##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-Q

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended August 1,
    2004                                           
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number 001-13927

CSK Auto Corporation

(Exact name of registrant as specified in its
charter)


|                                                                                                     |  |                                         
|---------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                             |  | 86-0765798                              
|(State or other jurisdiction of
    Incorporation or organization)                                   |  | (I.R.S. Employer
    Identification No.)
|                                                                                                    
|645 E. Missouri Ave.
    Suite 400,
    Phoenix, Arizona(Address of principal executive
    offices) |  | 85012(Zip Code)                         

(602) 265-9200

(Registrants telephone number, including
area code)


N/A

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


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

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

As of
September 7, 2004, CSK Auto Corporation had
45,278,966 shares of common stock outstanding.



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TABLE OF CONTENTS

|                                   |  |                                                                                           |                                                    |      |    |   | 
|---------------------------------- |  | ----------------------------------------------------------------------------------------- | -------------------------------------------------- | ---- | -- | - | 
|                                   |  |                                                                                           |                                                    | Page
|                                   |  |                                                                                           |                                                    |     
|PART I 
    Financial Information
|Item 1.                            |  | Financial Statements
    (unaudited)                                                      |                                                    |      |    |  
|                                   |  |                                                                                           | Consolidated Balance
    Sheets                    |      |    | 2 | 
|                                   |  |                                                                                           | Consolidated Statements of
    Operations          |      |    | 3 | 
|                                   |  |                                                                                           | Consolidated Statement of
    Stockholders Equity |      |    | 4 | 
|                                   |  |                                                                                           | Consolidated Statements of
    Cash Flows          |      |    | 5 | 
|                                   |  |                                                                                           | Notes to Consolidated
    Financial Statements     |      |    | 6 | 
|Item 2.                            |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |                                                    |      | 12 |  
|Item 3.                            |  | Quantitative and Qualitative
    Disclosures About Market Risk                            |                                                    |      | 19 |  
|Item 4.                            |  | Controls and Procedures                                                                   |                                                    |      | 19 |  
|                                  
|PART II 
    Other Information   
|Item 1.                            |  | Legal Proceedings                                                                         |                                                    |      | 20 |  
|Item 2.                            |  | Changes in Securities, Use
    of Proceeds and Issuer Purchases of Equity Securities      |                                                    |      | 20 |  
|Item 3.                            |  | Defaults Upon Senior
    Securities                                                       |                                                    |      | 21 |  
|Item 4.                            |  | Submission of Matters to a
    Vote of Security Holders                                   |                                                    |      | 21 |  
|Item 5.                            |  | Other Information                                                                         |                                                    |      | 21 |  
|Item 6.                            |  | Exhibits and Reports on
    Form 8-K                                                      |                                                    |      | 21 |  
|Signature                          |  |                                                                                           | 24                                                 |     
|EX-10.2                           
|EX-31.1                           
|EX-31.2                           
|EX-32.0                           



1



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##### Table of Contents






PART I

FINANCIAL INFORMATION





|        |                     
|------- | --------------------
|Item 1. | Financial Statements

CSK AUTO CORPORATION AND
SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |          |           | 
|------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | --------- | - | ------- | -------- | --------- | 
|                                                                    |                                                                                                                                                                                       | August 1,                                  |         | February 1,
|                                                                    |                                                                                                                                                                                       | 2004                                       |         | 2004       
|                                                                    |                                                                                                                                                                                       |                                            |         |            
|                                                                    |                                                                                                                                                                                       |                                           
|                                                                    |                                                                                                                                                                                       | (In thousands, except share data)         
|ASSETS                                                             
|Cash and cash equivalents                                           |                                                                                                                                                                                       | $                                          | 44,615  |             |           | $ | 37,221  |         
|Receivables, net of allowances of $773 and
    $1,577, respectively |                                                                                                                                                                                       |                                            | 133,551 |             |           |   | 136,523 |         
|Inventories                                                         |                                                                                                                                                                                       |                                            | 695,423 |             |           |   | 666,263 |         
|Deferred income taxes                                               |                                                                                                                                                                                       |                                            |        |             |           |   | 787     |         
|Prepaid expenses and other current assets                           |                                                                                                                                                                                       |                                            | 19,908  |             |           |   | 21,123  |         
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                       | Total current assets                       |         |             | 893,497   |   |         |          | 861,917   | 
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Property and equipment, net                                         |                                                                                                                                                                                       |                                            | 123,499 |             |           |   | 124,813 |         
|Leasehold interests, net                                            |                                                                                                                                                                                       |                                            | 11,371  |             |           |   | 12,278  |         
|Goodwill                                                            |                                                                                                                                                                                       |                                            | 127,069 |             |           |   | 127,069 |         
|Other assets, net                                                   |                                                                                                                                                                                       |                                            | 32,249  |             |           |   | 27,388  |         
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                       | Total assets                               |         | $           | 1,187,685 |   |         | $        | 1,153,465 | 
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                   
|LIABILITIES AND STOCKHOLDERS
    EQUITY                           
|Accounts payable                                                    |                                                                                                                                                                                       | $                                          | 206,022 |             |           | $ | 177,150 |         
|Accrued payroll and related expenses                                |                                                                                                                                                                                       |                                            | 43,824  |             |           |   | 47,498  |         
|Accrued expenses and other current liabilities                      |                                                                                                                                                                                       |                                            | 48,403  |             |           |   | 49,617  |         
|Deferred income taxes                                               |                                                                                                                                                                                       |                                            | 13,230  |             |           |   |        |         
|Current maturities of amounts due under senior
    credit facility  |                                                                                                                                                                                       |                                            | 2,550   |             |           |   | 2,550   |         
|Current maturities of capital lease obligations                     |                                                                                                                                                                                       |                                            | 6,910   |             |           |   | 10,240  |         
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                       | Total current liabilities                  |         |             | 320,939   |   |         |          | 287,055   | 
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Long term debt                                                      |                                                                                                                                                                                       |                                            | 482,590 |             |           |   | 492,463 |         
|Obligations under capital leases                                    |                                                                                                                                                                                       |                                            | 9,630   |             |           |   | 15,017  |         
|Deferred income taxes                                               |                                                                                                                                                                                       |                                            | 14,471  |             |           |   | 13,121  |         
|Other liabilities                                                   |                                                                                                                                                                                       |                                            | 20,697  |             |           |   | 14,251  |         
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                       | Total non-current liabilities              |         |             | 527,388   |   |         |          | 534,852   | 
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Commitments and contingencies                                       |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Stockholders equity:                                               |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                    | Common stock, $0.01 par value,
    58,000,000 shares authorized, 45,278,186 and
    46,497,936 shares issued and outstanding at August 1,
    2004 and February 1, 2004, respectively |                                            |         | 453         |           |   |         | 465      |          
|                                                                    | Additional paid-in capital                                                                                                                                                            |                                            |         | 447,569     |           |   |         | 466,576  |          
|                                                                    | Stockholder receivable                                                                                                                                                                |                                            |         | (65         | )         |   |         | (73      | )        
|                                                                    | Accumulated deficit                                                                                                                                                                   |                                            |         | (108,599    | )         |   |         | (135,410 | )        
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                       | Total stockholders equity                 |         |             | 339,358   |   |         |          | 331,558   | 
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                       | Total liabilities and stockholders equity |         | $           | 1,187,685 |   |         | $        | 1,153,465 | 
|                                                                    |                                                                                                                                                                                       |                                            |         |             |           |   |         |         

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

2



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES



CONSOLIDATED STATEMENTS OF
OPERATIONS


(Unaudited)


|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |         | 
|------------------------------------------ | ---------------------------- | ------------------------------------- | ------- | ---------------------- |  | --------- | ------- | --------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                           |                              |                                       |         |                       
|                                           |                              | Thirteen Weeks Ended                  |         | Twenty-six Weeks Ended
|                                           |                              |                                       |         |                       
|                                           |                              | August 1,                             |         | August 3,              |  | August 1, |         | August 3,
|                                           |                              | 2004                                  |         | 2003                   |  | 2004      |         | 2003     
|                                           |                              |                                       |         |                        |  |           |         |          
|                                           |                              |                                      
|                                           |                              | (In thousands, except per share data)
|Net sales                                  |                              | $                                     | 409,057 |                        |  | $         | 418,514 |           |  | $ | 806,111 |         |  | $ | 795,963 |        
|Cost of sales                              |                              |                                       | 217,740 |                        |  |           | 224,812 |           |  |   | 426,198 |         |  |   | 427,237 |        
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Gross profit                               |                              |                                       | 191,317 |                        |  |           | 193,702 |           |  |   | 379,913 |         |  |   | 368,726 |        
|Other costs and expenses:                  |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|                                           | Operating and administrative |                                       |         | 160,437                |  |           |         | 158,475   |  |   |         | 319,182 |  |   |         | 307,198 | 
|                                           | Store closing costs          |                                       |         | 561                    |  |           |         | 43        |  |   |         | 887     |  |   |         | 136     | 
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Operating profit                           |                              |                                       | 30,319  |                        |  |           | 35,184  |           |  |   | 59,844  |         |  |   | 61,392  |        
|Interest expense, net                      |                              |                                       | 7,592   |                        |  |           | 13,251  |           |  |   | 15,847  |         |  |   | 27,187  |        
|Loss on debt retirement                    |                              |                                       |        |                        |  |           | 4,315   |           |  |   |        |         |  |   | 4,315   |        
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Income before income taxes                 |                              |                                       | 22,727  |                        |  |           | 17,618  |           |  |   | 43,997  |         |  |   | 29,890  |        
|Income tax expense                         |                              |                                       | 8,869   |                        |  |           | 6,804   |           |  |   | 17,186  |         |  |   | 11,553  |        
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Net income                                 |                              | $                                     | 13,858  |                        |  | $         | 10,814  |           |  | $ | 26,811  |         |  | $ | 18,337  |        
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Basic earnings per share:                  |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|                                           | Net income                   |                                       | $       | 0.30                   |  |           | $       | 0.24      |  |   | $       | 0.58    |  |   | $       | 0.41    | 
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Shares used in computing per share amounts |                              |                                       | 46,184  |                        |  |           | 45,217  |           |  |   | 46,349  |         |  |   | 45,183  |        
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Diluted earnings per share:                |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|                                           | Net income                   |                                       | $       | 0.30                   |  |           | $       | 0.24      |  |   | $       | 0.57    |  |   | $       | 0.41    | 
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        
|Shares used in computing per share amounts |                              |                                       | 46,466  |                        |  |           | 45,499  |           |  |   | 46,675  |         |  |   | 45,274  |        
|                                           |                              |                                       |         |                        |  |           |         |           |  |   |         |         |  |   |         |        

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

3



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES



CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY


(Unaudited)


|                                               |  |                                   |            |            |  |             |     |             |  |         |         |        |  |   |     |   |  |   |          |   |  |   |         |  
|---------------------------------------------- |  | --------------------------------- | ---------- | ---------- |  | ----------- | --- | ----------- |  | ------- | ------- | ------ |  | - | --- | - |  | - | -------- | - |  | - | ------- | -
|                                               |  |                                   |            |            |  |             |     |             |  |        
|                                               |  | Common Stock                      |            | Additional |  |             |     |             |  |        
|                                               |  |                                   |            | Paid-in    |  | Stockholder |     | Accumulated |  | Total  
|                                               |  | Shares                            |            | Amount     |  | Capital     |     | Receivable  |  | Deficit |         | Equity
|                                               |  |                                   |            |            |  |             |     |             |  |         |         |       
|                                               |  |                                  
|                                               |  | (In thousands, except share data)
|Balances at February 1, 2004                   |  |                                   | 46,497,936 |            |  | $           | 465 |             |  | $       | 466,576 |        |  | $ | (73 | ) |  | $ | (135,410 | ) |  | $ | 331,558 |  
|Exercise of options                            |  |                                   | 52,652     |            |  |             |    |             |  |         | 531     |        |  |   |    |   |  |   |         |   |  |   | 531     |  
|Issuances of restricted stock                  |  |                                   | 2,554      |            |  |             |    |             |  |         | 45      |        |  |   |    |   |  |   |         |   |  |   | 45      |  
|Tax benefit relating to stock option exercises |  |                                   |           |            |  |             |    |             |  |         | 169     |        |  |   |    |   |  |   |         |   |  |   | 169     |  
|Repurchase and retirement of common stock      |  |                                   | (1,274,956 | )          |  |             | (12 | )           |  |         | (19,752 | )      |  |   |    |   |  |   |         |   |  |   | (19,764 | )
|Recovery of stockholder receivable             |  |                                   |           |            |  |             |    |             |  |         |        |        |  |   | 8   |   |  |   |         |   |  |   | 8       |  
|Net income                                     |  |                                   |           |            |  |             |    |             |  |         |        |        |  |   |    |   |  |   | 26,811   |   |  |   | 26,811  |  
|                                               |  |                                   |            |            |  |             |     |             |  |         |         |        |  |   |     |   |  |   |          |   |  |   |         |  
|Balances at August 1, 2004                     |  |                                   | 45,278,186 |            |  | $           | 453 |             |  | $       | 447,569 |        |  | $ | (65 | ) |  | $ | (108,599 | ) |  | $ | 339,358 |  
|                                               |  |                                   |            |            |  |             |     |             |  |         |         |        |  |   |     |   |  |   |          |   |  |   |         |  

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

4



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |          |         |         |  
|---------------------------------------------- | ------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------------------- | --------- | ------- | ------- | ------ | -------- | ------- | ------- | -
|                                               |                                                                                       |                                                                
|                                               |                                                                                       | Twenty-six Weeks Ended                                         
|                                               |                                                                                       |                                                                
|                                               |                                                                                       | August 1,                                                       |                                                                     | August 3,
|                                               |                                                                                       | 2004                                                            |                                                                     | 2003     
|                                               |                                                                                       |                                                                 |                                                                     |          
|                                               |                                                                                       |                                                                
|                                               |                                                                                       | (In thousands)                                                 
|Cash flows from operating activities:          |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|                                               | Net income                                                                            |                                                                 | $                                                                   | 26,811    |         |         | $      | 18,337   |        
|                                               | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                 |                                                                     |           |         |         |        |          |        
|                                               |                                                                                       | Depreciation and amortization of property and
    equipment     |                                                                     |           | 13,781  |         |        |          | 15,437  |        
|                                               |                                                                                       | Amortization of deferred financing costs                        |                                                                     |           | 965     |         |        |          | 2,367   |        
|                                               |                                                                                       | Amortization of long term debt fair market value
    adjustment |                                                                     |           | (53     | )       |        |          | (307    | )      
|                                               |                                                                                       | Amortization of other items                                     |                                                                     |           | 2,133   |         |        |          | 1,900   |        
|                                               |                                                                                       | Accretion of debt discount                                      |                                                                     |           | 28      |         |        |          | 461     |        
|                                               |                                                                                       | Losses on disposal of property, equipment and
    other assets  |                                                                     |           | 606     |         |        |          | 560     |        
|                                               |                                                                                       | Tax benefit relating to stock option exercises                  |                                                                     |           | 169     |         |        |          | 302     |        
|                                               |                                                                                       | Write off of debt issuance costs                                |                                                                     |           |        |         |        |          | 2,268   |        
|                                               |                                                                                       | Premium paid on early retirement of debt                        |                                                                     |           |        |         |        |          | (350    | )      
|                                               |                                                                                       | Proceeds from interest rate swap termination                    |                                                                     |           |        |         |        |          | 6,031   |        
|                                               |                                                                                       | Deferred income taxes                                           |                                                                     |           | 15,367  |         |        |          | 10,623  |        
|                                               |                                                                                       | Change in operating assets and liabilities:                     |                                                                     |           |         |         |        |          |         |        
|                                               |                                                                                       |                                                                 | Receivables                                                         |           |         | 4,096   |        |          |         | 6,625   |  
|                                               |                                                                                       |                                                                 | Inventories                                                         |           |         | (34,605 | )      |          |         | (33,943 | )
|                                               |                                                                                       |                                                                 | Prepaid expenses and other current assets                           |           |         | 1,215   |        |          |         | (2,978  | )
|                                               |                                                                                       |                                                                 | Accounts payable                                                    |           |         | 26,398  |        |          |         | 18,687  |  
|                                               |                                                                                       |                                                                 | Accrued payroll, accrued expenses and other
    current liabilities |           |         | (4,062  | )      |          |         | (1,204  | )
|                                               |                                                                                       |                                                                 | Other operating activities                                          |           |         | (448    | )      |          |         | 676     |  
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|                                               |                                                                                       | Net cash provided by operating activities                       |                                                                     |           | 52,401  |         |        |          | 45,492  |        
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|Cash flows from investing activities:          |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|                                               | Capital expenditures                                                                  |                                                                 |                                                                     | (12,831   | )       |         |        | (4,802   | )      
|                                               | Other investing activities                                                            |                                                                 |                                                                     | (1,653    | )       |         |        | (1,666   | )      
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|                                               |                                                                                       | Net cash used in investing activities                           |                                                                     |           | (14,484 | )       |        |          | (6,468  | )      
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|Cash flows from financing activities:          |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|                                               | Borrowings under senior credit facility                                               |                                                                 |                                                                     | 20,600    |         |         |        | 281,000  |        
|                                               | Payments under senior credit facility                                                 |                                                                 |                                                                     | (21,875   | )       |         |        | (283,000 | )      
|                                               | Retirement of balance of 11% senior
    subordinated notes                            |                                                                 |                                                                     |          |         |         |        | (9,547   | )      
|                                               | Payment of debt issuance costs                                                        |                                                                 |                                                                     | (892      | )       |         |        | (4,047   | )      
|                                               | Payments on capital lease obligations                                                 |                                                                 |                                                                     | (8,975    | )       |         |        | (5,814   | )      
|                                               | Proceeds from repayment of stockholder receivable                                     |                                                                 |                                                                     | 8         |         |         |        | 168      |        
|                                               | Proceeds from exercise of stock options                                               |                                                                 |                                                                     | 531       |         |         |        | 2,867    |        
|                                               | Repurchase of common stock                                                            |                                                                 |                                                                     | (19,764   | )       |         |        |         |        
|                                               | Other financing activities                                                            |                                                                 |                                                                     | (156      | )       |         |        | (146     | )      
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|                                               |                                                                                       | Net cash used in financing activities                           |                                                                     |           | (30,523 | )       |        |          | (18,519 | )      
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|                                               |                                                                                       | Net increase in cash and cash equivalents                       |                                                                     |           | 7,394   |         |        |          | 20,505  |        
|Cash and cash equivalents, beginning of period |                                                                                       |                                                                 | 37,221                                                              |           |         |         | 15,519 |         
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         
|Cash and cash equivalents, end of period       |                                                                                       | $                                                               | 44,615                                                              |           |         | $       | 36,024 |         
|                                               |                                                                                       |                                                                 |                                                                     |           |         |         |        |         

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

5



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


Thirteen and Twenty-six Weeks Ended
August 1, 2004


CSK Auto Corporation is a holding company. At
August 1, 2004, CSK Auto Corporation had no business
activity other than its investment in CSK Auto, Inc.
(Auto), a wholly owned subsidiary. On a consolidated
basis, CSK Auto Corporation and its subsidiaries are referred to
herein as the Company, we,
us, or our.

Auto is a specialty retailer of automotive
aftermarket parts and accessories. At August 1, 2004, we
operated 1,123 stores in 19 states as a fully integrated
company and single business segment under three brand names:
Checker Auto Parts, founded in 1969 and operating in the
Southwestern, Rocky Mountain and Northern Plains states and
Hawaii; Schucks Auto Supply, founded in 1917 and operating
in the Pacific Northwest and Alaska; and Kragen Auto Parts,
founded in 1947 and operating primarily in California.

Note 1  Basis of
Presentation

We prepared the unaudited consolidated financial
statements included herein in accordance with generally accepted
accounting principles for interim financial information and with
instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, the financial statements do
not include all information and footnotes required by generally
accepted accounting principles for fiscal year end financial
statements. In the opinion of management, the consolidated
financial statements reflect all adjustments, which are of a
normal recurring nature, necessary for a fair presentation of
our financial position and the results of our operations. The
accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and
related notes thereto for the fiscal year ended February 1,
2004 (fiscal 2003), as included in our Annual Report on
Form 10-K filed with the SEC on April 15, 2004.

Certain amounts in the prior years
financial statements have been reclassified to conform to the
current year presentation. This has no impact on our previously
reported financial position, results of operations or cash flows.

Note 2  Recent Accounting
Pronouncements

In January 2003, the Financial Accounting
Standards Board (FASB) issued Financial
Interpretation No. (FIN) 46, Consolidation of
Variable Interest Entities, which addressed accounting for
special-purpose and variable interest entities. In December
2003, the FASB issued FIN 46R, Consolidation of
Variable Interest Entities, which superseded FIN 46.
The effective date of FIN 46R is the end of the first
reporting period that ends after March 15, 2004, unless the
entity is considered to be a special-purpose entity. Companies
that have adopted FIN 46 prior to the effective date of
FIN 46R will either continue to apply FIN 46 until the
effective date of FIN 46R or apply the provision of
FIN 46R at an earlier date. We have adopted the provisions
of FIN 46R with no impact on our financial statements.

Note 3  Inventories

Inventories are valued at the lower of cost or
market, our costs being determined utilizing the Last-in
First-out (LIFO) method. Under the LIFO method,
costs of sales reflect the costs of the most recently purchased
inventories. Inventory carrying balances on the other hand,
reflect the costs relating to prices paid in prior years under
the LIFO method. Our costs of acquiring inventories through
normal purchasing activities have been moderately decreasing, as
our increased size, financial performance and cash flows have
enabled us to take advantage of volume discounts and lower
product acquisition costs. Accordingly, it costs us less money
to replace inventory today than the LIFO balances carried for
similar inventory in our financial statements.

The replacement cost of inventories, including
the capitalization of certain purchase related costs, was
approximately $580.2 million and $552.0 million at
August 1, 2004 and February 1, 2004, respectively, as
compared to financial statement carrying values of
$695.4 million and $666.3 million. While financial
statement carrying balances are higher than replacement costs,
such carrying balances are not higher than the

6



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

net realizable value amount (NRV) we
expect to earn by selling the inventory through our retail
stores in the normal course of business. Under generally
accepted accounting principles, NRV reflects the expected
selling price of the inventories, less selling costs and a
normal profit margin to compute our NRV floor.

We evaluate the difference between carrying
balances and NRV of our inventories at each balance sheet
reporting date. At August 1, 2004, we estimated that the
NRV of our inventories exceeded carrying balances by
approximately $1.0 million. Though not anticipated at this
time, if our evaluation in a future period indicated that
carrying balances exceeded the NRV of the inventories, the
carrying balances of the inventory would be reduced to NRV, with
a corresponding charge to operations.

Note 4  Store Closing
Costs

On an on-going basis, store locations are
reviewed and analyzed based on several factors including market
saturation, store profitability, and store size and format. In
addition, we analyze sales trends and geographical and
competitive factors to determine the viability and future
profitability of our store locations. If a store location does
not meet our required performance, it is considered for closure.
As a result of past acquisitions, we have closed numerous
locations due to store overlap with previously existing store
locations.

We account for the costs of closed stores in
accordance with Statement of Financial Accounting Standard
(SFAS) No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. Under
SFAS No. 146, costs of operating lease commitments for
a closed store are recognized as expense at fair value at the
time we cease operating the store. Fair value of the liability
is determined as the present value of future cash flows
discounted using a credit-adjusted risk free rate. Accretion
expense represents interest on our recorded closed store
liabilities at the same credit adjusted risk free rate used to
discount the cash flows. In addition, SFAS No. 146
also requires that the amount of remaining lease payments owed
be reduced by estimated sublease income (but not to an amount
less than zero). Sublease income in excess of costs associated
with the lease is recognized as it is earned and included as a
reduction to operating and administrative expense in the
accompanying financial statements.

The allowance for store closing costs is included
in accrued expenses and other long term liabilities in the
accompanying financial statements and primarily represents the
discounted value of the following future net cash outflows
related to closed stores: (1) future rents to be paid over
the remaining terms of the lease agreements for the stores (net
of estimated probable sublease income); (2) lease
commissions associated with the anticipated store subleases; and
(3) contractual expenses associated with the closed store
vacancy periods. Certain operating expenses, such as utilities
and repairs, are expensed as incurred and no provision is made
for employee termination costs.

As of August 1, 2004, we had a total of 148
store locations included in the allowance for store closing
costs. Of this total, 13 locations were vacant and 135 locations
were subleased. In addition to these stores, we had 55 service
centers of which 3 were vacant and 52 were subleased. Future
rental payments will be made through the expiration of the
non-cancelable leases, the longest of which runs through January
2018.

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Activity in the allowance for store closings and
the related payments for the first half of fiscal 2004 are as
follows ($ in thousands):

|                             |                                        |                          |        |        |        |  
|---------------------------- | -------------------------------------- | ------------------------ | ------ | ------ | ------ | -
|Balance, beginning of year   |                                        | $                        | 12,148 |       
|Store closing costs:         |                                        |                          |        |       
|                             | Provision for store closing costs      |                          |        | 106    |       
|                             | Revisions in estimates                 |                          |        | (12    | )     
|                             | Accretion                              |                          |        | 287    |       
|                             | Operating expenses and other           |                          |        | 506    |       
|                             |                                        |                          |        |       
|                             |                                        | Store closing costs, net |        |        | 887    |  
|Payments:                    |                                        |                          |        |       
|                             | Rent expense, net of sublease income   |                          |        | (1,553 | )     
|                             | Occupancy and other expenses           |                          |        | (481   | )     
|                             | Lease buyouts and sublease commissions |                          |        | (2,103 | )     
|                             |                                        |                          |        |       
|                             |                                        | Total payments           |        |        | (4,137 | )
|                             |                                        |                          |        |       
|Balance as of August 1, 2004 |                                        | $                        | 8,898  |       
|                             |                                        |                          |        |       

We expect cash outflows for vacant stores (which
includes certain operating expenses that are expensed as
incurred), sublease losses and lease buyouts to be approximately
$7.0 million during fiscal 2004. We expect the remainder of
cash outflows relating to these stores to occur primarily during
fiscal 2005 through fiscal 2007.

Note 5  Debt

Outstanding debt, excluding capital leases, is
comprised of the following ($ in thousands):

|                                                          |                                                             |           |         |             |   |   |         |         |  
|--------------------------------------------------------- | ----------------------------------------------------------- | --------- | ------- | ----------- | - | - | ------- | ------- | -
|                                                          |                                                             | August 1, |         | February 1,
|                                                          |                                                             | 2004      |         | 2004       
|                                                          |                                                             |           |         |            
|Senior credit facility  term loan                        |                                                             | $         | 253,725 |             |   | $ | 255,000 |        
|12% senior notes                                          |                                                             |           | 14,910  |             |   |   | 14,910  |        
|                                                          | Unamortized original issue discount on
    12% senior notes |           |         | (121        | ) |   |         | (149    | )
|7% senior subordinated notes                              |                                                             |           | 225,000 |             |   |   | 225,000 |        
|                                                          |                                                             |           |         |             |   |   |         |        
|                                                          | Notes and loans, including current maturities               |           |         | 493,514     |   |   |         | 494,761 |  
|SFAS No. 133 fair market value
    adjustment:            |                                                             |           |         |             |   |   |         |        
|                                                          | $100.0 million of 7% senior
    subordinated notes          |           |         | (8,573      | ) |   |         |        |  
|                                                          | 12% senior notes                                            |           |         | 199         |   |   |         | 252     |  
|                                                          |                                                             |           |         |             |   |   |         |        
|Total debt                                                |                                                             |           | 485,140 |             |   |   | 495,013 |        
|Less: current maturities under senior credit
    facility |                                                             |           | 2,550   |             |   |   | 2,550   |        
|                                                          |                                                             |           |         |             |   |   |         |        
|                                                          | Total long term debt                                        |           | $       | 482,590     |   |   | $       | 492,463 |  
|                                                          |                                                             |           |         |             |   |   |         |        

On August 10, 2004, we amended our senior
credit facility to provide for an immediate reduction of the
interest rate on the term loan of 25 basis points and an
opportunity for an additional 25 basis points reduction of
the interest rate on such term loan upon the achievement of
certain conditions, as more particularly set forth in the
amendment. The amendment also provides for a one-year extension
of the term loan maturity to August 2010.

On April 5, 2004, we entered into an
interest rate swap agreement to effectively convert
$100.0 million of our 7% senior subordinated notes due
2014 to a floating rate, set semi-annually in arrears, equal to
the 6 month

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

LIBOR + 283 basis points. The agreement is
for the term of the notes. The hedge is accounted for as a
fair value hedge; accordingly, the fair value of the
derivative and changes in the fair value of the underlying debt
will be reported on our consolidated balance sheet and
recognized in the results of operations. Based upon our
assessment of effectiveness of the hedge, changes in the fair
value of this derivative and the underlying debt will not have a
significant effect on our consolidated results of operations. At
August 1, 2004, the fair value of the interest rate swap
approximated $8.6 million, which is included as an increase
in other long-term liabilities with an identical amount
reflected as a basis adjustment to the 7% senior
subordinated notes on the accompanying Consolidated Balance
Sheet.

Note 6  Earnings Per
Share

Calculation of the numerator and denominator used
in computing per share amounts is summarized as follows (in
thousands):

|                                                  |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |        |        | 
|------------------------------------------------- | ------------------------------------------- | --------------------------------------------- | - | ---------------------- | ------ | -------------- | - | -------------- | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                  |                                             |                                               |   |                       
|                                                  |                                             | Thirteen Weeks Ended                          |   | Twenty-six Weeks Ended
|                                                  |                                             |                                               |   |                       
|                                                  |                                             | August 1, 2004                                |   | August 3, 2003         |        | August 1, 2004 |   | August 3, 2003
|                                                  |                                             |                                               |   |                        |        |                |   |               
|Numerator for basic and diluted EPS:              |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|                                                  | Net income                                  |                                               | $ | 13,858                 |        |                | $ | 10,814         |        |  | $ | 26,811 |        |  | $ | 18,337 |       
|                                                  |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|Denominator for basic EPS:                        |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|                                                  | Weighted average shares outstanding (basic) |                                               |   | 46,184                 |        |                |   | 45,217         |        |  |   | 46,349 |        |  |   | 45,183 |       
|                                                  |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|Denominator for diluted EPS:                      |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|                                                  | Weighted average shares outstanding (basic) |                                               |   | 46,184                 |        |                |   | 45,217         |        |  |   | 46,349 |        |  |   | 45,183 |       
|                                                  | Effect of dilutive stock options            |                                               |   | 282                    |        |                |   | 282            |        |  |   | 326    |        |  |   | 91     |       
|                                                  |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|                                                  |                                             | Weighted average shares outstanding (diluted) |   |                        | 46,466 |                |   |                | 45,499 |  |   |        | 46,675 |  |   |        | 45,274 | 
|                                                  |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|Shares excluded as a result of
    anti-dilution: |                                             |                                               |   |                        |        |                |   |                |        |  |   |        |        |  |   |       
|                                                  | Stock options                               |                                               |   | 473                    |        |                |   | 652            |        |  |   | 375    |        |  |   | 2,056  |       

Note 7  Stock Based
Compensation

In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure.
SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 requires
expanded and more prominent disclosure in both annual and
interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method
on reported results.

We have stock-based employee compensation plans,
which are described more fully in Note 11 of the Notes to
Consolidated Financial Statements in our 2003 Annual Report on
Form 10-K filed with the SEC on April 15, 2004. We
continue to apply the recognition and measurement provisions of
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees and related
interpretations in accounting for those plans. No material
stock-based employee compensation expense is reflected in net
income for the thirteen or twenty-six weeks ended August 1,
2004 or August 3, 2003 as the intrinsic value of all
options granted under those plans was zero. The following table
illustrates the effect on net income and

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

earnings per share if we had applied the fair
value recognition provisions of SFAS No. 123
Accounting for Stock-Based Compensation ($ in
thousands, except per share amounts):

|                                                                                                                                                   |             |                |        |                  |  |           |        |           |  |   |        |      |  |   |        |      | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | -------------- | ------ | ---------------- |  | --------- | ------ | --------- |  | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                                   |             |                |        |                 
|                                                                                                                                                   |             | Thirteen Weeks |        | Twenty-six Weeks
|                                                                                                                                                   |             | Ended          |        | Ended           
|                                                                                                                                                   |             |                |        |                 
|                                                                                                                                                   |             | August 1,      |        | August 3,        |  | August 1, |        | August 3,
|                                                                                                                                                   |             | 2004           |        | 2003             |  | 2004      |        | 2003     
|                                                                                                                                                   |             |                |        |                  |  |           |        |          
|Net income  as reported                                                                                                                           |             | $              | 13,858 |                  |  | $         | 10,814 |           |  | $ | 26,811 |      |  | $ | 18,337 |     
|Less: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related income taxes |             |                | (164   | )                |  |           | (157   | )         |  |   | (335   | )    |  |   | (402   | )   
|                                                                                                                                                   |             |                |        |                  |  |           |        |           |  |   |        |      |  |   |        |     
|Net income  pro forma                                                                                                                             |             | $              | 13,694 |                  |  | $         | 10,657 |           |  | $ | 26,476 |      |  | $ | 17,935 |     
|                                                                                                                                                   |             |                |        |                  |  |           |        |           |  |   |        |      |  |   |        |     
|Earnings per share  basic:                                                                                                                        |             |                |        |                  |  |           |        |           |  |   |        |      |  |   |        |     
|                                                                                                                                                   | As reported |                | $      | 0.30             |  |           | $      | 0.24      |  |   | $      | 0.58 |  |   | $      | 0.41 | 
|                                                                                                                                                   | Pro forma   |                | $      | 0.30             |  |           | $      | 0.24      |  |   | $      | 0.57 |  |   | $      | 0.40 | 
|Earnings per share  diluted:                                                                                                                      |             |                |        |                  |  |           |        |           |  |   |        |      |  |   |        |     
|                                                                                                                                                   | As reported |                | $      | 0.30             |  |           | $      | 0.24      |  |   | $      | 0.57 |  |   | $      | 0.41 | 
|                                                                                                                                                   | Pro forma   |                | $      | 0.30             |  |           | $      | 0.23      |  |   | $      | 0.57 |  |   | $      | 0.40 | 

During the second quarter of fiscal 2004, our
stockholders approved a new Stock and Incentive Plan which
allows for the issuance of a variety of equity-based awards,
including stock options and restricted stock.

Note 8  Stock Repurchase
Program

On June 8, 2004, our Board of Directors
approved a share repurchase program that authorized our purchase
of shares of our common stock with an aggregate purchase price
not to exceed $25.0 million. The program provides that we
may buy shares in the open market or in privately negotiated
transactions and that we will base our decisions on whether to
repurchase shares and the timing of any such repurchases on
factors including the stock price, our cash and debt levels, and
general economic and market conditions. Shares of stock
repurchased under the program will be retired and returned to
the status of authorized and unissued shares. This program will
expire in December 2005. During the second quarter of fiscal
2004, we repurchased approximately 1.3 million shares of
our common stock at a cost of approximately $19.8 million
under this program.

Note 9  Legal
Matters

During the third quarter of fiscal 2003, we
received notification from the State of California Board of
Equalization (the Board) of an assessment for
approximately $1.2 million for sales tax and approximately
$0.6 million for related interest based on the Boards
audit findings for the tax periods of October 1997 through
September 2000. During this time period, we refunded the sales
tax associated with battery cores to customers who returned a
battery core to our stores. The Board believes that the sales
tax associated with the battery cores should have been remitted
to the taxing authority rather than refunded to the customers.
Based on the Boards position, we could be responsible for
the sales tax and related interest associated with this matter
for the audited periods of October 1997 through September 2000,
plus the additional unaudited time period through December 2002,
when we changed our business practices in this area to mitigate
potential future tax related liability.

We believe that we have a strong basis under
California law for disputing the payment of this assessment, and
in October 2003 we timely filed a Petition for Redetermination
with the Board. In May 2004, we received a response from the
Board indicating that the district office that conducted the
audit upheld its position and requested confirmation of our
desire to proceed with the scheduling of an appeals conference
concerning this

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

matter. We responded affirmatively to the
Boards letter in May 2004 and are presently waiting for
formal scheduling by the Board of an appeals conference before
an appeals division attorney or auditor. Our practices through
December 2002 relative to the handling of taxes on battery cores
had been consistent for over a decade, and it is our position
that our consistent treatment of battery core charges, together
with prior tax audits and tax auditors written commentary
concerning our handling of such charges, permits us to rely upon
precedent set in prior audits. Reliance on prior audits is a
position that is supportable under California law. We also have
other defenses and intend to vigorously defend our position with
regard to this matter. A liability for the potential sales tax
and related interest payments has not been recorded in our
consolidated financial statements.

We currently and from time to time are involved
in other litigation incidental to the conduct of our business,
including asbestos and similar product liability claims, slip
and fall and other general liability claims, discrimination and
employment claims, vendor disputes, and miscellaneous
environmental and real estate claims. The damages claimed in
some of this litigation are substantial. Based on internal
review, we accrue reserves using our best estimate of the
probable and reasonably estimable contingent liabilities. We do
not currently believe that any of the legal claims, individually
or in the aggregate, will result in liabilities material to our
consolidated financial position, results of operations or cash
flows.

11



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Overview

CSK Auto Corporation is the largest specialty
retailer of automotive parts and accessories in the Western
United States and one of the largest retailers of these products
in the United States based, in each case, on our number of
stores. As of August 1, 2004, through our wholly owned
subsidiary CSK Auto, Inc., we operated 1,123 stores in
19 states under one fully integrated operating format and
three brand names:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Checker Auto Parts, founded in 1969, with 419
    stores in the Southwestern, Rocky Mountain and Northern Plains
    states and Hawaii;
|
| |  | Schucks Auto Supply, founded in 1917, with 225
    stores in the Pacific Northwest and Alaska; and                                     
|
| |  | Kragen Auto Parts, founded in 1947, with 479
    stores primarily in California.                                                       

In the following discussion, we refer to the
thirteen and twenty-six week periods ended on August 1,
2004 and August 3, 2003, respectively, as the second
quarter and first half of those respective
fiscal years.

During the first half of fiscal 2004, we opened
16 stores, relocated 4 stores and closed 7 stores in addition to
the 4 stores closed upon relocation. Our goal for fiscal 2004 is
to open approximately 45 stores, consisting of approximately 35
new stores and 10 relocated stores. During fiscal 2004, we
expect to close approximately 10 stores (in addition to
approximately 10 stores closed due to relocation) for a net
increase of approximately 25 stores.

During the first half of fiscal 2004, we were
faced with many challenges. We experienced 5.2% same store sales
increases during the first quarter of fiscal 2004 and same store
sales decreases of 2.5% during the second quarter of fiscal
2004. We believe our sales during the second quarter of fiscal
2004 were negatively impacted by higher gas prices and milder
summer temperatures in many of our key markets. Despite the
sales environment, our gross profit rate increased almost
50 basis points compared to the same period last year. Our
inventory management process allowed us to effectively control
our inventory with only a slight increase compared to the same
period last year. We will continue to: (1) analyze our
operating and administrative expenses to further reduce our cost
structure; (2) review and refine our core product
categories, such as batteries, brakes, shocks, starters and
alternators, to ensure that we are meeting our customers
expectations; (3) add new product offerings as we deem
appropriate to give our customers additional reasons to shop our
stores; and (4) review our marketing programs, sales
promotions, event marketing and sports sponsorships to build
customer awareness and help increase store traffic. Our primary
objective is to remain focused on our long-term goals and
initiatives of: (1) reducing our debt while maximizing our
return on investment; (2) accelerating our store growth;
(3) continuing to strengthen our vendor partnerships to
reduce costs from the supply chain and reduce our merchandise
inventory; and (4) reducing our operating and
administrative expenses.

Automotive Information Systems, Inc.
(AIS) is a wholly owned subsidiary of CSK Auto, Inc.
that provides diagnostic vehicle repair information to
automotive technicians, automotive replacement parts
manufacturers, automotive test equipment manufacturers, and to
DIY consumers. We are continuing to examine alternatives that
will allow us to maximize the potential value of AIS without
significantly increasing our capital commitment. Possibilities
include joint ventures or a sale in a manner that would allow us
to retain certain of the attributes of AIS we deem most valuable
to our business. We do not anticipate that any potential
transaction will have a material effect on our fiscal 2004
consolidated results of operations or our financial condition.

The following discussion and analysis presents
factors that affected our consolidated results of operations for
the thirteen and twenty-six weeks ended August 1, 2004 and
our consolidated financial position at that date. The following
information should be read in conjunction with the Consolidated
Financial Statements and Notes included in this Form 10-Q
as well as our Annual Report on Form 10-K, which was filed
with the Securities and Exchange Commission on April 15,
2004.

12



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##### Table of Contents





| |                      
| | ---------------------
| | Results of Operations

The following table expresses the statements of
operations as a percentage of sales for the periods shown:

|                             |  |                      |       |                        |  |           |       |           |  |  |       |   |  |  |       |  
|---------------------------- |  | -------------------- | ----- | ---------------------- |  | --------- | ----- | --------- |  |  | ----- | - |  |  | ----- | -
|                             |  |                      |       |                       
|                             |  | Thirteen Weeks Ended |       | Twenty-six Weeks Ended
|                             |  |                      |       |                       
|                             |  | August 1,            |       | August 3,              |  | August 1, |       | August 3,
|                             |  | 2004                 |       | 2003                   |  | 2004      |       | 2003     
|                             |  |                      |       |                        |  |           |       |          
|Net sales                    |  |                      | 100.0 | %                      |  |           | 100.0 | %         |  |  | 100.0 | % |  |  | 100.0 | %
|Cost of sales                |  |                      | 53.2  |                        |  |           | 53.7  |           |  |  | 52.9  |   |  |  | 53.7  |  
|                             |  |                      |       |                        |  |           |       |           |  |  |       |   |  |  |       |  
|Gross profit                 |  |                      | 46.8  |                        |  |           | 46.3  |           |  |  | 47.1  |   |  |  | 46.3  |  
|Operating and administrative |  |                      | 39.2  |                        |  |           | 37.9  |           |  |  | 39.6  |   |  |  | 38.6  |  
|Store closing costs          |  |                      | 0.2   |                        |  |           |      |           |  |  | 0.1   |   |  |  |      |  
|                             |  |                      |       |                        |  |           |       |           |  |  |       |   |  |  |       |  
|Operating profit             |  |                      | 7.4   |                        |  |           | 8.4   |           |  |  | 7.4   |   |  |  | 7.7   |  
|Interest expense             |  |                      | 1.8   |                        |  |           | 3.2   |           |  |  | 2.0   |   |  |  | 3.4   |  
|Loss on debt retirement      |  |                      |      |                        |  |           | 1.0   |           |  |  |      |   |  |  | 0.5   |  
|                             |  |                      |       |                        |  |           |       |           |  |  |       |   |  |  |       |  
|Income before income taxes   |  |                      | 5.6   |                        |  |           | 4.2   |           |  |  | 5.4   |   |  |  | 3.8   |  
|Income tax expense           |  |                      | 2.2   |                        |  |           | 1.6   |           |  |  | 2.1   |   |  |  | 1.5   |  
|                             |  |                      |       |                        |  |           |       |           |  |  |       |   |  |  |       |  
|Net Income                   |  |                      | 3.4   | %                      |  |           | 2.6   | %         |  |  | 3.3   | % |  |  | 2.3   | %
|                             |  |                      |       |                        |  |           |       |           |  |  |       |   |  |  |       |  

Thirteen Weeks Ended August 1, 2004
Compared to Thirteen Weeks Ended August 3, 2003

Net sales for the second quarter of fiscal 2004
decreased 2.3% to $409.1 million from $418.5 million
for the second quarter of fiscal 2003. Same store sales
decreased 2.5% (negative 2.5% for retail and negative 2.7% for
commercial). We believe our sales during the second quarter of
fiscal 2004 were negatively impacted by higher gas prices and
milder summer temperatures in many of our key markets. During
the quarter we experienced weaker than anticipated demand for
products in heat-related categories (for example, air
conditioning, cooling accessories, batteries, starters,
alternators and water pumps).

Gross profit was $191.3 million, or 46.8% of
net sales, for the second quarter of fiscal 2004 as compared to
$193.7 million, or 46.3% of net sales, for the second
quarter of fiscal 2003. Gross profit dollars were lower due to
our decline in sales. Gross profit, as a percent to sales,
increased during the quarter primarily due to lower acquisition
costs on selected products, improvements in our balance of sales
through our category management systems, and reduced store
inventory shrinkage as a result of improved store procedures and
enhanced inventory control systems.

Operating and administrative expenses were
$160.4 million or 39.2% of net sales in the second quarter
of fiscal 2004, compared to $158.5 million or 37.9% of net
sales in the second quarter of fiscal 2003. The increase is
primarily attributable to higher payroll rates and
benefit-related expenses.

Interest expense for the second quarter of fiscal
2004 decreased to $7.6 million from $13.3 million in
the second quarter of fiscal 2003 primarily as a result of the
lower interest rate and corresponding reduced interest expense
associated with our January 2004 refinancing.

Income tax expense for the second quarter of
fiscal 2004 was $8.9 million, compared to $6.8 million
for the comparable period of fiscal 2003. Our effective tax rate
increased slightly to 39.0% from 38.6% primarily as a result of
the non-deductibility of certain employee benefits and a
reduction in employment based state tax credits as a percentage
of pretax income.

Net income increased to $13.9 million, or
$0.30 per diluted common share, for the second quarter of
fiscal 2004, compared to net income of $10.8 million, or
$0.24 per diluted common share, for the second quarter of
fiscal 2003.

13



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Twenty-six Weeks Ended August 1, 2004
Compared to Twenty-six Weeks Ended August 3, 2003

Net sales for the first half of fiscal 2004
increased 1.3% to $806.1 million from $796.0 million
for the first half of fiscal 2003. Same store sales increased
1.1% (1.1% for retail and 1.5% for commercial). During the first
quarter of fiscal 2004 same store sales increased 5.2% and were
strong in core product categories such as batteries, brakes,
shocks and rotating electric parts. We believe our sales during
the second quarter of fiscal 2004 were negatively impacted by
higher gas prices and milder summer temperatures in many of our
key markets. Same store sales decreased primarily due to weak
demand for products in heat-related categories.

Gross profit was $379.9 million, or 47.1% of
net sales, for the first half of fiscal 2004 as compared to
$368.7 million, or 46.3% of net sales, for the first half
of fiscal 2003. The increased gross profit margin dollars and
percent are a result of our continuing efforts to lower the
acquisition costs of our core products and our ability to source
our promotional products at more favorable terms. In addition,
we have reduced our store inventory shrinkage through improved
store procedures and enhanced inventory control systems.

Operating and administrative expenses were
$319.2 million or 39.6% of net sales in the first half of
fiscal 2004, compared to $307.2 million or 38.6% of net
sales in the first half of fiscal 2003. The increase year over
year is primarily attributable to increased store count and
higher payroll rates and benefit-related costs.

Interest expense for the first half of fiscal
2004 decreased to $15.8 million from $27.2 million in
the first half of fiscal 2003 primarily as a result of the lower
interest rate and corresponding reduced interest expense
associated with our January 2004 refinancing.

Income tax expense for the first half of fiscal
2004 was $17.2 million, compared to $11.6 million for
the comparable period of fiscal 2003. Our effective tax rate
increased slightly to 39.1% from 38.7% primarily as a result of
the non-deductibility of certain employee benefits and a
reduction in employment based state tax credits as a percentage
of pretax income.

Net income increased to $26.8 million, or
$0.57 per diluted common share, for the first half of
fiscal 2004, compared to net income of $18.3 million, or
$0.41 per diluted common share, for the first half of
fiscal 2003.

Liquidity and Capital Resources



| |                      
| | ---------------------
| | Overview of Liquidity

Our primary cash requirements include working
capital (primarily inventory), interest on our debt and capital
expenditures. We are required to make only minimal debt
amortization payments prior to fiscal 2009 other than capital
lease payments. We intend to fund our cash requirements with
cash flows from operating activities, borrowings under our
senior credit facility and short-term trade credit relating to
extended payment terms for inventory purchases. The following
table outlines our liquidity:

|                                            |  |                  |         |             |  |   |         | 
|------------------------------------------- |  | ---------------- | ------- | ----------- |  | - | ------- | 
|                                            |  | August 1,        |         | February 1,
|                                            |  | 2004             |         | 2004       
|                                            |  |                  |         |            
|                                            |  |                 
|                                            |  | ($ in thousands)
|Cash                                        |  | $                | 44,615  |             |  | $ | 37,221  | 
|Availability under revolving line of credit |  |                  | 113,616 |             |  |   | 120,068 | 
|Working capital                             |  |                  | 572,558 |             |  |   | 574,862 | 

Availability under our revolving line of credit
decreased during the first half of fiscal 2004 relative to prior
periods, primarily due to the issuance of letters of credit
relating to our increased purchases of import products.

On August 10, 2004, we amended our senior
credit facility to provide for an immediate reduction of the
interest rate on the term loan of 25 basis points and an
opportunity for an additional 25 basis points reduction of
the interest rate on such term loan upon the achievement of
certain conditions, as more particularly set forth in the
amendment. The amendment also provides for a one-year extension
of the term loan maturity to

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##### Table of Contents



August 2010. We anticipate that this interest
rate reduction will reduce our interest expense for the balance
of fiscal 2004 (approximately six months) by approximately
$0.3 million.


On June 8, 2004, our Board of Directors
approved a share repurchase program that authorized the purchase
of shares of our common stock with an aggregate purchase price
not to exceed $25.0 million. The program provides that we
may buy shares in the open market or in privately negotiated
transactions and that we will base our decisions on whether to
repurchase shares and the timing of any such repurchases on
factors including the stock price, our cash and debt levels, and
general economic and market conditions. Shares of stock
repurchased under the program will be retired and returned to
the status of authorized and unissued shares. This program will
expire in December 2005. During the second quarter of fiscal
2004, we repurchased approximately 1.3 million shares of
our common stock at a cost of approximately $19.8 million
under this program.

We lease our office and warehouse facilities, all
but one of our retail stores, and much of our equipment.
Substantially all of our store leases are operating leases with
private landlords and provide for monthly rental payments based
on a contractual amount. These leases generally require minimal
initial cash outlay and we expect that substantially all of our
new store locations will be leased pursuant to similar operating
leases.

In order to facilitate an understanding of our
contractual obligations and commercial commitments, the
following data is provided ($ in thousands):

|                               |  |                             |           |         |  |             |        |             |  |            |         |  |  |   |         |  |  |   |         | 
|------------------------------ |  | --------------------------- | --------- | ------- |  | ----------- | ------ | ----------- |  | ---------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                               |  |                            
|                               |  | Payments Due by Fiscal Year
|                               |  |                            
|Contractual Obligation         |  | Total                       |           | 2004(1) |  | 2005  2006 |        | 2007  2008 |  | Thereafter
|                               |  |                             |           |         |  |             |        |             |  |           
|Long-term debt(2)              |  | $                           | 493,635   |         |  | $           | 1,275  |             |  | $          | 20,010  |  |  | $ | 5,100   |  |  | $ | 467,250 | 
|Capital lease obligations      |  |                             | 20,918    |         |  |             | 4,771  |             |  |            | 11,139  |  |  |   | 3,142   |  |  |   | 1,866   | 
|Operating lease obligations(3) |  |                             | 744,312   |         |  |             | 60,526 |             |  |            | 222,856 |  |  |   | 170,952 |  |  |   | 289,978 | 
|                               |  |                             |           |         |  |             |        |             |  |            |         |  |  |   |         |  |  |   |         | 
|Total contractual obligations  |  | $                           | 1,258,865 |         |  | $           | 66,572 |             |  | $          | 254,005 |  |  | $ | 179,194 |  |  | $ | 759,094 | 
|                               |  |                             |           |         |  |             |        |             |  |            |         |  |  |   |         |  |  |   |         | 



---



|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the period from August 2, 2004 to
    January 30, 2005.                                                                                                           
|   
|(2) | Change from fiscal year 2003 annual report due to
    the extension of our term loan to August 10, 2010.                                                                     
|   
|(3) | Operating lease obligations are not reduced to
    reflect sublease income. Changes from fiscal year 2003 annual
    report due primarily to new stores and lease extensions.

Other commercial commitments consist of standby
letters of credit totaling $31.4 million, the latest of
which expire in April 2005. Our inventory purchase commitments
are cancelable and therefore not included in the above table.

Analysis of Cash Flows

The following table summarizes our cash flows
from operating activities:

|                                                  |                                      |                        |        |           |  |   |         |        | 
|------------------------------------------------- | ------------------------------------ | ---------------------- | ------ | --------- |  | - | ------- | ------ | 
|                                                  |                                      |                       
|                                                  |                                      | Twenty-six Weeks Ended
|                                                  |                                      |                       
|                                                  |                                      | August 1,              |        | August 3,
|                                                  |                                      | 2004                   |        | 2003     
|                                                  |                                      |                        |        |          
|                                                  |                                      |                       
|                                                  |                                      | ($ in thousands)      
|Net income                                        |                                      | $                      | 26,811 |           |  | $ | 18,337  |       
|Non-cash expenses and adjustments                 |                                      |                        | 32,996 |           |  |   | 33,261  |       
|Change in inventory, net of accounts payable      |                                      |                        | (8,207 | )         |  |   | (15,256 | )     
|Proceeds from interest rate swap termination      |                                      |                        |       |           |  |   | 6,031   |       
|Changes in other operating assets and liabilities |                                      |                        | 801    |           |  |   | 3,119   |       
|                                                  |                                      |                        |        |           |  |   |         |       
|                                                  | Cash flows from operating activities |                        | $      | 52,401    |  |   | $       | 45,492 | 
|                                                  |                                      |                        |        |           |  |   |         |       

During the first half of fiscal 2004, net cash
provided by operating activities was $52.4 million compared
to $45.5 million of cash provided by operating activities
during the first half of fiscal 2003. The change

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primarily relates to the following: (1) an
increase of $8.5 million in net income resulting primarily
from lower interest expense; and (2) a reduction of our
inventory purchases (net of accounts payable) by
$7.0 million as a result of improved payables management.
Cash flows from operations during the first half of fiscal 2003
were favorably impacted by $6.0 million associated with the
termination of an interest rate swap agreement.


Net cash used in investing activities totaled
$14.5 million for the first half of fiscal 2004, compared
to $6.5 million used during the comparable period of fiscal
2003. Capital expenditures during the first half of fiscal 2004
were $8.0 million higher than in the first half of fiscal
2003 as a result of new store expenditures, additional capital
upgrades to existing stores, and the purchase of certain leased
assets.

Net cash used in financing activities totaled
$30.5 million in the first half of fiscal 2004 compared to
$18.5 million used in financing activities in the
comparable period of fiscal 2003. During the first half of
fiscal 2004, we utilized approximately $19.8 million of our
cash to repurchase and subsequently retire approximately
1.3 million shares of our common stock; no such purchases
were made in fiscal 2003. Payments on capital leases were
$3.2 million higher in the first half of fiscal 2004 than
in the comparable period of fiscal 2003 due to $4.5 million
of lease buyouts during fiscal 2004 offset by $1.3 million
of lower monthly lease payments. Payments for debt issuance
costs were $3.2 million less during the first half of
fiscal 2004 than in the first half of fiscal 2003. Also, during
the first half of fiscal 2003 we retired $9.5 million of
our 11% senior subordinated notes. No debt retirements
occurred during the first half of fiscal 2004.

Store Closures

On an on-going basis, store locations are
reviewed and analyzed based on several factors including market
saturation, store profitability, and store size and format. In
addition, we analyze sales trends and geographical and
competitive factors to determine the viability and future
profitability of our store locations. If a store location does
not meet our required performance, it is considered for closure.
As a result of past acquisitions, we have closed numerous
locations due to store overlap with previously existing store
locations.

We account for the costs of closed stores in
accordance with SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities. Under
SFAS No. 146, costs of operating lease commitments for
a closed store are recognized as expense at fair value at the
time we cease operating the store. Fair value of the liability
is determined as the present value of future cash flows
discounted using a credit-adjusted risk free rate. Accretion
expense represents interest on our recorded closed store
liabilities at the same credit adjusted risk free rate used to
discount the cash flows. In addition, SFAS No. 146
also requires that the amount of remaining lease payments owed
be reduced by estimated sublease income (but not to an amount
less than zero). Sublease income in excess of costs associated
with the lease is recognized as it is earned and included as a
reduction to operating and administrative expense in the
accompanying financial statements.

The allowance for store closing costs is included
in accrued expenses and other long term liabilities in the
accompanying financial statements and primarily represents the
discounted value of the following future net cash outflows
related to closed stores: (1) future rents to be paid over
the remaining terms of the lease agreements for the stores (net
of estimated probable sublease income); (2) lease
commissions associated with the anticipated store subleases; and
(3) contractual expenses associated with the closed store
vacancy periods. Certain operating expenses, such as utilities
and repairs, are expensed as incurred and no provision is made
for employee termination costs.

As of August 1, 2004, we had a total of 148
store locations included in the allowance for store closing
costs. Of this total, 13 locations were vacant and 135 locations
were subleased. In addition to these stores, we had 55 service
centers of which 3 were vacant and 52 were subleased. Future
rental payments will be made through the expiration of the
non-cancelable leases, the longest of which runs through January
2018.

16



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##### Table of Contents



Activity in the allowance for store closings and
the related payments for the first half of fiscal 2004 are as
follows ($ in thousands):

|                             |                                        |                |                          |        |        |     | 
|---------------------------- | -------------------------------------- | -------------- | ------------------------ | ------ | ------ | --- | 
|Balance, beginning of year   |                                        | $              | 12,148                   |       
|Store closing costs:         |                                        |                |                          |       
|                             | Provision for store closing costs      |                |                          | 106    |       
|                             | Revisions in estimates                 |                |                          | (12    | )     
|                             | Accretion                              |                |                          | 287    |       
|                             | Operating expenses and other           |                |                          | 506    |       
|                             |                                        |                |                          |       
|                             |                                        |                | Store closing costs, net |        |        | 887 | 
|Payments:                    |                                        |                |                          |       
|                             | Rent expense, net of sublease income   |                |                          | (1,553 | )     
|                             | Occupancy and other expenses           |                |                          | (481   | )     
|                             | Lease buyouts and sublease commissions |                |                          | (2,103 | )     
|                             |                                        |                |                          |       
|                             |                                        | Total payments |                          |        | (4,137 | )  
|                             |                                        |                |                          |       
|Balance as of August 1, 2004 |                                        | $              | 8,898                    |       
|                             |                                        |                |                          |       

We expect cash outflows for vacant stores (which
includes certain operating expenses that are expensed as
incurred), sublease losses and lease buyouts to be approximately
$7.0 million during fiscal 2004. We expect the remainder of
cash outflows relating to these stores to occur primarily during
fiscal 2005 through 2007.

Factors Affecting Liquidity and Capital
Resources



| |             
| | ------------
| | Sales Trends

Our business is somewhat seasonal in nature, with
the highest sales typically occurring in the months of June
through October (overlapping our second and third fiscal
quarters.) In addition, our business is affected by weather
conditions. While unusually severe or inclement weather tends to
reduce sales, as our customers are more likely to defer elective
maintenance during such periods, extremely hot and cold
temperatures tend to enhance sales by causing auto parts to fail
and sales of seasonal product to increase.

Our same store sales increased 1.1% during the
first half of fiscal 2004, which was comprised of 5.2% same
store sales increases during the first quarter of fiscal 2004
and same store sales decreases of 2.5% during the second quarter
of fiscal 2004. We believe higher gas prices and milder summer
temperatures in many of our key markets adversely impacted our
sales during the second quarter of fiscal 2004. Based on current
sales trends and in recognition of our 7.8% same store sales
increase in the second half of fiscal 2003, we would expect same
store sales to decline 2.0% to 3.5% during the third quarter of
fiscal 2004 and to be flat to negative 2% for the fourth quarter
of fiscal 2004.



| |          
| | ---------
| | Inflation

We do not believe our operations have been
materially affected by inflation. We believe that we will be
able to mitigate the effects of future merchandise cost
increases principally through economies of scale resulting from
increased volumes of purchases, selective forward buying and the
use of alternative suppliers.



| |               
| | --------------
| | Debt Covenants

Our credit agreement contains negative covenants
and restrictions on actions by us and our subsidiaries
including, without limitation, restrictions and limitations on
indebtedness, liens, guarantees, mergers, asset dispositions not
in the ordinary course of business, investments, loans, advances
and acquisitions, payment of dividends, transactions with
Affiliates (as defined in the credit agreement), change in
business conducted, and certain prepayments (other than in the
ordinary course of business) and amendments of subordinated
indebtedness. Our credit agreement requires that we meet certain
financial covenants, ratios and tests,

17



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##### Table of Contents



including a maximum leverage ratio and a minimum
interest coverage ratio. The Consolidated Leverage Ratio is
Consolidated Total Funded Debt, as defined in the
credit agreement, divided by Consolidated EBITDA as
defined in the credit agreement. The Interest Coverage Ratio is
Consolidated EBITDA, as defined in the credit
agreement, divided by cash interest expense, as
defined in the credit agreement. At August 1, 2004 we were
in compliance with the related covenants. We anticipate meeting
all required covenants under our existing credit agreement in
fiscal 2004.


A breach of the covenants, ratios, or
restrictions contained in our credit agreement could result in
an event of default thereunder. Upon the occurrence of such an
event of default, the lenders under our credit agreement could
elect to declare all amounts outstanding under the credit
agreement, together with accrued interest, to be immediately due
and payable. If we were unable to repay those amounts, the
lenders could proceed against the collateral granted to them to
secure the indebtedness. If the lenders under the credit
agreement accelerate the payment of the indebtedness, we cannot
be assured that our assets would be sufficient to repay in full
that indebtedness, which is collateralized by substantially all
of our assets.

Although we have significantly reduced our
outstanding debt over recent years, we are still highly
leveraged. The degree to which we are leveraged could have
important consequences on our ability to obtain additional
financing for working capital, capital expenditures,
acquisitions or general corporate purposes. A substantial
portion of our cash flow from operations must be dedicated to
the payment of interest on our indebtedness, thereby reducing
the funds available for other purposes. We are substantially
more leveraged than some of our competitors, which might place
us at a competitive disadvantage to those competitors that have
lower debt service obligations and significantly greater
operating and financial flexibility than we do. We may not be
able to adjust rapidly to changing market conditions and we may
be more vulnerable in the event of a downturn in general
economic conditions or in our business.



| |               
| | --------------
| | Interest Rates

Financial market risks relating to our operations
result primarily from changes in interest rates. Interest earned
on our cash equivalents as well as interest paid on our variable
rate debt and interest received or paid on our interest rate
swap is sensitive to changes in market interest rates. Our
variable rate debt relates to borrowings under our senior credit
facility, which is primarily vulnerable to movements in the
LIBOR rate. We hold no market risk sensitive instruments for
trading purposes.

On April 5, 2004, we entered into an
interest rate swap agreement to effectively convert
$100.0 million of our 7% senior subordinated notes due
2014 to a floating rate, set semi-annually in arrears, equal to
the 6 month LIBOR + 283 basis points. The agreement is
for the term of the notes. We entered into the interest rate
swap to hedge the changes in the fair value of the underlying
fixed rate debt that result from changes in market interest
rates. The hedge is accounted for as a fair value
hedge; accordingly, the fair value of the derivative and changes
in the fair value of the underlying debt will be reported on our
consolidated balance sheet and recognized in the results of
operations. Based upon our assessment of effectiveness of the
hedge, changes in the fair value of this derivative and the
underlying debt will not have a significant effect on our
consolidated results of operations. At August 1, 2004, the
fair value of the interest rate swap approximated
$8.6 million, which is included as an increase in other
long-term liabilities with an identical amount reflected as a
basis adjustment to the 7% senior subordinated notes on the
accompanying Consolidated Balance Sheet.

At August 1, 2004, including the
$100.0 million of senior subordinated notes that are
subject to the interest rate swap agreement, 70% of our
outstanding debt was at variable interest rates and 30% of our
outstanding debt was at fixed interest rates. With
$354.0 million in variable rate debt outstanding, assuming
that our debt balance remains constant for an annual period and
the interest rate change occurs at the beginning of the period,
a 1% change in the LIBOR rate to which this variable rate debt
is tied would result in a $3.5 million change in our annual
interest expense.



| |                            
| | ---------------------------
| | Critical Accounting Matters

For a discussion of our critical accounting
matters, please refer to our fiscal 2003 Annual Report on
Form 10-K filed with the Securities and Exchange Commission
on April 15, 2004.

18



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##### Table of Contents





| |                                     
| | ------------------------------------
| | Recent Accounting
    Pronouncements

In January 2003, the Financial Accounting
Standards Board (FASB) issued Financial
Interpretation No. (FIN) 46, Consolidation of
Variable Interest Entities, which addressed accounting for
special-purpose and variable interest entities. In December
2003, the FASB issued FIN 46R, Consolidation of
Variable Interest Entities, which superseded FIN 46.
The effective date of FIN 46R is the end of the first
reporting period that ends after March 15, 2004, unless the
entity is considered to be a special-purpose entity. Companies
that have adopted FIN 46 prior to the effective date of
FIN 46R will either continue to apply FIN 46 until the
effective date of FIN 46R or apply the provision of
FIN 46R at an earlier date. We have adopted the provisions
of FIN 46R with no impact on our financial statements.



| |                           
| | --------------------------
| | Forward-Looking Statements

Certain statements contained in the foregoing
Managements Discussion and Analysis of Financial Condition
and Results of Operations are forward-looking statements. They
discuss, among other things, expected growth, future store
development and relocation strategy, business strategies, future
revenues and future performance. The forward-looking statements
are subject to risks, uncertainties and assumptions, including,
but not limited to, competitive pressures and impacts, demand
for our products, factors impacting procurement of import
products, fluctuations in and the overall condition of the
economy, timing and number of equity awards issued and the
market value of such awards, inflation, consumer debt levels,
factors impacting consumer spending and driving habits,
conditions affecting new store development, weather conditions,
and litigation and regulatory matters. Actual results may differ
materially from anticipated results described in these
forward-looking statements. Additional information regarding
these and other risks that may cause differences are contained
in our periodic and other filings with the Securities and
Exchange Commission.






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures
    About Market Risk

See Factors Affecting Liquidity and Capital
Resources above.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures



| |                                                     
| | ----------------------------------------------------
| | Evaluation of Disclosure Controls and
    Procedures

Our management carried out an evaluation, under
the supervision and with the participation of our Chief
Executive Officer (CEO) and Chief Financial Officer
(CFO), of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the Exchange
Act)), as of August 1, 2004, the end of the period
covered by this Quarterly Report on Form 10-Q. Based upon
that evaluation, the CEO and CFO concluded that as of the
evaluation date, our disclosure controls and procedures are
effective to ensure that information required to be disclosed by
the company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange
Commission rules and forms.



| |                                                         
| | --------------------------------------------------------
| | Changes in Internal Control Over Financial
    Reporting

During the fiscal quarter ended August 1,
2004, there has been no change in our internal control over
financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) under the Exchange Act) that has materially affected
or is reasonably likely to materially affect, our internal
control over financial reporting.

19



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##### Table of Contents






PART II

OTHER INFORMATION






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

During the third quarter of fiscal 2003, we
received notification from the State of California Board of
Equalization (the Board) of an assessment for
approximately $1.2 million for sales tax and approximately
$0.6 million for related interest based on the Boards
audit findings for the tax periods of October 1997 through
September 2000. During this time period, we refunded the sales
tax associated with battery cores to customers who returned a
battery core to our stores. The Board believes that the sales
tax associated with the battery cores should have been remitted
to the taxing authority rather than refunded to the customers.
Based on the Boards position, we could be responsible for
the sales tax and related interest associated with this matter
for the audited periods of October 1997 through September 2000,
plus the additional unaudited time period through December 2002,
when we changed our business practices in this area to mitigate
potential future tax related liability.

We believe that we have a strong basis under
California law for disputing the payment of this assessment, and
in October 2003 we timely filed a Petition for Redetermination
with the Board. In May 2004, we received a response from the
Board indicating that the district office that conducted the
audit upheld its position and requested confirmation of our
desire to proceed with the scheduling of an appeals conference
concerning this matter. We responded affirmatively to the
Boards letter in May 2004 and are presently waiting for
formal scheduling by the Board of an appeals conference before
an appeals division attorney or auditor. Our practices through
December 2002 relative to the handling of taxes on battery cores
had been consistent for over a decade, and it is our position
that our consistent treatment of battery core charges, together
with prior tax audits and tax auditors written commentary
concerning our handling of such charges, permits us to rely upon
precedent set in prior audits. Reliance on prior audits is a
position that is supportable under California law. We also have
other defenses and intend to vigorously defend our position with
regard to this matter. A liability for the potential sales tax
and related interest payments has not been recorded in our
consolidated financial statements.

We currently and from time to time are involved
in other litigation incidental to the conduct of our business,
including asbestos and similar product liability claims, slip
and fall and other general liability claims, discrimination and
employment claims, vendor disputes, and miscellaneous
environmental and real estate claims. The damages claimed in
some of this litigation are substantial. Based on internal
review, we accrue reserves using our best estimate of the
probable and reasonably estimable contingent liabilities. We do
not currently believe that any of the legal claims, individually
or in the aggregate, will result in liabilities material to our
consolidated financial position, results of operations or cash
flows.






|        |                                                                                     
|------- | ------------------------------------------------------------------------------------
|Item 2. | Changes in Securities, Use of Proceeds and
    Issuer Purchases of Equity Securities

|                               |  |                                          |           |                 |  |                  |       |                |  |  |           |  |  |   |            | 
|------------------------------ |  | ---------------------------------------- | --------- | --------------- |  | ---------------- | ----- | -------------- |  |  | --------- |  |  | - | ---------- | 
|                               |  |                                         
|                               |  | Issuer Purchases of Equity Securities(1)
|                               |  |                                         
|                               |  |                                          |           | Total Number of |  | Dollar Value of 
|                               |  |                                          |           | Average         |  | Shares Purchased |       | Shares That   
|                               |  | Total Number                             |           | Price           |  | as Part of       |       | May Yet be    
|                               |  | of Shares                                |           | Paid per        |  | Publicly         |       | Purchased     
|Period                         |  | Purchased                                |           | Share           |  | Announced Plans  |       | Under the Plan
|                               |  |                                          |           |                 |  |                  |       |               
|June 8, 2004                   |  |                                          |          |                 |  |                  |      |                |  |  |          |  |  | $ | 25,000,000 | 
|June 8, 2004 to July 4, 2004   |  |                                          | 475,756   | (2)             |  | $                | 17.50 |                |  |  | 475,756   |  |  |   | 16,674,270 | 
|July 5, 2004 to August 1, 2004 |  |                                          | 799,200   |                 |  |                  | 14.31 |                |  |  | 799,200   |  |  |   | 5,234,924  | 
|                               |  |                                          |           |                 |  |                  |       |                |  |  |           |  |  |   |            | 
|As of August 1, 2004           |  |                                          | 1,274,956 |                 |  | $                | 15.50 |                |  |  | 1,274,956 |  |  | $ | 5,234,924  | 
|                               |  |                                          |           |                 |  |                  |       |                |  |  |           |  |  |   |            | 



---



|    |                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On June 8, 2004, our Board of Directors
    approved a share repurchase program authorizing us to acquire up
    to $25.0 million of our common stock. The program expires
    in December 2005. See Note 8 to the Consolidated Financial
    Statements.

20



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##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents shares purchased in a privately
    negotiated transaction with Investcorp S.A., formerly one of the
    Companys significant shareholders, at an approximate 1%
    discount from the average market price of our common stock on
    the date of purchase. Charles K. Marquis, a member of our
    Board of Directors, is employed by Investcorp.






|        |                                    
|------- | -----------------------------------
|Item 3. | Defaults upon Senior
    Securities

NONE






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

We held our annual meeting of stockholders on
June 16, 2004. The following are the results of certain
matters voted upon at the meeting:

I. Stockholders elected seven directors to
serve until our 2005 Annual Meeting of the Stockholders. The
stockholders voted as follows:

|                       |  |           |            |          |  |  |            | 
|---------------------- |  | --------- | ---------- | -------- |  |  | ---------- | 
|Directors              |  | Votes for |            | Withheld
|                       |  |           |            |         
|Maynard L. Jenkins Jr. |  |           | 31,659,440 |          |  |  | 9,374,772  | 
|James G. Bazlen        |  |           | 31,690,231 |          |  |  | 9,343,981  | 
|Morton Godlas          |  |           | 33,787,833 |          |  |  | 7,246,379  | 
|Terilyn A. Henderson   |  |           | 33,806,868 |          |  |  | 7,227,344  | 
|Charles K. Marquis     |  |           | 33,937,335 |          |  |  | 7,096,877  | 
|Charles J. Philippin   |  |           | 33,806,858 |          |  |  | 7,227,354  | 
|William A. Shutzer     |  |           | 30,194,731 |          |  |  | 10,839,481 | 

There were no votes against or broker non-votes
with respect to the election of directors.

II. Stockholders ratified the appointment of
PricewaterhouseCoopers LLP as our independent accountants for
the fiscal year ending January 30, 2005. The stockholders
voted as follows:

For: 40,681,707  Against:
347,195  Abstain: 5,310  Broker non-vote: 0

III. Stockholders approved the adoption of
the 2004 Executive Incentive Program covering certain senior
executives. The stockholders voted as follows:

For: 40,530,914  Against:
481,750  Abstain: 21,548  Broker non-vote: 0

IV. Stockholders approved the adoption of
the 2004 Stock and Incentive Plan. The stockholders voted as
follows:

For: 27,958,583  Against:
4,635,180  Abstain: 21,213  Broker non-vote:
8,413,926






|        |                  
|------- | -----------------
|Item 5. | Other Information

NONE






|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits:

| |        |  |  |                                                                                                                                                                                                                                                
| | ------ |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.01   |  |  | Restated Certificate of Incorporation of the
    Company, incorporated herein by reference to Exhibit 3.01
    of our Annual Report on Form 10-K, filed on May 4,
    1998 (File No. 001-13927).                                               
| | 3.02   |  |  | Certificate of Correction to the Restated
    Certificate of Incorporation of the Company, incorporated herein
    by reference to Exhibit 3.02 of our Annual Report on
    Form 10-K, filed on May 4, 1998 (File
    No. 001-13927).          
| | 3.02.1 |  |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of CSK Auto Corporation,
    incorporated herein by reference to Exhibit 3.02.1 of our
    Report on Form 10-Q, filed on September 18, 2002 (File
    No. 001-13927).

21



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##### Table of Contents



| |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------ |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.03   |  |  | Amended and Restated By-Laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of our
    Annual Report on Form 10-K, filed on April 28, 1999
    (File No. 001-13927).                                                                                                                                                                                                                                                                              
| | 3.03.1 |  |  | First Amendment to Amended and Restated By-Laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our Annual Report on Form 10-K,
    filed on May 1, 2001 (File No. 001-13927).                                                                                                                                                                                                                                                            
| | 3.03.2 |  |  | Second Amendment to Amended and Restated Bylaws
    of the Company, dated May 6, 2004 incorporated herein by
    reference to Exhibit 3.03.2 of our Report on
    Form 10-Q, filed June 14, 2004 (File
    No. 001-13927).                                                                                                                                                                                                                                              
| | 4.01   |  |  | Amended and Restated Credit Agreement dated as of
    January 16, 2004, by and among CSK Auto, Inc., JPMorgan
    Chase Bank, as Administrative Agent, Credit Suisse First Boston,
    acting through its Cayman Islands branch, as Syndication Agent,
    and Bank of America, N.A., incorporated herein by reference to
    Exhibit 99.2 of our Current Report on Form 8-K, filed
    January 20, 2004.                                                               
| | 4.01.1 |  |  | Amendment No. 1 to Amended and Restated
    Credit Agreement among CSK Auto, Inc. and JPMorgan Chase Bank,
    as administrative agent for the Lenders, dated as of
    April 29, 2004, incorporated herein by reference to
    Exhibit 4.01.1 of our Quarterly Report on Form 10-Q,
    filed June 14, 2004.                                                                                                                                                           
| | 4.01.2 |  |  | Amendment No. 2 to Amended and Restated
    Credit Agreement among CSK Auto, Inc. and JPMorgan Chase Bank,
    as administrative agent for the Lenders, dated as of
    August 10, 2004, incorporated herein by reference to
    Exhibit 99.1 of our Current Report on Form 8-K, filed
    August 12, 2004.                                                                                                                                                             
| | 4.02   |  |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                                                                                                              
| | 4.03   |  |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc., as Guarantors;
    and Credit Suisse First Boston Corporation, J.P. Morgan
    Securities Inc. and UBS Warburg LLC as Purchasers, incorporated
    herein by reference to Exhibit 99.4 of our Current Report
    on Form 8-K, filed January 18, 2002.                                                 
| | 4.04   |  |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc., as
    subsidiary guarantors; and the Bank of New York, as Trustee,
    incorporated herein by reference to Exhibit 99.3 of our
    Current Report on Form 8-K, filed January 18, 2002.                                                                                                        
| | 4.05   |  |  | Purchase Agreement, dated January 9, 2004,
    by and among CSK Auto, Inc. as issuer; CSK Auto Corporation,
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc. as
    Guarantors; and Credit Suisse First Boston LLC, Lehman Brothers
    Inc., J.P. Morgan Securities Inc., Piper Jaffray &
    Co. and Banc of America Securities LLC, incorporated herein by
    reference to Exhibit 99.5 of our Current Report on
    Form 8-K, filed January 20, 2004.
| | 4.06   |  |  | Indenture dated as of January 16, 2004 by
    and among CSK Auto, Inc. (as Issuer), CSK Auto Corporation,
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc. (each
    a Guarantor) and The Bank of New York (as Trustee), incorporated
    herein by reference to Exhibit 99.3 of our Current Report
    on Form 8-K, filed January 20, 2004.                                                                                                              
| | 10.1   |  |  | Amendment and Restated Supplemental Executive
    Retirement Plan Agreement between CSK Auto, Inc. and Maynard
    Jenkins dated May 4, 2004 incorporated herein by reference
    to exhibit 10.1 of our Current Report on Form 10-Q,
    filed June 14, 2004.                                                                                                                                                                                                          
| | 10.2   |  |  | CSK Auto Corporation 2004 Stock and Incentive
    Plan.                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 31.1   |  |  | Certification by the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                             
| | 31.2   |  |  | Certification by the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                             
| | 32.0   |  |  | Certification by the Chief Executive Officer and
    Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                          

(b) Reports on Form 8-K:

22



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##### Table of Contents



On June 3, 2004, we filed a current report
on Form 8-K to report under Items 9 and 12 thereof,
the issuance of a press release announcing our financial results
for the first quarter of fiscal 2004.

On June 9, 2004, we filed a current report
on Form 8-K to report under Item 9 thereof, the
placement of slides from an investors conference on our
web site.

On July 8, 2004, we filed a current report
on Form 8-K to report under Item 9 thereof, our
comparable store sales for the nine weeks ended July 4,
2004 and revised projections for the second quarter of fiscal
2004.

23



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##### Table of Contents






SIGNATURE

Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.



| |                     
| | --------------------
| | CSK AUTO CORPORATION



| |     |                  
| | --- | -----------------
| | By: | /s/ DON W. WATSON

| |                        
| | -----------------------
| |                        
| | Don W. Watson          
| | Chief Financial Officer

Dated: September 9, 2004

24



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##### Table of Contents



EXHIBIT INDEX

|        |   |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | - | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |            
|Number  |   | Description
|        |   |            
|        | 3 | .01         |  | Restated Certificate of Incorporation of the
    Company, incorporated herein by reference to Exhibit 3.01
    of our Annual Report on Form 10-K, filed on May 4,
    1998 (File No. 001-13927).                                                                                                                                                                                                                                                                        
|        | 3 | .02         |  | Certificate of Correction to the Restated
    Certificate of Incorporation of the Company, incorporated herein
    by reference to Exhibit 3.02 of our Annual Report on
    Form 10-K, filed on May 4, 1998 (File
    No. 001-13927).                                                                                                                                                                                                                                   
|        | 3 | .02.1       |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of CSK Auto Corporation,
    incorporated herein by reference to Exhibit 3.02.1 of our
    Report on Form 10-Q, filed on September 18, 2002 (File
    No. 001-13927).                                                                                                                                                                                                                         
|        | 3 | .03         |  | Amended and Restated By-Laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of our
    Annual Report on Form 10-K, filed on April 28, 1999
    (File No. 001-13927).                                                                                                                                                                                                                                                                              
|        | 3 | .03.1       |  | First Amendment to Amended and Restated By-Laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our Annual Report on Form 10-K,
    filed on May 1, 2001 (File No. 001-13927).                                                                                                                                                                                                                                                            
|        | 3 | .03.2       |  | Second Amendment to Amended and Restated Bylaws
    of the Company, dated May 6, 2004 incorporated herein by
    reference to Exhibit 3.03.2 of our Report on
    Form 10-Q, filed June 14, 2004 (File
    No. 001-13927).                                                                                                                                                                                                                                              
|        | 4 | .01         |  | Amended and Restated Credit Agreement dated as of
    January 16, 2004, by and among CSK Auto, Inc., JPMorgan
    Chase Bank, as Administrative Agent, Credit Suisse First Boston,
    acting through its Cayman Islands branch, as Syndication Agent,
    and Bank of America, N.A., incorporated herein by reference to
    Exhibit 99.2 of our Current Report on Form 8-K, filed
    January 20, 2004.                                                               
|        | 4 | .01.1       |  | Amendment No. 1 to Amended and Restated
    Credit Agreement among CSK Auto, Inc. and JPMorgan Chase Bank,
    as administrative agent for the Lenders, dated as of
    April 29, 2004, incorporated herein by reference to
    Exhibit 4.01.1 of our Quarterly Report on Form 10-Q,
    filed June 14, 2004.                                                                                                                                                           
|        | 4 | .01.2       |  | Amendment No. 2 to Amended and Restated
    Credit Agreement among CSK Auto, Inc. and JPMorgan Chase Bank,
    as administrative agent for the Lenders, dated as of
    August 10, 2004, incorporated herein by reference to
    Exhibit 99.1 of our Current Report on Form 8-K, filed
    August 12, 2004.                                                                                                                                                             
|        | 4 | .02         |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                                                                                                              
|        | 4 | .03         |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc., as Guarantors;
    and Credit Suisse First Boston Corporation, J.P. Morgan
    Securities Inc. and UBS Warburg LLC as Purchasers, incorporated
    herein by reference to Exhibit 99.4 of our Current Report
    on Form 8-K, filed January 18, 2002.                                                 
|        | 4 | .04         |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc., as
    subsidiary guarantors; and the Bank of New York, as Trustee,
    incorporated herein by reference to Exhibit 99.3 of our
    Current Report on Form 8-K, filed January 18, 2002.                                                                                                        
|        | 4 | .05         |  | Purchase Agreement, dated January 9, 2004,
    by and among CSK Auto, Inc. as issuer; CSK Auto Corporation,
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc. as
    Guarantors; and Credit Suisse First Boston LLC, Lehman Brothers
    Inc., J.P. Morgan Securities Inc., Piper Jaffray &
    Co. and Banc of America Securities LLC, incorporated herein by
    reference to Exhibit 99.5 of our Current Report on
    Form 8-K, filed January 20, 2004.
|        | 4 | .06         |  | Indenture dated as of January 16, 2004 by
    and among CSK Auto, Inc. (as Issuer), CSK Auto Corporation,
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc. (each
    a Guarantor) and The Bank of New York (as Trustee), incorporated
    herein by reference to Exhibit 99.3 of our Current Report
    on Form 8-K, filed January 20, 2004.                                                                                                              



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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                               
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .1          |  | Amendment and Restated Supplemental Executive
    Retirement Plan Agreement between CSK Auto, Inc. and Maynard
    Jenkins dated May 4, 2004 incorporated herein by reference
    to exhibit 10.1 of our Current Report on Form 10-Q,
    filed June 14, 2004.
|        | 10 | .2          |  | CSK Auto Corporation 2004 Stock and Incentive
    Plan.                                                                                                                                                                                                       
|        | 31 | .1          |  | Certification by the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                   
|        | 31 | .2          |  | Certification by the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                   
|        | 32 | .0          |  | Certification by the Chief Executive Officer and
    Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.