own common stock, sell or place liens upon assets, provide guarantees and pay cash dividends.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

7. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT (Continued)

On April 1, 2003, the Company entered into a new agreement with a lender that allowed the Company to borrow $50 million under Series D variable rate Senior Notes, due April 16, 2009. Borrowings under the Series D Senior Notes were made April 16, 2003, with the proceeds being used to help finance the acquisition of Merchant’s (see Note 5). On November 29, 2003, the agreements under which the Company’s Series A, B, C and D Senior Notes were issued were amended to modify the interest rates payable thereunder and, among other things, incorporate all of the financial covenants and restrictions contained in the amended and restated bank credit facilities noted above. The Company’s obligations under the Senior Notes are collateralized by substantially all of the Company’s assets, with principal payments required to be made semi-annually and interest payable quarterly.

The Company was in compliance with all of its borrowing covenants as of December 31, 2004 and for the year then ended. A total of $41.0 million and $29.0 million was borrowed under the bank revolving loan facility at December 31, 2004 and 2003, respectively. The combined weighted average interest rate on both short-term and long-term average borrowings during 2004 and 2003 was 6.1% and 6.4%, respectively.

Long-term debt and capital lease obligations are summarized as follows (in thousands):


	December 31,
	2004		2003
9.62% Series B Senior Note, due from 2004 through 2005	$	5,500	$	11,000
9.81% Series C Senior Note, due from 2006 through 2008		16,500		16,500
7.25% Series D Senior Note, due from 2007 through 2009		50,000		50,000
Variable-Rate Term Loan Payable to Banks, due from 2004 through 2008		124,776		147,334
Capital lease obligations		11,789		12,509

		208,565		237,343

Less current portion		41,216		28,723

	$	167,349	$	208,620

Maturities of long-term debt and capital lease obligations are as follows: $41.2 million due in 2005, $41.3 in 2006, $46.4 million in 2007, $46.5 million in 2008, $26.2 million in 2009, and $6.9 million thereafter.

8. INTEREST RATE SWAP AGREEMENTS

The Company has certain interest-rate swap agreements which are hedge instruments accounted for under Statement of Financial Accounting Standards No. 133, adopted by the Company on January 1, 2001. SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, requires the recognition of all derivative instruments on the balance sheet at fair value. The Company’s interest-rate swap agreements expire over periods of five years or less and are designated cash-flow hedges since they are used to convert a portion of the Company’s variable-rate bank debt to fixed rates and thereby minimize earnings fluctuations caused by interest rate volatility. Changes in the fair value of interest-rate swaps are recorded in other comprehensive income, until earnings are affected by the variability of actual cash flows. As of December 31, 2004, deferred losses on interest-rate swaps, net of deferred taxes, totaled $0.2 million and were included in other comprehensive income (loss) on the balance sheet. At the end of 2004, interest expense of approximately $0.4 million was expected to be recorded within the next twelve months, in conjunction with the realization of assumed interest rates. At December 31, 2004 and 2003, the fair value of these interest-rate swaps were $0.4 million and $0.9 million, respectively. The current and long-term portions of the fair value are recorded in other current liabilities and noncurrent liabilities, respectively.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

9. LEASE COMMITMENTS

The Company’s commitments under operating leases relate substantially to retail store locations and distribution facilities. In addition to rental payments, the Company is obligated in some instances to pay real estate taxes, insurance and certain maintenance costs. Leased capital assets are included in property, plant and equipment on the consolidated balance sheets. The accumulated depreciation relating to these capital assets is $1.6 million and $0.7 million in 2004 and 2003, respectively. Other facilities and equipment are leased under arrangements that are accounted for as operating leases. Rental expense of $86.7 million, $52.8 million and $35.6 million was charged to operations in 2004, 2003 and 2002, respectively, after deducting sublease income of $5.1 million in 2004, $4.2 million in 2003 and $4.4 million in 2002. Minimum rent is expensed on a straight-line basis over the terms of the operating leases.

Future minimum capital and operating lease payments and the related present value of capital lease payments at December 31, 2004 were as follows (in thousands):


	Operating		Capital
Year	Leases		Leases
2005	$	92,100	$	2,156
2006		88,852		2,154
2007		80,696		2,136
2008		75,175		2,041
2009		70,293		1,985
Thereafter		516,401		10,572

Total minimum lease payments		923,517		21,044

Less — sublease income associated with operating leases		37,579


Net minimum lease payments	$	885,938


Less — interest expense associated with capital leases				(9,255	)


Present value of net minimum lease payments			$	11,789

In conjunction with the acquisition of NTW Incorporated in November 2003, the Company entered into a transaction whereby 86 retail stores were sold and leased back pursuant to leases that qualified and were accounted for as operating leases. The Company continues to lease and operate the sold stores, but does not have any other retained or contingent interests in the sold stores. Proceeds from this sale-leaseback transaction, net of related fees, totaled $132.2 million, with no gain being recognized since the net book value of the sold properties was the same as the fair market value. In addition to the NTW stores, certain other retail stores were sold and leased back during the year under sale-leaseback arrangements. The leases that resulted from these sale-leaseback transactions are included in the above table.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

10. INCOME TAXES (Continued)

The provision for deferred income taxes represents the change in the Company’s net deferred income tax asset or liability during the year, excluding deferred taxes related to other comprehensive income or loss and including the effect of any tax rate changes. Deferred income taxes arise from temporary differences between the tax basis of the Company’s assets and liabilities and their reported amounts in the financial statements. Deferred income tax assets of $1,355,000 were recorded in connection with the acquisition of Merchant’s in April 2003. Deferred income tax assets of $179,000 were recorded in January 2004 in connection with the acquisition of Merchant’s as a result of changes to the severance accrual. No deferred income tax assets were recorded in connection with the November 2003 acquisition of NTW. Deferred income tax assets of $477,000 were recorded in April 2004 in connection with the acquisition of NTW as a result of changes to the severance accrual. The major components of deferred income tax assets and liabilities on the balance sheets are summarized as follows (in thousands):


	December 31,
				RESTATED
				(See Note 3)
	2004			2003
Deferred income tax assets:
Allowance for doubtful accounts	$	3,429		$	3,211
Warranty-related reserves		5,831			3,599
Insurance-related accruals		6,761			3,143
Compensation and retirement-related accruals		3,123			2,555
Lease accruals and related arrangements		4,071			2,841
Deferred revenues		2,961			1,110
Inventory		2,481			—
Foreign subsidiary basis difference		1,874			1,579
Foreign subsidiary basis difference valuation allowance		(650	)		(650	)
Capital loss carryover		944			—
Other deferred income tax assets		1,594			1,258

Total deferred income tax assets	$	32,419		$	18,646


Deferred income tax liabilities:
Trademarks and intangible assets	$	11,397		$	7,599
Accumulated depreciation		6,496			4,636
Inventory		—			1,118
Other deferred income tax liabilities		349			196

Total deferred income tax liabilities	$	18,242		$	13,549

Net deferred income tax asset	$	14,177		$	5,097


Balance sheet presentation:
Current deferred income tax asset	$	24,790		$	12,987
Noncurrent deferred income tax liability		10,613			7,890

Net deferred income tax asset	$	14,177		$	5,097

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

10. INCOME TAXES (Continued)

A reconciliation of the statutory U.S. Federal income tax rate to the Company’s effective income tax rate is as follows:


	2004			2003			2002
Statutory U.S. Federal rate		35.0	%		35.0	%		35.0	%
State income taxes		1.5	%		1.2	%		2.2	%
Other		-1.1	%		-0.7	%		0.0	%


Effective tax rate		35.4	%		35.5	%		37.2	%

In assessing the realization of the Company’s deferred income tax assets, the Company considers whether it is more likely than not that the deferred income tax assets will be realized. The ultimate realization of the Company’s deferred income tax assets depends upon generating future taxable income during the periods in which the temporary differences become deductible and before the net operating loss carryforwards and foreign tax credits expire. The Company evaluates the recoverability of the deferred income tax assets by assessing the need for a valuation allowance on a quarterly basis. If the Company determines that it is more likely than not that the deferred income tax assets will not be recovered, a valuation allowance is established against some or all of the deferred income tax assets. The valuation allowance reflected by the Company due to uncertainties related to its ability to utilize some of its deferred tax assets, primarily consisting of certain foreign tax credits as of December 31, 2004, 2003, and 2002 was $650,000, $650,000 and $700,000, respectively. At December 31, 2004, certain of the Company’s consolidated subsidiaries had net operating loss carryforwards available in certain states. These state loss carryforwards are expected to be utilized prior to their expiration in 2018 through 2023.

During 2004, the American Jobs Creation Act of 2004 (Jobs Creation Act) was signed into law. Beginning in 2005, the Jobs Creation Act includes relief for domestic manufacturers by providing a tax deduction for qualified production activities. In addition, the Job Creation Act phases out the exclusion for extraterritorial income (“ETI”) during 2005 and 2006. While the Company has historically benefited from ETI, its repeal will not materially impact the Company’s effective tax rate. With respect to the tax deduction provided for domestic manufacturers, the Company has initially determined that the deduction should not have an impact on its effective tax rate in future periods.

11. RETIREMENT PLANS

The Company maintains employee savings plans under Section 401(k) of the Internal Revenue Code. Contributions are typically made by the Company to the 401(k) plans based on specified percentages of employee contributions, but may also include discretionary contributions. Expenses recorded for the Company’s contributions totaled $2.0 million in 2004, $1.4 million in 2003 and $1.8 million in 2002.

The Company has a defined benefit pension plan which covered less than 100 of its employees at the end of 2004. The benefits are based on years of service and the employee’s final compensation. The plan is funded by contributions by the Company, not to exceed the maximum amount that can be deducted for federal income tax purposes. The plan was amended as of December 31, 2001 to freeze accrued participant benefits by providing that years of service and compensation after that date shall not be taken into account in the calculation of plan benefits. Although no decision has been made to terminate the plan, it may be terminated at some point in the future (in accordance with the requirements of ERISA and the Pension Benefit Guaranty Corporation). The Company wrote off the remaining balance of its prepaid pension asset during 2001 and recorded an expense of $720,000. In 2004 and 2003, the Company recorded minimum pension liability adjustments of $219,000 and $59,000, respectively, related to the excess of accumulated benefit obligations over the fair value of the underlying plan assets. Accumulated adjustments, reflected in other comprehensive income or loss on the balance sheets net of deferred income taxes, were $566,000 and $428,000 as of December 31, 2004 and 2003, respectively.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

11. RETIREMENT PLANS (Continued)

The table which follows sets forth the defined benefit pension plan’s changes in projected benefit obligations for service rendered to date, changes in the fair value of plan assets, the funded status and amounts recognized in the Company’s balance sheets (in thousands):


	2004			2003
Actuarial present value of projected benefit obligations, at beginning of year	$	(5,261	)	$	(5,894	)

Service cost		(50	)		(50	)
Interest cost		(328	)		(366	)
Actuarial loss		(336	)		(60	)
Settlement gain		516			840
Benefits paid		94			134
Expenses paid		82			135
Amendments and other		—			—


Actuarial present value of projected benefit obligations, at end of year		(5,283	)		(5,261	)


Fair value of plan assets, at beginning of year		4,343			5,184

Return on plan assets		325			459
Employer contributions		76			—
Benefits and expenses paid		(176	)		(269	)
Settlements		(515	)		(1,031	)


Fair value of plan assets, at end of year		4,053			4,343


Funded Status — plan assets under projected benefit obligation, at end of year		(1,230	)		(918	)

Unrecognized net loss from experience different from that assumed		902			683
Unrecognized prior service cost		—			—
Accumulated pension liability adjustment		(902	)		(683	)


Accrued benefit liability, at end of year	$	(1,230	)	$	(918	)

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

11. RETIREMENT PLANS (Continued)

The net expense for the defined benefit plan for 2004, 2003 and 2002 was comprised of the following (in thousands):


	2004			2003			2002
Interest cost	$	328		$	366		$	383
Service cost		50			50			—
Expected return on plan assets		(319	)		(376	)		(340	)
Net amortization, deferral and settlement charges		111			109			43


	$	170		$	149		$	86

A description of plan asset allocation percentages by investment type are included as follows:


	Target			Allocation			Allocation
	Allocation			Percentage			Percentage
	2005			2004			2003
Equity securities		70.00	%		71.51	%		75.68	%
Debt securities		30.00	%		28.04	%		21.88	%
Real estate		3.50	%		0.00	%		0.00	%
Other		5.00	%		0.45	%		2.44	%
Total					100.00	%		100.00	%

The Company expects to contribute approximately $54,000 to the plan in 2005. Additionally, expected benefit payments are detailed as follows:


Year ended December 31,	Payment Amount
2005	$	160,187
2006		271,121
2007		210,520
2008		262,567
2009		381,468
Thereafter		2,123,585

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

11. RETIREMENT PLANS (Continued)

The discount rates used in determining the actuarial present values of benefit obligations for the defined benefit plan were 6.00%, 6.25% and 6.50% in 2004, 2003 and 2002, respectively. Estimated increases in future compensation levels were not applicable due to the plan amendment freezing participant benefits. The expected long-term rate of return on assets was 7.5%, 7.5% and 6% in 2004, 2003 and 2002, respectively. The assumptions used to develop the net periodic pension expense are developed based on the discount rate, the expected long-term rate of return on assets and interest rates used to determine the benefit obligations. Additionally, administrative expense assumptions are based on historical plan trust information. Actuarial present values of accumulated benefit obligations were $5.3 million, $5.3 million and $5.9 million at December 31, 2004, 2003 and 2002, respectively.

The Company also has unfunded supplemental retirement plans for certain of its key executives, to provide benefits in excess of amounts permitted to be paid by its other retirement plans under current tax law. Expenses recorded for supplemental retirement benefits totaled $692,000, $409,000 and $387,000 in 2004, 2003 and 2002, respectively. At December 31, 2004, the projected benefit obligation, computed using a 6.0% discount rate and 5.0% expected increase in future compensation, was $3,710,000. The accumulated benefit obligation, which was reflected as a noncurrent liability at December 31, 2004, totaled $2,475,000.

12. STOCKHOLDERS’ EQUITY

The Company is authorized to issue 50,000,000 shares of $.10 par value common stock. In addition, 2,500,000 shares of $.10 par value preferred stock are authorized, none of which were outstanding at December 31, 2004 or 2003.

The Company has a Stockholder Rights Plan whereby outstanding shares of the Company’s common stock are accompanied by preferred stock purchase rights. The rights become exercisable ten days after a public announcement that a person or group has acquired 20% or more of the Company’s common stock or any earlier date designated by the Board of Directors. Under defined circumstances, the rights allow TBC stockholders (other than the 20% acquirer) to purchase common stock in the Company at a price which may be substantially less than the market price. The rights expire on July 31, 2008 unless redeemed at an earlier date.

In 2002 and 2001, shares of the Company’s common stock were repurchased and retired under authorizations made by the Board of Directors. No common stock repurchases were made during 2004 or 2003. As of December 31, 2004, the Company had unused authorizations from the Board for the repurchase of approximately 1,199,000 additional shares.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

13. STOCK OPTION AND INCENTIVE PLANS

The Company has a 1989 stock incentive plan (“1989 Plan”), a 2000 stock option plan (“2000 Plan”) and a 2004 stock option plan (“2004 Plan”). The plans provide for the grant of options to purchase shares of the Company’s common stock to officers and other key employees upon terms and conditions determined by a committee of the Board of Directors. Options typically are granted at the fair market value of the stock on the date of grant, vest ratably over a three-year period and expire in ten years.

The committee is authorized under the 1989 Plan to grant performance awards and restricted stock awards to officers and other key employees. Additionally, the 1989 Plan provides for the annual grant of restricted stock with a market value of $10,000 ($5,000 for years prior to 2003) to each non-employee director of the Company. Each of these shares of restricted stock is accompanied by four options, which are only exercisable under certain conditions and the exercise of which results in the forfeiture of the associated share of restricted stock. The options expire in one-third increments as the associated restricted stock vests. Such tandem options are not included in the totals shown below for outstanding options. At December 31, 2004, 2,070,272 shares were reserved for issuance under the 1989, 2000 and 2004 Plans.

A summary of stock option activity during 2002, 2003 and 2004 is shown below:


						Weighted
						Average
	Option			Option Price		Exercise
	Shares			Range		Price
Outstanding at December 31, 2001 (1,113,628 exercisable)		2,218,141		$	4.63 - $12.13	$	7.53
Granted in 2002		539,490			11.59 - 13.05		13.03
Exercised in 2002		(501,673	)		4.69 - 12.13		7.86
Forfeited in 2002		(34,723	)		4.69 - 13.05		9.62

Outstanding at December 31, 2002 (1,116,947 exercisable)		2,221,235		$	4.63 - $13.05	$	8.76
Granted in 2003		621,284			12.62 - 29.70		13.13
Exercised in 2003		(540,574	)		4.63 - 13.05		8.57
Forfeited in 2003		(129,136	)		5.50 - 13.05		11.32

Outstanding at December 31, 2003 (1,117,383 exercisable)		2,172,809		$	4.69 - $29.70	$	9.91
Granted in 2004		393,723			23.93 - 30.60		27.89
Exercised in 2004		(402,369	)		4.69 - 16.00		8.54
Forfeited in 2004		(51,394	)		5.75 - 27.90		13.20

Outstanding at December 31, 2004 (1,271,485 exercisable)		2,112,769		$	4.69 - $30.60	$	13.44

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

13. STOCK OPTION AND INCENTIVE PLANS (Continued)

Additional information regarding stock options outstanding at December 31, 2004 is shown below:


	Outstanding Options					Exercisable Options
			Weighted		Weighted			Weighted
			Average		Average			Average
	Option		Exercise		Remaining	Option		Exercise
Option Price Range	Shares		Price		Term	Shares		Price
$4.69 - $8.50		597,165	$	6.23	5.2 yrs		597,165	$	6.23

$8.51 - $12.62		739,133		11.42	6.9 yrs		430,395		10.56

$12.63 - $30.60		776,471		20.91	8.1 yrs		243,925		13.46


		2,112,769					1,271,485

As of December 31, 2004, 626,600 of the outstanding options contained a “reload” feature. Options granted by the committee with a reload feature provide for the grant of a new option, called a “reload option,” for a number of shares equal to the number of shares delivered by the optionee to pay the exercise price of the original option and to pay any tax withholding payments associated with the exercise of the original option.

The fair value of each option granted in 2004, 2003 and 2002 was estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions: dividend yield of 0%; risk-free interest rates equal to zero-coupon governmental issues; and expected lives of 5.0 years. The expected volatility percentages used for options granted were 38.8% in 2004, 36.4% in 2003 and 36.3% in 2002.

14. FINANCIAL GUARANTEES AND CREDIT RISKS

The Company’s Big O Tires, Inc. subsidiary has provided certain financial guarantees associated with real estate leases and financing of its franchisees. Although the guarantees were issued in the normal course of business to meet the financing needs of its franchisees, they represent credit risk in excess of the amounts reported on the balance sheet as of December 31, 2004. The contractual amounts of the guarantees, which represent the Company’s maximum exposure to credit loss in the event of non-performance by the franchisees, totaled $3.5 million as of December 31, 2004, including $2.7 million related to franchisee financing and $0.8 million related to store and real estate leases. Most of the guarantees extend for more than five years and expire in decreasing amounts through 2009. The credit risk associated with these guarantees is essentially the same as that involved in extending loans to the franchisees. Big O evaluates each franchisee’s creditworthiness and requires that sufficient collateral (primarily inventories and equipment) and security interests be obtained by the third party lenders or lessors, before the guarantees are issued. There are no cash requirements associated with the guarantees, except in the event that an actual financial loss is subsequently incurred due to non-performance by the franchisees. Any fair value associated with guarantees is immaterial.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

15. SEGMENT INFORMATION

The Company is principally engaged in the marketing and distribution of tires in the automotive replacement market and has two reportable segments: retail and wholesale. The retail segment includes the franchised retail tire business conducted by Big O Tires, Inc., as well as the operation of retail tire and service centers by Tire Kingdom, Inc., Merchant’s, Incorporated and NTW Incorporated. The franchised and Company-operated retail systems are evaluated using similar operating measurements and are aggregated for segment reporting purposes since they have similar marketing concepts, distribution methods, customers and other economic characteristics. The wholesale segment markets and distributes the Company’s proprietary brands of tires, as well as other tires and related products, on a wholesale basis to distributors who resell to or operate independent tire dealers.

Accounting policies of both the retail and wholesale segments are the same as those described in the summary of significant accounting policies. The Company evaluates the performance of its two segments based upon earnings before interest, taxes, depreciation and amortization (“EBITDA”). Net sales by the wholesale segment to the retail segment are eliminated in consolidation and totaled $255.9 million, $176.9 million and $164.9 million in 2004, 2003 and 2002 respectively. Such intersegment sales had no effect on the EBITDA of the individual reporting segments.

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

15. SEGMENT INFORMATION (Continued)

Segment information for the three years ended December 31, 2004, 2003 and 2002 is as follows (in thousands):


	Retail		Wholesale		Total
Period ended December 31, 2004

Total assets	$	591,208	$	285,071	$	876,279

Operating results -
Net sales to external customers		1,193,360		662,058		1,855,418

EBITDA		69,063		35,405		104,468

Depreciation and amortization						27,544

Interest expense, net						18,739

Income before income taxes						58,184

Period ended December 31, 2003 (Restated)

Total assets	$	520,346	$	265,472	$	785,818

Operating results -
Net sales to external customers		734,073		584,458		1,318,531

EBITDA		51,087		27,458		78,545

Depreciation and amortization						18,228

Interest expense, net						10,409

Income before income taxes						49,908

Period ended December 31, 2002 (Restated)

Total assets	$	238,868	$	236,392	$	475,260

Operating results -
Net sales to external customers		511,925		597,738		1,109,663

EBITDA		33,427		30,044		63,471

Depreciation and amortization						12,689

Interest expense, net						8,703

Income before income taxes						42,079

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

16. VARIABLE INTEREST ENTITIES

In January 2003 and December 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46), and its revision, FIN 46-R, respectively. FIN 46 and FIN 46-R provide guidance on the consolidation of entities whose equity holders have either not provided sufficient equity at risk to allow the entity to finance its own activities or do not possess certain characteristics of a controlling financial interest. FIN 46 and FIN 46-R require the consolidation of these entities, known as variable interest entities (VIE’s), by the primary beneficiary of the entity and also require certain disclosures by primary beneficiaries and other significant variable interest holders. The primary beneficiary is the entity, if any, that is subject to a majority of the risk of loss from the VIE’s activities, entitled to receive a majority of the VIE’s residual returns, or both. The guidance of FIN 46 was immediately applicable for VIE’s created after January 31, 2003. In applying such guidance for purposes of determining whether an entity is a VIE, the Company has reviewed arrangements created after that date in which it has: 1) an economic interest in an entity or obligations to that entity; 2) issued guarantees related to the liabilities of an entity; 3) transferred assets to an entity; 4) managed the assets of an entity; or 5) leased assets from an entity or provided that entity with financing. As of December 31, 2004, the Company has determined that it holds interests in VIE’s created after January 31, 2003 in connection with the franchise business activities conducted at its Big O Tires, Inc. (“Big O”) subsidiary. The Company has identified one hundred forty-seven (147) retail stores operated by Big O franchisees that meet the VIE conditions due to lending, leasing or guarantee arrangements. These stores make retail tire sales and provide automotive services to consumers under the trade name of Big O Tires through franchise agreements entered into with the Company’s subsidiary. Under the franchise agreements, Big O sells private-branded and other tires to the franchised stores and receives a 2% royalty on all revenues of the stores. As of December 31, 2004, the Company’s subsidiary had extended loans in the aggregate of $8.6 million, entered into leasing or subleasing arrangements for minimum payments totaling $37.6 million, and guaranteed loans or leases on behalf of these franchisees totaling $2.3 million. During 2004, Big O recorded product sales of $42.2 million and royalty fee revenues of $2.8 million related to these 147 franchised stores. During 2004, the store themselves had retail sales totaling $140.2 million. The 147 franchised stores are owned and/or operated by numerous entities and persons. The process of obtaining complete financial information for the stores was a lengthy one and in some instances the Company was unable to obtain certain financial information. In some instances, the Company evaluated these stores based on their economic characteristics and made certain assumptions in instances where financial information was not available. Based on these evaluations, at December 31, 2004, the Company is the primary beneficiary of three VIEs. However, the consolidation of those entities for which the Company is the primary beneficiary would not have a material impact on the Company’s consolidated financial statements and therefore, the three entities are not included in the consolidated results of operations of the Company.

17. CONSIDERATION RECEIVED FROM A VENDOR

On March 20, 2003, the Emerging Issues Task Force (“EITF”) issued EITF 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor,” which states that cash consideration received from a vendor is presumed to be a reduction of the price of the vendor’s products or services and should, therefore, be characterized as a reduction of cost of goods sold and a portion of these amounts be capitalized into ending inventory. This presumption is overcome when the consideration is either a reimbursement of specific, incremental and identifiable costs incurred to sell the vendor’s products, or a payment for assets or services delivered to the vendor. EITF 02-16 is effective for volume-based rebate agreements entered into after November 21, 2002 and for all other rebate agreements entered into or modified after December 31, 2002.

During 2003, the Company adopted EITF 02-16; however, the adoption of this pronouncement did not have a material impact on the results of operations. Prior to the effective date of EITF 02-16, the Company entered into numerous multi-year supply agreements. Consistent with EITF 02-16, the Company continued accounting for these agreements under its historical method of recognizing the vendor allowances based on the Company’s fulfillment of the related obligations of the agreement. In the second quarter of 2004, the Company entered into a new supply agreement with one of its major vendors. As required by EITF 02-16, the Company

TBC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

17. CONSIDERATION RECEIVED FROM A VENDOR (CONTINUED)

began capitalizing a portion of the allowances afforded it under this new agreement. Earnings in 2004 reflect a negative net income impact of EITF 02-16 of $2.3 million, or $0.10 per diluted share, related to the Company’s new purchase agreement with this major vendor. In addition, during 2003, the Company reclassified $1.7 million of vendor allowances previously classified in selling, general and administrative expenses to properly record these as cost of goods sold with no impact on net income. For the year ended December 31, 2002, a reclassification was not required since vendor rebates were properly accounted for as a component of cost of sales.

18. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings which are routine to the conduct of its business. The Company does not believe that any such routine litigation will have a material adverse effect on its consolidated financial position, results of operations or cash flows.

SUPPLEMENTARY DATA:

QUARTERLY FINANCIAL INFORMATION

Unaudited quarterly results for 2004 and 2003 are summarized as follows:

(In thousands, except per share amounts)


	First		Second		Third		Fourth		Full
	Quarter		Quarter		Quarter		Quarter		Year
	RESTATED (See Note 3)
2004
Net sales	$	433,841	$	456,490	$	476,464	$	488,623	$	1,855,418
Gross profit		161,866		175,201		175,251		182,476		694,794
Net income		5,499		9,131		10,922		12,046		37,598
Earnings per share -
Basic	$	0.25	$	0.41	$	0.49	$	0.54	$	1.69
Diluted	$	0.24	$	0.39	$	0.47	$	0.52	$	1.62

2003 (Restated — See Note 3)
Net sales	$	256,545	$	328,843	$	362,401	$	370,742	$	1,318,531
Gross profit		74,992		108,856		114,653		135,385		433,886
Net income		4,611		7,976		10,020		9,578		32,185
Earnings per share -
Basic	$	0.22	$	0.37	$	0.46	$	0.44	$	1.49
Diluted	$	0.21	$	0.35	$	0.44	$	0.41	$	1.42

Item 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.

None.

Item 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and its Chief Financial Officer, carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Securities Exchange Act of 1934, Rules 13(a)- 15(f) and 15(d)-15(f). Under the supervision and with the participation of the Company’s Chief Executive Officer and its Chief Financial Officer, management of the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. Based on that evaluation, the Company’s management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2004.

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financing reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deterioate.

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) FINANCIAL STATEMENTS

The following items, including consolidated financial statements of the Company are set forth in this report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets — December 31, 2004, and 2003

Consolidated Statements of Income — Years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Stockholders’ Equity — Years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Cash Flows — Years ended December 31, 2004, 2003 and 2002

Notes to Consolidated Financial Statements

(a) (2)FINANCIAL STATEMENT SCHEDULES

Schedule II — Valuation and qualifying accounts

All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto.

(a) (3) EXHIBITS — See Index to Exhibits included at p. 40 of this Report

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, TBC Corporation has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

TBC CORPORATION

April 28, 2005 By: /s/ LAWRENCE C. DAY
Lawrence C. Day
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of TBC Corporation and in the capacities and on the dates indicated:


Name	Title	Date

/s/ LAWRENCE C. DAY Lawrence C. Day	President, Chief Executive Officer and Director	April 28, 2005

/s/ THOMAS W. GARVEY Thomas W. Garvey	Executive Vice President and Chief Financial Officer (principal financial and accounting officer)	April 28, 2005

Marvin E. Bruce	Chairman of the Board of Directors	April ___, 2005

Michael E. Dunlap	Director	April ___, 2005

TBC CORPORATION

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(In thousands)


			Additions
			Charged			Charged
			to Costs			to
	Balance		and			Other						Balance
	January 1,		Expenses			Accounts			Deductions			December 31,
2004
Warranty reserve	$	29,394	$	3,420		$	61		$	7,208		$	25,667

Allowance for doubtful accounts		8,260		4,322			(646	)		2,629	⁽³⁾		9,307

Deferred tax asset valuation allowance		650		—			—			—			650

2003

Warranty reserve		10,997		3,750			20,140	⁽¹⁾		5,493	⁽²⁾	$	29,394

Allowance for doubtful accounts		8,701		4,267			83	⁽¹⁾		4,791	⁽³⁾		8,260

Deferred tax asset valuation allowance		700		(50	)		—			—			650

2002

Warranty reserve		8,762		7,854			—	⁽¹⁾		5,619	⁽²⁾	$	10,997

Allowance for doubtful accounts		7,737		2,861			—	⁽¹⁾		1,897	⁽³⁾		8,701

Deferred tax asset valuation allowance		100		600			—			—			700

(1)	Includes amounts for Merchant’s, Incorporated and NTW Incorporated as of the dates of their acquisition by TBC Corporation during 2003.

(2)	Amounts added during current year and payable at year end less amount payable at beginning of year.

(3)	Accounts written off during year, net of recoveries.

INDEX TO EXHIBITS


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(2)	PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION:

2.1	Stock Purchase Agreement, dated March 25, 2003, by and among TBC Corporation, Linda Merchant Bell, Carol Merchant Kirby, and Wilson C. Merchant III was filed as Exhibit 2.1 to the TBC Corporation Current Report on Form 8-K dated April 1, 2003	*

2.2	Stock Purchase Agreement, dated as of September 21, 2003, by and between TBC Corporation and Sears, Roebuck and Co., was filed as Exhibit 2.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2003	*

2.3	First Amendment, dated as of November 28, 2003, to Stock Purchase Agreement, dated September 21, 2003, by and between TBC Corporation and Sears, Roebuck & Co. was filed as Exhibit 2.2 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

2.4	Agreement and Plan of Merger, dated November 19, 2004, among TBC Corporation, TBC Parent Holding Corp., and TBC Merger Corp. was filed as Exhibit 2.1 to the TBC Corporation Current Report on Form 8-K dated November 19, 2004	*

(3)(i)	ARTICLES OF INCORPORATION:

3(i).1	Certificate of Incorporation of TBC Corporation (formerly named TBC Parent Holding Corp.) was filed as Exhibit 3(i).1 to the TBC Corporation Current Report on Form 8-K dated November 19, 2004	*

(3)(ii)	BYLAWS:

3(ii).1	ByLaws of TBC Corporation (formerly named TBC Parent Holding Corp.) were filed as Exhibit 3(ii).1 to the TBC Corporation Current Report on Form 8-K dated November 19, 2004	*

(4)	INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES:

4.1	Amended and Restated Rights Agreement, dated as of July 23, 1998, between TBC Corporation and BankBoston, N.A., as Rights Agent, including as Exhibit A thereto the form of Rights Certificate, was filed as Exhibit 4.1 to the TBC


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	Corporation Form 8-A/A-1 Registration Statement filed with the Commission on July 30, 1998	*

4.2	Second Amended and Restated Credit Agreement, dated as of November 19, 2004, among TBC Corporation, TBC Private Brands, Inc., the Lenders party thereto, U.S. Bank National Association, as Documentation Agent, SunTrust Bank, as Syndication Agent, First Tennessee Bank National Association, as Administrative Agent, and JP Morgan Chase Bank, as Co-Administrative Agent, was filed as Exhibit 4.1 the TBC Corporation Current Report on Form 8-K dated November 19, 2004	*

4.3	Second Amended and Restated Note Agreement, dated as of April 1, 2003, between TBC Corporation and The Prudential Insurance Company of America, was filed as Exhibit 4.2 to the TBC Corporation Current Report on Form 8-K dated April 1, 2003	*

4.4	Amendment No. 1, dated as of November 29, 2003, to Second Amended and Restated Note Agreement, dated as of April 1, 2003, between TBC Corporation and The Prudential Insurance Company of America, including as Exhibits B and C thereto the amended form of Variable Rate Senior Notes issued thereunder, was filed as Exhibit 4.2 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

4.5	Amendment No. 2, dated as of November 19, 2004, among TBC Corporation, TBC Private Brands, Inc., and The Prudential Insurance Company of America, to Second Amended and Restated Note Agreement, dated as of April 1, 2003 and amended by Amendment No. 1, dated as of November 29, 2003, was filed as Exhibit 4.3 to the TBC Corporation Current Report on Form 8-K dated November 19, 2004	*

4.6	Note Purchase Agreement, dated as of April 1, 2003, among TBC Corporation, The Prudential Insurance Company of America, and certain of its affiliates, managed funds, and accounts purchasing Notes thereunder, including as Exhibit 1 thereto the form of Senior Secured Note evidencing the Series D Variable Rate Senior Secured Notes in the aggregate principal amount of $50,000,000 issued thereunder, was filed as Exhibit 4.3 to the TBC Corporation Current Report on Form 8-K dated April 1, 2003	*

4.7	Amendment No. 1, dated as of November 29, 2003, to Note Purchase Agreement, dated as of April 1, 2003, among TBC Corporation, The Prudential Insurance Company of America, and certain of its affiliates, managed funds, and accounts purchasing Notes thereunder, was filed as Exhibit 4.3 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

4.8	Amendment No. 2, dated as of November 19, 2004, among TBC Corporation, TBC Private Brands, Inc., and the Noteholders party thereto, to Note Purchase Agreement, dated as of April 1, 2003 and amended by Amendment No. 1, dated as of November 29, 2003, was filed as Exhibit 4.4 to the TBC Corporation Current Report on Form 8-K dated November 19, 2004	*


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4.9	Form of Deed of Trust, Assignment of Leases and Security Agreement, dated March 31, 2003, executed by TBC Corporation in favor of JP Morgan Chase Bank, as Collateral Agent and beneficiary, was filed as Exhibit 4.4 to the TBC Corporation Current Report on Form 8-K dated April 1, 2003	*

4.10	Amendment No. 1, dated November 29, 2003, to Deed of Trust, Assignment of Leases and Security Agreement, dated as of March 31, 2003, executed by TBC Corporation in favor of JP Morgan Chase Bank, as Collateral Agent and Beneficiary, was filed as Exhibit 4.4 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

4.11	Guarantee and Collateral Agreement, dated as of March 31, 2003, executed by TBC Corporation and the subsidiaries of TBC Corporation in favor of JPMorgan Chase Bank, as Collateral Agent, was filed as Exhibit 4.5 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

4.12	First Amendment, dated November 29, 2003, to Guarantee and Collateral Agreement, dated as of March 31, 2003, executed by TBC Corporation and the subsidiaries of TBC Corporation in favor of JPMorgan Chase Bank, as Collateral Agent, was filed as Exhibit 4.6 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

4.13	Assumption Agreement, dated as of November 19, 2004, between TBC Corporation (formerly known as TBC Parent Holding Corp.) and JPMorgan Chase Bank, as Collateral Agent, was filed as Exhibit 4.2 to the TBC Corporation Current Report on Form 8-K dated November 19, 2004	*

4.14	Intercreditor Agreement, dated as of March 31, 2003, among various secured lenders to TBC Corporation, was filed as Exhibit 4.7 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

4.15	First Amendment, dated as of November 29, 2003, to Intercreditor Agreement, dated March 31, 2003, among various secured lenders to TBC Corporation, was filed as Exhibit 4.8 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

4.16	Other long-term debt instruments	#

(10)	MATERIAL CONTRACTS:

	Management Contracts and Compensatory Plans or Arrangements

10.1	Form of Trust Agreement (between the Company and certain executive officers - 1/1/98 version) was filed as Exhibit 10.1 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2003	*

10.2	TBC Corporation 2000 Stock Option Plan was filed as Exhibit 4.3 to the TBC Corporation Registration Statement on Form S-8 (Reg. No. 333-48802) filed on


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	October 27, 2000	*

10.3	TBC Corporation 1989 Stock Incentive Plan, as amended and restated August 9, 2002, was filed as Exhibit 10.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2002	*

10.4	TBC Corporation 2004 Incentive Plan was filed as Exhibit 10.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2004	*

10.5	Form of Restricted Share Grants to Executive Officers under the TBC Corporation 1989 Stock Incentive Plan was filed as Exhibit 10.2 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2004	*

10.6	Form of Incentive Stock Options Granted to Executive Officers under the TBC Corporation 1989 Stock Incentive Plan was filed as Exhibit 10.3 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2004	*

10.7	Form of Nonqualified Stock Options Granted to Executive Officers under the TBC Corporation 1989 Stock Incentive Plan was filed as Exhibit 10.4 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2004	*

10.8	Form of Incentive Stock Options, Including Reload Feature, Granted to Executive Officers under the TBC Corporation 2000 Stock Option Plan was filed as Exhibit 10.5 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2004	*

10.9	Form of Nonqualified Stock Options, Including Reload Feature, Granted to Executive Officers under the TBC Corporation 2000 Stock Option Plan was filed as Exhibit 10.6 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2004	*

10.10	Form of Stock Options, Including Reload Feature, Granted to Executive Officers under the TBC Corporation 2000 Stock Option Plan was filed as Exhibit 10.7 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2004	*

10.11	Form of Stock Options Granted to Executive Officers under the TBC Corporation 2004 Incentive Plan was filed as Exhibit 10.2 to the TBC Corporation Current Report on Form 8-K dated March 1, 2005	*

10.12	Executive Employment Agreement between the Company and Lawrence C. Day, amended and restated as of September 1, 2002 (without Exhibit A thereto, which is substantially identical to the form of Trust Agreement referenced in Exhibit 10.1), was filed as Exhibit 10.2 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2002	*


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10.13	Executive Employment Agreement, dated as of October 31, 2000, between the Company and Kenneth P. Dick (without Exhibit A thereto, which is substantially identical to the form of Trust Agreement referenced in Exhibit 10.1), was filed as Exhibit 10.7 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2000	*

10.14	Executive Employment Agreement, dated as of January 19, 2001, between the Company and Thomas W. Garvey (without Exhibit A thereto, which is substantially identical to the form of Trust Agreement referenced in Exhibit 10.1), was filed as Exhibit 10.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2001	*

10.15	Employment Agreement, dated as of May 8, 2000, between TBC Corporation and Orland Wolford, together with Assignment and Assumption, effective as of June 5, 2000, between TBC Corporation and Tire Kingdom, Inc., was filed as Exhibit 10.3 to the TBC Corporation Current Report on Form 8-K dated March 1, 2005	*

10.16	TBC Corporation Deferred Compensation Plan for Directors (Effective January 1, 1989 and Amended Effective July 1, 1992 and March 2, 2005) was filed as Exhibit 10.1 to the TBC Corporation Current Report on Form 8-K dated March 1, 2005	*

10.17	TBC Corporation Management Incentive Compensation Plan, effective January 1, 1997, was filed as Exhibit 10.9 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2002	*

10.18	TBC Corporation Executive Supplemental Retirement Plan, as amended through August 1, 1997, was filed as Exhibit 10.10 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2002	*

10.19	TBC Corporation Executive Retirement Plan was filed as Exhibit 10.11 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2003	*

10.20	TBC Corporation Executive Deferred Compensation Plan, effective August 1, 1999	**

10.21	TBC Corporation Long Term Incentive Plan, effective January 1, 2002, was filed as Exhibit 10.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2002	*

10.22	Resolutions establishing fees payable to directors of TBC Corporation, as adopted by TBC Corporation Board of Directors on August 9, 2002, were filed as Exhibit 10.14 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2002	*

10.23	TBC Corporation Senior Executive Professional Services Reimbursement Program was filed as Exhibit 10.1 to the TBC Quarterly Report on Form 10-Q for the quarter ended June 30, 2003	*

Other Material Contracts


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10.24	Transition Services Agreement, dated November 29, 2003, by and between TBC Corporation and Sears, Roebuck & Co., was filed as Exhibit 10.1 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

10.25	Purchase Agreement and Escrow Instructions, dated October 23, 2003, between TBC Corporation and Realty Income Corporation or its assignee (including Crest Net Lease, Inc. and Realty Income Texas Properties, L.P.), including as Exhibit B thereto the form of Land and Building Lease Agreement to be executed by NTW Incorporated, together with a schedule setting forth certain information with respect to the leases so executed by NTW Incorporated, was filed as Exhibit 10.2 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

10.26	Joinder Agreement, executed effective as of November 21, 2003, by TBC Corporation in favor of Realty Income Corporation, Crest Net Lease, Inc., Realty Income Texas Properties, L.P., and their successors and assigns, was filed as Exhibit 10.3 to the TBC Corporation Current Report on Form 8-K dated November 29, 2003	*

10.27	Form of TBC Corporation’s standard Distributor Agreement was filed as Exhibit 10.13 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2000	*

10.28	Form of Franchise Agreement in use by Big O Tires, Inc. was filed as Exhibit 10.14 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2001	*

10.29	Agreement, dated October 1, 1977, between TBC Corporation and The Kelly-Springfield Tire Company, including letter dated June 30, 1978, was filed as Exhibit 10.6 to TBC Corporation Registration statement on Form S-1, filed on April 21, 1983 (Reg. No. 2-83116)	*

10.30	Ten-Year Commitment Agreement, dated March 21, 1994, between the Company and The Kelly-Springfield Tire Company, was filed as Exhibit 10.16 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2000	*

10.31	Extension Agreement, dated November 4, 2003, between the Company and The Goodyear Tire & Rubber Company was filed as Exhibit 10.23 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2003	*

10.32	Agreement, effective January 1, 1994, between the Company and Cooper Tire & Rubber Company, was filed as Exhibit 10.17 to the TBC Corporation Annual Report on Form 10-K for the year ended December 21, 2000	*

10.33	Amendment, effective May 17, 2000, to Agreement between the Company and Cooper Tire & Rubber Company, was filed as Exhibit 10.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2001	*


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10.34	Agreement, effective January 1, 2002, between the Company and Cooper Tire & Rubber Company, was filed as Exhibit 10.19 to the TBC Corporation Annual Report on Form 10-K for the year ended December 31, 2001		*

10.35	2004-2005 Dealer Agreement, effective as of April 1, 2004, between TBC Corporation and Michelin Americas Small Tires, a division of Michelin North America, Inc., was filed as Exhibit 10.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2004		*

(18)	LETTER RE CHANGE IN ACCOUNTING PRINCIPLES:

18.1	Letter, dated July 22, 2004, from PricewaterhouseCoopers LLP was filed as Exhibit 18.1 to the TBC Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 2004		*

(21)	SUBSIDIARIES OF THE COMPANY:

21.1	List of the names and jurisdictions of incorporation of the subsidiaries of the Company		**

(23)	CONSENTS OF EXPERTS AND COUNSEL:

23.1	Consent of PricewaterhouseCoopers LLP to the incorporation by reference of their reports dated April 27, 2005 into Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 for the Company’s 1989 Stock Incentive Plan (Reg. No. 33-43166) and into the Registration Statement on Form S-8 for the Company’s 2000 Stock Option Plan (Reg. No. 333-48802).		48

(24)	POWER OF ATTORNEY:

24.1	Power of attorney of each person who signed this Annual Report on Form 10-K on behalf of another pursuant to a power of attorney		**

(31)	RULE 13a - 14(a)/15(d)-14(a) CERTIFICATIONS:

31.1	Rule 13a-14(a) Certification of Chief Executive Officer of TBC Corporation in accordance with Section 302 of the Sarbanes-Oxley Act of 2002		49

31.2	Rule 13a-14(a) Certification of Chief Financial Officer of TBC Corporation in accordance with Section 302 of the Sarbanes-Oxley Act of 2002		51

(32)	SECTION 1350 CERTIFICATIONS:

*		Indicates that the Exhibit is incorporated by reference into this Annual Report on Form 10-K from a previous filing with the Commission.

**		Indicates that the Exhibit was included in the Company’s Annual Report on Form 10-K filed on April 1, 2005.

#		With respect to any other instrument defining the rights of holders of long-term debt, the amount of securities authorized under any such instrument does not exceed 10% of the total assets of TBC Corporation and its subsidiaries on a consolidated basis. A copy of any such instrument will be furnished to the Commission upon request.


	TBC CORPORATION
April 28, 2005	By:	/s/ LAWRENCE C. DAY
		Lawrence C. Day
		President and Chief Executive Officer