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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-Q/A (Mark One)þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended May 2, 2004Oro
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For 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 June 3, 2004, CSK Auto Corporation had 46,532,915 shares of common stock outstanding.




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Explanatory Note As previously disclosed in the Current Report on Form 8-K as filed by CSK Auto Corporation, (the
Company) on April 18, 2005, the Audit Committee of the Board of Directors and management of the
Company concluded that, due to certain accounting errors, the Companys annual financial statements
for the fiscal years ended February 1, 2004 (fiscal 2003) and February 2, 2003 (fiscal 2002), and
the related interim financial statements for each of the quarters within those years, as well as
the first three quarters for the fiscal year ended January 30, 2005 (fiscal 2004), should be
restated. The restatements contained in this Form 10-Q/A for the quarterly period ended May 2, 2004 reflect
corrections and adjustments required as a result of the following items. 1. In the course of the Companys review of its lease accounting practices, the Company identified
accounting errors pertaining to the evaluation of lease terms (thus impacting the amortization of
leasehold improvements), free rent periods (i.e., rent holidays), straight-lining of minimum lease
payments, the classification of landlord incentives/allowances, and the treatment of costs incurred
for certain stores that are constructed and subsequently transferred to our landlords. 2. The Company has historically recognized estimated vendor allowances in a systematic manner
ratably over a performance period that ran from October through September. This recognition period
was initially selected to match the expected benefits to be received
with expected costs the Company was incurring to
perform promotional activities. The Company reevaluated this
accounting convention and concluded that the recognition period
should be corrected to the contractual period which corresponds to a calendar
year because substantially all allowances are determined and collected based on purchases from
vendors in the calendar year. 3. The Company also recently identified vendor allowances recorded in prior periods that will not
be collected and has determined that the amounts were recorded in
error and should not have
been recognized in earlier periods. In addition, we identified certain vendor allowances recorded
in improper periods. 4. The Company implemented a
voluntary change in accounting for inventory costs from the Last-In,
First-Out (LIFO) method to the First-In, First-Out (FIFO) method of accounting for inventories in
fiscal 2004. Such a change in inventory accounting method requires a
retroactive restatement of prior periods
and has a material impact on the Companys historical financial statements. The Company believes
the change is preferable because it will result in reported inventory cost on our balance sheet
that approximates replacement costs instead of higher historical
costs under LIFO. A preferability letter from our independent registered public accounting firm,
PricewaterhouseCoopers LLP, was filed with the Securities and Exchange Commission on
May 2, 2005 as part of the Companys Annual Report on Form 10-K. See Note 1, Accounting Change and Restatements of Financial Statements, in the accompanying
Consolidated Financial Statements (including the notes thereto), and Managements Discussion and
Analysis of Financial Condition and Results of Operations for the impact of these restatements.
This amended Quarterly Report on Form 10-Q/A amends and restates only those items of the previously
filed Form 10-Q for the thirteen weeks ended May 2, 2004 and May 4, 2003, that have been affected
by these restatements. In order to preserve the nature and character of the disclosures set forth
in such items as originally filed, no attempt has been made in this amendment to modify or update
the disclosures in the original Quarterly Report on Form 10-Q except for the foregoing
restatements. As a result, this amended Quarterly Report on Form 10-Q/A contains forward-looking
information that has not been updated for events subsequent to the date of the original filing, and
all information contained in this amended Quarterly Report on Form 10-Q/A and the original Report
on Form 10-Q is subject to updating and supplementing as provided in the periodic reports that the
Company has filed and/or will file with the SEC after the original filing date of the Quarterly
Report on Form 10-Q. 2




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TABLE OF CONTENTS PagePART I  Financial InformationItem 1.
    
    Financial Statements as Restated (unaudited)Consolidated Balance Sheets
    
    
    4Consolidated Statements of Operations
    
    
    5Consolidated Statement of Stockholders Equity
    
    
    6Consolidated Statements of Cash Flows
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27PART II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    29Item 2.
    
    Changes in Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits and Reports on Form 8-K
    
    
    30Signature
    
    
    31Exhibit 31.1Exhibit 31.2Exhibit 32.0
  3




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PART IFINANCIAL INFORMATION 
 Item 1.Financial Statements CSK AUTO CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
 (Unaudited)
 May 2,
    
    
    February 1,2004
    
    
    2004(Restated)
    
    
    (Restated)ASSETSCash and cash equivalents
    
    $
    43,561
    
    
    $
    37,221Receivables, net of allowances of $1,622 and $1,577, respectively
    
    
    93,765
    
    
    
    91,932Inventories
    
    
    536,088
    
    
    
    522,849Deferred income taxes
    
    
    60,381
    
    
    
    67,857Prepaid expenses and other current assets
    
    
    22,369
    
    
    
    21,123Total current assets
    
    
    756,164
    
    
    
    740,982Property and equipment, net
    
    
    136,724
    
    
    
    140,275Leasehold interests, net
    
    
    11,810
    
    
    
    12,278Goodwill
    
    
    127,069
    
    
    
    127,069Other assets, net
    
    
    36,711
    
    
    
    27,388Total assets
    
    $
    1,068,478
    
    
    $
    1,047,992LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    188,079
    
    
    $
    177,150Accrued payroll and related expenses
    
    
    48,174
    
    
    
    47,498Accrued expenses and other current liabilities
    
    
    48,545
    
    
    
    49,617Current maturities of long term debt
    
    
    2,780
    
    
    
    2,743Current maturities of capital lease obligations
    
    
    9,892
    
    
    
    10,240Total current liabilities
    
    
    297,470
    
    
    
    287,248Long term debt
    
    
    489,418
    
    
    
    498,726Obligations under capital leases
    
    
    12,811
    
    
    
    15,017Deferred income taxes
    
    
    3,421
    
    
    
    3,333Other liabilities
    
    
    53,672
    
    
    
    45,257Total non-current liabilities
    
    
    559,322
    
    
    
    562,333Commitments and contingenciesStockholders equity:Common stock, $0.01 par value, 58,000,000 shares authorized,
46,530,750 and 46,497,936 shares issued and outstanding at May
2, 2004 and February 1, 2004, respectively
    
    
    465
    
    
    
    465Additional paid-in capital
    
    
    467,028
    
    
    
    466,576Stockholder receivable
    
    
    (65
    )
    
    
    (73
    )Accumulated deficit
    
    
    (255,742
    )
    
    
    (268,557
    )Total stockholders equity
    
    
    211,686
    
    
    
    198,411Total liabilities and stockholders equity
    
    $
    1,068,478
    
    
    $
    1,047,992
 The accompanying notes are an integral part of these consolidated financial statements. 4




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CSK AUTO CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited) Thirteen Weeks EndedMay 2,
    
    
    May 4,2004
    
    
    2003(Restated)
    
    
    (Restated)Net sales
    
    $
    397,054
    
    
    $
    377,449Cost of sales
    
    
    208,359
    
    
    
    214,596Gross profit
    
    
    188,695
    
    
    
    162,853Other costs and expenses:Operating and administrative
    
    
    158,712
    
    
    
    148,959Store closing costs
    
    
    326
    
    
    
    93Operating profit
    
    
    29,657
    
    
    
    13,801Interest expense, net
    
    
    8,614
    
    
    
    14,270Income before income taxes
    
    
    21,043
    
    
    
    (469
    )Income tax expense (benefit)
    
    
    8,228
    
    
    
    (259
    )Net income (loss)
    
    $
    12,815
    
    
    $
    (210
    )Basic earnings per share:Net income (loss)
    
    $
    0.28
    
    
    $
    (0.01
    )Shares used in computing per share amounts
    
    
    46,517
    
    
    
    45,149Diluted earnings per share:Net income (loss)
    
    $
    0.27
    
    
    $
    (0.01
    )Shares used in computing per share amounts
    
    
    46,885
    
    
    
    45,149
 The accompanying notes are an integral part of these consolidated financial statements. 5




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CSK AUTO CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(In thousands, except share data)
(Unaudited) AdditionalCommon Stock
    
    
    Paid-in
    
    
    Stockholder
    
    
    Accumulated
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Receivable
    
    
    Deficit
    
    
    EquityBalances at February 1, 2004
(Restated)
    
    
    46,497,936
    
    
    $
    465
    
    
    $
    466,576
    
    
    $
    (73
    )
    
    $
    (268,557
    )
    
    $
    198,411Exercise of options
    
    
    32,814
    
    
    
    
    
    
    
    346
    
    
    
    
    
    
    
    
    
    
    
    346Tax benefit relating to
stock option exercises
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    106Repayment of stockholder
receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Net income (Restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,815
    
    
    
    12,815Balances at May 2, 2004
(Restated)
    
    
    46,530,750
    
    
    $
    465
    
    
    $
    467,028
    
    
    $
    (65
    )
    
    $
    (255,742
    )
    
    $
    211,686
 The accompanying notes are an integral part of these consolidated financial statements. 6




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CSK AUTO CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) Thirteen Weeks EndedMay 2,
    
    
    May 4,2004
    
    
    2003(Restated)
    
    
    (Restated)Cash flows from operating activities:Net income (loss)
    
    $
    12,815
    
    
    $
    (210
    )Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    8,185
    
    
    
    8,712Amortization of other items
    
    
    1,032
    
    
    
    926Amortization of deferred financing costs
    
    
    483
    
    
    
    1,286Amortization of long term debt fair market value adjustment
    
    
    (27
    )
    
    
    Accretion of debt discount
    
    
    14
    
    
    
    226Losses on disposal of property, equipment and other assets
    
    
    174
    
    
    
    340Tax benefit relating to stock option exercises
    
    
    106
    
    
    
    Deferred income taxes
    
    
    7,564
    
    
    
    (522
    )Change in operating assets and liabilities:Receivables
    
    
    (709
    )
    
    
    9,687Inventories
    
    
    (20,823
    )
    
    
    (16,668
    )Prepaid expenses and other current assets
    
    
    (1,246
    )
    
    
    (1,157
    )Accounts payable
    
    
    7,767
    
    
    
    8,029Accrued payroll, accrued expenses and
    
    
    392
    
    
    
    6,029other current liabilities
Other operating activities
    
    
    (556
    )
    
    
    (650
    )Net cash provided by operating activities
    
    
    15,171
    
    
    
    16,028Cash flows from investing activities:Capital expenditures
    
    
    (4,817
    )
    
    
    (1,522
    )Other investing activities
    
    
    (817
    )
    
    
    (858
    )Net cash used in investing activities
    
    
    (5,634
    )
    
    
    (2,380
    )Cash flows from financing activities:Borrowings under senior credit facility
    
    
    20,600
    
    
    
    56,000Payments under senior credit facility
    
    
    (20,600
    )
    
    
    (68,000
    )Payment of debt issuance costs
    
    
    (854
    )
    
    
    Payments on capital lease obligations
    
    
    (2,554
    )
    
    
    (2,774
    )Proceeds from seller financing arrangements
    
    
    
    
    
    
    600Payments on seller financing arrangements
    
    
    (45
    )
    
    
    (41
    )Proceeds from repayment of stockholder receivable
    
    
    8
    
    
    
    Proceeds from exercise of stock options
    
    
    346
    
    
    
    8Other financing activities
    
    
    (98
    )
    
    
    (92
    )Net cash used in financing activities
    
    
    (3,197
    )
    
    
    (14,299
    )Net increase (decrease) in cash and cash equivalents
    
    
    6,340
    
    
    
    (651
    )Cash and cash equivalents, beginning of period
    
    
    37,221
    
    
    
    15,519Cash and cash equivalents, end of period
    
    $
    43,561
    
    
    $
    14,868
 The accompanying notes are an integral part of these consolidated financial statements. 7




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CSK AUTO CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Thirteen Weeks Ended May 2, 2004 CSK Auto Corporation is a holding company. At May 2, 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 May 2, 2004,
we operated 1,117 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  Accounting Change and Restatements of Financial Statements We
implemented a voluntary change in accounting for inventories, which is
effected by a retroactive restatement of our historical financial statements. In addition, we
identified errors in our accounting for leases and vendor allowances, which required a restatement
of our previously issued historical financial statements. Change in inventory accounting method We historically used the last-in, first-out (LIFO) method for accounting for inventories.
In the fourth quarter of fiscal 2004, we changed our method of determining the cost of
inventories to the first-in, first-out (FIFO) method. We have applied this accounting change
retroactively by restating prior period financial statements as required by Accounting Principles
Board Opinion No. 20, Accounting Changes. Our inventory levels over the last five years have increased modestly due to new store
openings and growth. During the same time, we were able to reduce the overall unit costs of our
inventories. In this environment, our LIFO method of accounting was resulting in an increasing
difference between the carrying cost of inventories on our balance sheet and our current product
acquisition costs. The carrying cost on our balance sheet under LIFO reflected the higher prices
paid for inventories in prior periods and also included higher costs paid for inventories purchased
in connection with business acquisitions the last of which occurred in fiscal 1999. Since we do not
expect the pricing environment for most products we purchase to change dramatically in the
foreseeable future, this difference between LIFO cost and replacement cost can be expected to
continue and possibly increase as we continue to pursue strategies to reduce our product
acquisition costs. In the fourth quarter of fiscal 2004, we changed to the FIFO method of
inventory accounting which will result in reported inventory cost on our balance sheet that
approximates replacement costs, which we believe is preferable to continuing to report our
inventories at the higher costs we experienced in prior years. Although the primary effect of the change was a decrease in inventory on our balance sheet, it
also has a significant impact on our determination of cost of sales because of differences in unit
costs and increases in the amount of vendor allowances and inventory purchasing and handling costs
that will remain in inventory at period end under FIFO. As shown in the tables below, the change
had the effect of decreasing our cost of sales and increasing our gross profit by approximately
$0.9 million in the thirteen weeks ended May 2, 2004. The change increased our cost of sales and
decreased our gross profit by approximately $13.8 million in the thirteen weeks ended May 4, 2003
primarily as a result of higher product costs under the FIFO method. Lease accounting restatement We operate in excess of 1,100 leased locations, primarily consisting of retail stores but also
including warehouses, distribution centers and our corporate office facilities. We identified
accounting errors pertaining to the evaluation of lease terms (thus impacting our amortization of
leasehold improvements), free rent periods (i.e., rent holidays), straight-lining of minimum
escalating lease payments, the classification of landlord incentives/allowances, and the treatment
of costs incurred for certain stores which are constructed and subsequently transferred to our
landlords. We have corrected these errors by restating prior period financial statements. We reevaluated our lease terms for our operating leases, which resulted in a reduction to the
useful life assumption for depreciating leasehold improvements. We previously depreciated leasehold
improvements over the term of the lease which consisted of the initial term and could include one
renewal option period but no more than 15 years in total. We now include renewal option periods
when determining the life of our leasehold improvements only if they are to be included in the lease term as defined in Statement of Financial Accounting
Standards (SFAS) No. 13, Accounting for Leases, as amended. The impact of this change increased
our annual depreciation expense for the earlier years of the leases. 8




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CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) We previously recorded build-out allowances received from landlords as an offset to the
amounts capitalized as leasehold improvements. We are now recording such allowances as a deferred
rent liability with a related increase in recorded leasehold
improvements or property assets resulting in an increase to
depreciation expense while the amortization of the deferred rent liability reduces operating rent
expense over the lease term. This correction also increases our reported capital expenditures
(investing cash flows) and our operating cash flows we report in our Consolidated Statements of
Cash Flows. We identified a small number of stores where the extent of our monetary involvement in the
construction of the store (based on the excess of our construction costs over the landlords
reimbursement to us of such costs) results in the Company being
considered the owner of the property during the construction period
and in capitalization of the construction costs as an asset
and recording the landlord reimbursement as construction debt under Emerging Issues Task Force
(EITF) No. 97-10, The Effect of Lessee Involvement in Asset Construction (EITF 97-10). We also identified situations where we did not straight-line escalating rent or recognize rent
for free rent periods. The net effect of the required adjustments to address these errors increased
rent expenses in our historical financial statements. The Companys overall cash flow was not impacted by these corrections. Vendor allowance restatements We
historically recognized estimated vendor allowances in a systematic
manner ratably over our expected
performance period that ran from October through September. This recognition period was initially
selected to match the estimated benefits to be received with
estimated costs the Company was incurring to perform
promotional activities required to earn the vendor allowances. We reevaluated this accounting
convention and concluded that the recognition period should be
corrected to the contractual period which corresponds to a calendar year because
substantially all allowances are determined and collected based on purchases from vendors in the
calendar year. We also identified vendor allowances recorded in fiscal 2003 that will not be collected and
have determined that the amounts were recorded because of errors in earlier periods.
In addition, we identified certain vendor allowances recorded in improper periods. We have applied the changes required retroactively by restating prior period
financial statements. Effect of restatements on retained earnings The cumulative effect of the accounting restatements and the retroactive accounting change
increased our accumulated deficit at February 2, 2003 by approximately $112.8 million and consisted
of approximately $78.4 million attributable to the inventory method change, approximately $11.8
million for the lease accounting errors and approximately $22.6 million for the vendor allowance
errors. The effect of the above mentioned errors and accounting change on our previously reported
financial statements are detailed as follows. The effect of the errors and accounting change are
presented for the following statements:  
    Consolidated Balance Sheet as of May 2, 2004 and February 1, 2004;
    Consolidated Statements of Operations for the thirteen weeks ended May 2, 2004 and May 4, 2003;
    Consolidated Statement of Stockholders Equity as of May 2, 2004; and
    Consolidated Statements of Cash Flows for the thirteen weeks ended May 2, 2004 and May 4, 2003. 9




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CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) CONSOLIDATED BALANCE SHEET
AS OF May 2, 2004
(in thousands)
(Unaudited) Vendor Allowances
    
    
    AsAs
    
    
    
    
    
    
    Change in
    
    
    
    
    
    
    Corrected
    
    
    InventoryPreviously
    
    
    
    
    
    
    Recognition
    
    
    Other
    
    
    and
    
    
    Accounting
    
    
    AsReported
    
    
    Leases
    
    
    Period
    
    
    Items
    
    
    Restated
    
    
    Change
    
    
    RestatedASSETSCash and cash equivalents
    
    $
    43,561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,561
    
    
    
    
    
    
    $
    43,561Receivables, net of allowances
    
    
    139,124
    
    
    
    
    
    
    
    (28,862
    )
    
    
    (16,497
    )
    
    
    93,765
    
    
    
    
    
    
    
    93,765Inventories
    
    
    678,626
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    678,626
    
    
    
    (142,538
    )
    
    
    536,088Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    11,451
    
    
    
    6,540
    
    
    
    17,991
    
    
    
    42,390
    
    
    
    60,381Prepaid expenses and other current
assets
    
    
    22,369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,369
    
    
    
    
    
    
    
    22,369Total current assets
    
    
    883,680
    
    
    
    
    
    
    
    (17,411
    )
    
    
    (9,957
    )
    
    
    856,312
    
    
    
    (100,148
    )
    
    
    756,164Property and equipment, net
    
    
    121,589
    
    
    
    15,135
    
    
    
    
    
    
    
    
    
    
    
    136,724
    
    
    
    
    
    
    
    136,724Leasehold interests, net
    
    
    11,810
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,810
    
    
    
    
    
    
    
    11,810Goodwill, net
    
    
    127,069
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,069
    
    
    
    
    
    
    
    127,069Other assets, net
    
    
    36,711
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    36,711
    
    
    
    
    
    
    
    36,711Total assets
    
    $
    1,180,859
    
    
    
    15,135
    
    
    
    (17,411
    )
    
    
    (9,957
    )
    
    
    1,168,626
    
    
    
    (100,148
    )
    
    $
    1,068,478LIABILITIES AND
STOCKHOLDERS EQUITYAccounts payable
    
    $
    188,079
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,079
    
    
    
    
    
    
    $
    188,079Accrued payroll and related expenses
    
    
    48,174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,174
    
    
    
    
    
    
    
    48,174Accrued expenses and other current
liabilities
    
    
    48,545
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,545
    
    
    
    
    
    
    
    48,545Deferred income taxes
    
    
    6,778
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,778
    
    
    
    (6,778
    )
    
    
    Current maturities of long term debt
    
    
    2,550
    
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    2,780
    
    
    
    
    
    
    
    2,780Current maturities of capital lease
obligations
    
    
    9,892
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,892
    
    
    
    
    
    
    
    9,892Total current liabilities
    
    
    304,018
    
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    304,248
    
    
    
    (6,778
    )
    
    
    297,470Long term debt
    
    
    483,237
    
    
    
    6,181
    
    
    
    
    
    
    
    
    
    
    
    489,418
    
    
    
    
    
    
    
    489,418Obligations under capital leases
    
    
    12,811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,811
    
    
    
    
    
    
    
    12,811Deferred income taxes
    
    
    13,209
    
    
    
    (8,856
    )
    
    
    
    
    
    
    
    
    
    
    4,353
    
    
    
    (932
    )
    
    
    3,421Other
    
    
    22,613
    
    
    
    31,059
    
    
    
    
    
    
    
    
    
    
    
    53,672
    
    
    
    
    
    
    
    53,672Total non-current liabilities
    
    
    531,870
    
    
    
    28,384
    
    
    
    
    
    
    
    
    
    
    
    560,254
    
    
    
    (932
    )
    
    
    559,322Commitments and contingencies
Stockholders equityCommon stock
    
    
    465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    465
    
    
    
    
    
    
    
    465Additional paid-in capital
    
    
    467,028
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    467,028
    
    
    
    
    
    
    
    467,028Stockholder receivable
    
    
    (65
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    (65
    )Accumulated deficit
    
    
    (122,457
    )
    
    
    (13,479
    )
    
    
    (17,411
    )
    
    
    (9,957
    )
    
    
    (163,304
    )
    
    
    (92,438
    )
    
    
    (255,742
    )Total stockholders equity
    
    
    344,971
    
    
    
    (13,479
    )
    
    
    (17,411
    )
    
    
    (9,957
    )
    
    
    304,124
    
    
    
    (92,438
    )
    
    
    211,686Total liabilities and stockholders
equity
    
    $
    1,180,859
    
    
    
    15,135
    
    
    
    (17,411
    )
    
    
    (9,957
    )
    
    
    1,168,626
    
    
    
    (100,148
    )
    
    $
    1,068,478
 10




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) CONSOLIDATED BALANCE SHEET
AS OF FEBRUARY 1, 2004
(in thousands)
(Unaudited) Vendor Allowances
    
    
    AsAs
    
    
    
    
    
    
    Change in
    
    
    
    
    
    
    Corrected
    
    
    InventoryPreviously
    
    
    
    
    
    
    Recognition
    
    
    Other
    
    
    and
    
    
    AccountingReported
    
    
    Leases
    
    
    Period
    
    
    Items
    
    
    Restated
    
    
    Change
    
    
    As RestatedASSETSCash and cash equivalents
    
    $
    37,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,221
    
    
    
    
    
    
    $
    37,221Receivables, net of allowances
    
    
    136,523
    
    
    
    
    
    
    
    (29,147
    )
    
    
    (15,444
    )
    
    
    91,932
    
    
    
    

    
    
    
    91,932Inventories
    
    
    666,263
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    666,263
    
    
    
    (143,414
    )
    
    
    522,849Deferred
income taxes
    
    
    787
    
    
    
    
    
    
    
    11,562
    
    
    
    6,127
    
    
    
    18,476
    
    
    
    49,381
    
    
    
    67,857Prepaid expenses and other current
assets
    
    
    21,123
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    
    21,123
    
    
    
    
    
    
    
    21,123Total current assets
    
    
    861,917
    
    
    
    
    
    
    
    (17,585
    )
    
    
    (9,317
    )
    
    
    835,015
    
    
    
    (94,033
    )
    
    
    740,982Property and equipment, net
    
    
    124,813
    
    
    
    15,462
    
    
    
    
    
    
    
    
    
    
    
    140,275
    
    
    
    
    
    
    
    140,275Leasehold interests, net
    
    
    12,278
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,278
    
    
    
    
    
    
    
    12,278Goodwill, net
    
    
    127,069
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,069
    
    
    
    
    
    
    
    127,069Other assets, net
    
    
    27,388
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,388
    
    
    
    
    
    
    
    27,388Total assets
    
    $
    1,153,465
    
    
    
    15,462
    
    
    
    (17,585
    )
    
    
    (9,317
    )
    
    
    1,142,025
    
    
    
    (94,033
    )
    
    $
    1,047,992LIABILITIES AND
STOCKHOLDERS EQUITYAccounts payable
    
    $
    177,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177,150
    
    
    
    
    
    
    $
    177,150Accrued payroll and related expenses
    
    
    47,498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,498
    
    
    
    
    
    
    
    47,498Accrued expenses and other current
liabilities
    
    
    49,617
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,617
    
    
    
    
    
    
    
    49,617Current maturities of long term debt
    
    
    2,550
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    2,743
    
    
    
    
    
    
    
    2,743Current maturities of capital lease
obligations
    
    
    10,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,240
    
    
    
    
    
    
    
    10,240Total current liabilities
    
    
    287,055
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    287,248
    
    
    
    
    
    
    
    287,248Long term debt
    
    
    492,463
    
    
    
    6,263
    
    
    
    
    
    
    
    
    
    
    
    498,726
    
    
    
    
    
    
    
    498,726Obligations under capital leases
    
    
    15,017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,017
    
    
    
    
    
    
    
    15,017Deferred income taxes
    
    
    13,121
    
    
    
    (8,727
    )
    
    
    
    
    
    
    
    
    
    
    4,394
    
    
    
    (1,061
    )
    
    
    3,333Other
    
    
    14,251
    
    
    
    31,006
    
    
    
    
    
    
    
    
    
    
    
    45,257
    
    
    
    
    
    
    
    45,257Total non-current liabilities
    
    
    534,852
    
    
    
    28,542
    
    
    
    
    
    
    
    
    
    
    
    563,394
    
    
    
    (1,061
    )
    
    
    562,333Commitments and contingencies
Stockholders equityCommon stock
    
    
    465
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    465
    
    
    
    
    
    
    
    465Additional paid-in capital
    
    
    466,576
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    466,576
    
    
    
    
    
    
    
    466,576Stockholder receivable
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73
    )
    
    
    
    
    
    
    (73
    )Accumulated deficit
    
    
    (135,410
    )
    
    
    (13,273
    )
    
    
    (17,585
    )
    
    
    (9,317
    )
    
    
    (175,585
    )
    
    
    (92,972
    )
    
    
    (268,557
    )Total stockholders equity
    
    
    331,558
    
    
    
    (13,273
    )
    
    
    (17,585
    )
    
    
    (9,317
    )
    
    
    291,383
    
    
    
    (92,972
    )
    
    
    198,411Total liabilities and stockholders
equity
    
    $
    1,153,465
    
    
    
    15,462
    
    
    
    (17,585
    )
    
    
    (9,317
    )
    
    
    1,142,025
    
    
    
    (94,033
    )
    
    $
    1,047,992
 11




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) CONSOLIDATED STATEMENT OF OPERATIONS
for the Thirteen Weeks Ended May 2, 2004
(in thousands, except per share data)
(Unaudited) Vendor AllowancesAs
    
    
    
    
    
    
    Change in
    
    
    
    
    
    
    
    
    
    
    InventoryPreviously
    
    
    
    
    
    
    Recognition
    
    
    Other
    
    
    As Corrected
    
    
    AccountingReported
    
    
    Leases
    
    
    Period
    
    
    Items
    
    
    and Restated
    
    
    Change
    
    
    As RestatedNet Sales
    
    $
    397,054
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    397,054
    
    
    
    
    
    
    $
    397,054Cost of Sales
    
    
    208,458
    
    
    
    9
    
    
    
    (285
    )
    
    
    1,053
    
    
    
    209,235
    
    
    
    (876
    )
    
    
    208,359Gross Profit
    
    
    188,596
    
    
    
    (9
    )
    
    
    285
    
    
    
    (1,053
    )
    
    
    187,819
    
    
    
    876
    
    
    
    188,695Other costs and expenses:Operating and administrative
    
    
    158,745
    
    
    
    (33
    )
    
    
    
    
    
    
    
    
    
    
    158,712
    
    
    
    
    
    
    
    158,712Store closing costs
    
    
    326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    326
    
    
    
    
    
    
    
    326Operating profit
    
    
    29,525
    
    
    
    24
    
    
    
    285
    
    
    
    (1,053
    )
    
    
    28,781
    
    
    
    876
    
    
    
    29,657Interest expense
    
    
    8,255
    
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    8,614
    
    
    
    
    
    
    
    8,614Income (loss) before income taxes
    
    
    21,270
    
    
    
    (335
    )
    
    
    285
    
    
    
    (1,053
    )
    
    
    20,167
    
    
    
    876
    
    
    
    21,043Income tax expense (benefit)
    
    
    8,317
    
    
    
    (132
    )
    
    
    112
    
    
    
    (414
    )
    
    
    7,883
    
    
    
    345
    
    
    
    8,228Net income (loss)
    
    $
    12,953
    
    
    
    (203
    )
    
    
    173
    
    
    
    (639
    )
    
    $
    12,284
    
    
    
    531
    
    
    $
    12,815Basic earnings per share:Net income (loss) per share
    
    $
    0.28
    
    
    
    (0.00
    )
    
    
    0.00
    
    
    
    (0.01
    )
    
    $
    0.27
    
    
    
    0.01
    
    
    $
    0.28Shares used in computing per
share
amounts
    
    
    46,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,517Diluted earnings per share:Net income (loss) per share
    
    $
    0.28
    
    
    
    (0.01
    )
    
    
    0.00
    
    
    
    (0.01
    )
    
    $
    0.26
    
    
    
    0.01
    
    
    $
    0.27Shares used in computing per
share
amounts
    
    
    46,885
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,885
 12




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) CONSOLIDATED STATEMENT OF OPERATIONS
for the Thirteen Weeks Ended May 4, 2003
(in thousands, except per share data)
(Unaudited) Vendor AllowancesAs
    
    
    
    
    
    
    Change in
    
    
    
    
    
    
    As Corrected
    
    
    InventoryPreviously
    
    
    
    
    
    
    Recognition
    
    
    Other
    
    
    and
    
    
    AccountingReported
    
    
    Leases
    
    
    Period
    
    
    Items
    
    
    Restated
    
    
    Change
    
    
    As RestatedNet Sales
    
    $
    377,449
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    377,449
    
    
    
    
    
    
    $
    377,449Cost of Sales
    
    
    202,425
    
    
    
    8
    
    
    
    (1,559
    )
    
    
    (117
    )
    
    
    200,757
    
    
    
    13,839
    
    
    
    214,596Gross Profit
    
    
    175,024
    
    
    
    (8
    )
    
    
    1,559
    
    
    
    117
    
    
    
    176,692
    
    
    
    (13,839
    )
    
    
    162,853Other costs and expenses:Operating and administrative
    
    
    148,723
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    148,959
    
    
    
    
    
    
    
    148,959Store closing costs
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    
    
    
    
    93Operating profit
    
    
    26,208
    
    
    
    (244
    )
    
    
    1,559
    
    
    
    117
    
    
    
    27,640
    
    
    
    (13,839
    )
    
    
    13,801Interest expense
    
    
    13,936
    
    
    
    334
    
    
    
    
    
    
    
    
    
    
    
    14,270
    
    
    
    
    
    
    
    14,270Income (loss) before income taxes
    
    
    12,272
    
    
    
    (578
    )
    
    
    1,559
    
    
    
    117
    
    
    
    13,370
    
    
    
    (13,839
    )
    
    
    (469
    )Income tax expense (benefit)
    
    
    4,749
    
    
    
    (227
    )
    
    
    613
    
    
    
    46
    
    
    
    5,181
    
    
    
    (5,440
    )
    
    
    (259
    )Net income (loss)
    
    $
    7,523
    
    
    
    (351
    )
    
    
    946
    
    
    
    71
    
    
    $
    8,189
    
    
    
    (8,399
    )
    
    $
    (210
    )Basic earnings per share:Net income (loss) per share
    
    $
    0.17
    
    
    
    (0.01
    )
    
    
    0.02
    
    
    
    0.00
    
    
    $
    0.18
    
    
    
    (0.19
    )
    
    $
    (0.01
    )Shares used in computing per
share amounts
    
    
    45,149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,149Diluted earnings per share:Net income (loss) per share
    
    $
    0.17
    
    
    
    (0.01
    )
    
    
    0.02
    
    
    
    0.00
    
    
    $
    0.18
    
    
    
    (0.19
    )
    
    $
    (0.01
    )Shares used in computing per
share amounts
    
    
    45,188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,149
 13




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) CONSOLIDATED STATEMENT OF CASH FLOWS
for the Thirteen Weeks Ended May 2, 2004
(in thousands)
(Unaudited) Vendor Allowances
    
    
    AsAs
    
    
    
    
    
    
    Change in
    
    
    
    
    
    
    Corrected
    
    
    InventoryPreviously
    
    
    
    
    
    
    Recognition
    
    
    Other
    
    
    and
    
    
    Accounting
    
    
    AsReported
    
    
    Leases
    
    
    Period
    
    
    Items
    
    
    Restated
    
    
    Change
    
    
    RestatedCash Flows provided by (used in) operating
activities:Net income (loss)
    
    $
    12,953
    
    
    
    (203
    )
    
    
    173
    
    
    
    (639
    )
    
    
    12,284
    
    
    
    531
    
    
    $
    12,815Adjustments to reconcile net income (loss) to
net cash provided by operating activites:Depreciation & amortization on PP&E
    
    
    7,332
    
    
    
    853
    
    
    
    
    
    
    
    
    
    
    
    8,185
    
    
    
    
    
    
    
    8,185Amortization of other items
    
    
    1,032
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,032
    
    
    
    
    
    
    
    1,032Amortization of deferred financing costs
    
    
    483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    483
    
    
    
    
    
    
    
    483Amortization of long term debt fair market
value adjustment
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    (27
    )Accretion of debt discount
    
    
    14
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14Loss on disposal of property, equipment and
other assets
    
    
    235
    
    
    
    (61
    )
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    174Tax benefit relating to stock option exercises
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    106Deferred income taxes
    
    
    7,653
    
    
    
    (132
    )
    
    
    112
    
    
    
    (414
    )
    
    
    7,219
    
    
    
    345
    
    
    
    7,564Changes in operating assets and liabilities:Receivables
    
    
    (1,477
    )
    
    
    
    
    
    
    (285
    )
    
    
    1,053
    
    
    
    (709
    )
    
    
    
    
    
    
    (709
    )Inventories
    
    
    (19,947
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,947
    )
    
    
    (876
    )
    
    
    (20,823
    )Prepaid expenses and other current assets
    
    
    (1,246
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,246
    )
    
    
    
    
    
    
    (1,246
    )Accounts payable
    
    
    7,767
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,767
    
    
    
    
    
    
    
    7,767Accrued payroll, accrued expenses, & other
current liabilities
    
    
    392
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    392
    
    
    
    
    
    
    
    392Other operating activities
    
    
    (609
    )
    
    
    53
    
    
    
    
    
    
    
    
    
    
    
    (556
    )
    
    
    
    
    
    
    (556
    )Net cash provided by operating activities
    
    
    14,661
    
    
    
    510
    
    
    
    
    
    
    
    
    
    
    
    15,171
    
    
    
    
    
    
    
    15,171Capital expenditures
    
    
    (4,352
    )
    
    
    (465
    )
    
    
    
    
    
    
    
    
    
    
    (4,817
    )
    
    
    
    
    
    
    (4,817
    )Other investing activities
    
    
    (817
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (817
    )
    
    
    
    
    
    
    (817
    )Net cash used in investing activities:
    
    
    (5,169
    )
    
    
    (465
    )
    
    
    
    
    
    
    
    
    
    
    (5,634
    )
    
    
    
    
    
    
    (5,634
    )Borrowings under senior credit facility
    
    
    20,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,600
    
    
    
    
    
    
    
    20,600Payments under senior credit facility
    
    
    (20,600
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,600
    )
    
    
    
    
    
    
    (20,600
    )Payment of debt issuance costs
    
    
    (854
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (854
    )
    
    
    
    
    
    
    (854
    )Payments on capital lease obligations
    
    
    (2,554
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,554
    )
    
    
    
    
    
    
    (2,554
    )Exercise of options
    
    
    346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    346
    
    
    
    
    
    
    
    346Payments on seller financing arrangements
    
    
    
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    
    
    
    
    (45
    )Recovery of stockholders receivable
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Other financing activities
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    (98
    )Net cash used in financing activities:
    
    
    (3,152
    )
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    (3,197
    )
    
    
    
    
    
    
    (3,197
    )Net increase in cash
    
    
    6,340
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,340Cash and cash equivalents, beginning of period
    
    
    37,221
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,221Cash and cash equivalents, end of period
    
    $
    43,561
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    43,561
 14




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) CONSOLIDATED STATEMENT OF CASH FLOWS
for the Thirteen Weeks Ended May 4, 2003
($ in thousands)
(Unaudited) Vendor Allowances
    
    
    AsAs
    
    
    
    
    
    
    Change in
    
    
    
    
    
    
    Corrected
    
    
    InventoryPreviously
    
    
    
    
    
    
    Recognition
    
    
    Other
    
    
    and
    
    
    Accounting
    
    
    AsReported
    
    
    Leases
    
    
    Period
    
    
    Items
    
    
    Restated
    
    
    Change
    
    
    RestatedCash Flows provided by (used in) operating
activities:Net income (loss)
    
    $
    7,523
    
    
    
    (351
    )
    
    
    946
    
    
    
    71
    
    
    
    8,189
    
    
    
    (8,399
    )
    
    $
    (210
    )Adjustments to reconcile net income (loss) to
net cash provided by operating activites:Depreciation & amortization on PP&E
    
    
    7,712
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    8,712
    
    
    
    
    
    
    
    8,712Amortization of other items
    
    
    926
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    926
    
    
    
    
    
    
    
    926Amortization of deferred financing costs
    
    
    1,286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,286
    
    
    
    
    
    
    
    1,286Amortization of long term debt fair market
value adjustment
    
    
    
    
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accretion of debt discount
    
    
    226
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226
    
    
    
    
    
    
    
    226Loss on disposal of property, equipment and
other assets
    
    
    357
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    340
    
    
    
    
    
    
    
    340Tax benefit relating to stock option exercises
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    4,486
    
    
    
    (227
    )
    
    
    613
    
    
    
    46
    
    
    
    4,918
    
    
    
    (5,440
    )
    
    
    (522
    )Changes in operating assets and liabilities:Receivables
    
    
    11,363
    
    
    
    
    
    
    
    (1,559
    )
    
    
    (117
    )
    
    
    9,687
    
    
    
    
    
    
    
    9,687Inventories
    
    
    (30,507
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,507
    )
    
    
    13,839
    
    
    
    (16,668
    )Prepaid expenses and other current assets
    
    
    (1,157
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,157
    )
    
    
    
    
    
    
    (1,157
    )Accounts payable
    
    
    8,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,029
    
    
    
    
    
    
    
    8,029Accrued payroll, accrued expenses, & other
current liabilities
    
    
    6,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,029
    
    
    
    
    
    
    
    6,029Other operating activities
    
    
    (586
    )
    
    
    (64
    )
    
    
    
    
    
    
    
    
    
    
    (650
    )
    
    
    
    
    
    
    (650
    )Net cash provided by operating activities
    
    
    15,687
    
    
    
    341
    
    
    
    
    
    
    
    
    
    
    
    16,028
    
    
    
    
    
    
    
    16,028Capital expenditures
    
    
    (622
    )
    
    
    (900
    )
    
    
    
    
    
    
    
    
    
    
    (1,522
    )
    
    
    
    
    
    
    (1,522
    )Other investing activities
    
    
    (858
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (858
    )
    
    
    
    
    
    
    (858
    )Net cash used in investing activities:
    
    
    (1,480
    )
    
    
    (900
    )
    
    
    
    
    
    
    
    
    
    
    (2,380
    )
    
    
    
    
    
    
    (2,380
    )Borrowings under senior credit facility
    
    
    56,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,000
    
    
    
    
    
    
    
    56,000Payments under senior credit facility
    
    
    (68,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68,000
    )
    
    
    
    
    
    
    (68,000
    )Payment of debt issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on capital lease obligations
    
    
    (2,774
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,774
    )
    
    
    
    
    
    
    (2,774
    )Exercise of options
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Proceeds from seller financing arrangements
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    600Payments on seller financing arrangements
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    (41
    )Recovery of stockholders receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other financing activities
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    (92
    )Net cash provided by (used in) financing
activities:
    
    
    (14,858
    )
    
    
    559
    
    
    
    
    
    
    
    
    
    
    
    (14,299
    )
    
    
    
    
    
    
    (14,299
    )Net decrease in cash
    
    
    (651
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (651
    )Cash and cash equivalents, beginning of period
    
    
    15,519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,519Cash and cash equivalents, end of period
    
    $
    14,868
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $

    14,868
 15




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) Note 2  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,as restated, as included in our
Annual Report on Form 10-K, dated January 30, 2005, filed with the SEC on May 2, 2005. Note 3  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. As of May 2, 2004, we have adopted FIN
46 and FIN 46R with no impact on our financial statements. The FASB has released an Exposure Draft, Share-Based Payment  An Amendment to FASB
Statements No. 123 and 95, which revises the rules governing stock option accounting. The exposure
draft requires expense recognition of stock options and certain employee stock purchase plans in
the statements of operations. The comment period ends June 30, 2004. The effective date of this
Statement is expected to be in fiscal 2005. The pro forma impact on the first quarter of fiscal
2004 of expense recognition of unvested stock options is calculated, as required under SFAS No.
123, Accounting for Stock-Based Compensation, and disclosed in Note 8 of these financial
statements. Note 4  Inventories Inventories are valued at the lower of cost or market, cost being determined utilizing the
First-in First-out (FIFO) method. In most instances, we retain the ability to return damaged,
obsolete and excess merchandise inventory to our vendors. In situations where we do not have a
right to return merchandise inventory (generally for certain import products), we may from time to
time record an allowance representing an estimated loss for the difference between the cost of any
damaged, obsolete or excess product and the estimated retail selling price. Inventory levels and
margins earned on all products are monitored monthly. Quarterly, we assess whether we expect to
sell any significant amount of inventory below cost and, if so, record an estimated allowance. We
refer to this allowance as an obsolescence allowance. At each balance sheet reporting date, we adjust our inventory carrying balances by the
capitalization of certain operating and overhead administrative costs associated with purchasing
and handling of inventory, an estimation of vendor allowances that remain in ending inventory at
period end and an estimation of allowances for inventory shrinkage and obsolescence as follows: May 2, 2004
    
    
    
    February 1, 2004 (1)(Restated)
    
    
    (Restated)($ in millions)FIFO cost
    
    $
    568.5
    
    
    $
    557.0Administrative and overhead costs
    
    
    39.9
    
    
    
    39.6Vendor allowances
    
    
    (58.4
    )
    
    
    (60.4
    )Shrinkage
    
    
    (13.9
    )
    
    
    (13.4
    )Net inventory
    
    $
    536.1
    
    
    $
    522.8
 16




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)   1)
    
    FIFO cost, capitalized administration and overhead costs, and vendor allowance amounts
have been adjusted from those previously reported in our Form 10-K , filed with the SEC on
May 2, 2005, to reflect the correct balances. Net inventory did not change. Note 5  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 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 using
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 three 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. Operating expenses, such as utilities and
repairs, are expensed as incurred and no provision is made for employee termination costs. During
the period that they remain open for business, the rent and other operating expenses for the stores
to be closed continue to be reflected in normal operating expenses. As of May 2, 2004, we had a total of 161 store locations included in the allowance for store
closing costs. Of this total, 17 locations were vacant and 144 locations were subleased. In
addition to these stores, we had 56 service centers of which 3 were vacant and 53 were subleased.
Future rental payments will be made through the expiration of the non-cancelable leases, the
longest of which expires January 2018. Activity in the allowance for store closings and the related payments for the first quarter of
fiscal 2004 are as follows ($ in thousands): Balance, beginning of year
    
    $
    12,148Store closing costs:Provision for store closing costs
    
    
    29Revisions in estimates
    
    
    (4
    )Accretion
    
    
    153Operating expenses and other
    
    
    148Store closing costs, net
    
    
    326Payments:Rent expense, net of sublease income
    
    
    (806
    )Occupancy and other expenses
    
    
    (223
    )Lease buyouts and sublease commissions
    
    
    (1,211
    )Total payments
    
    
    (2,240
    )Balance as of May 2, 2004
    
    $
    10,234
 17




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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) We expect cash outflows for vacant stores, sublease losses and lease buyouts of approximately
$6.0 million during fiscal 2004, with the remainder of cash outflows relating to these items
primarily occurring during fiscal 2005 through 2007. Note 6  Long Term Debt Outstanding debt, excluding capital leases, is comprised of the following ($ in thousands): May 2,
    
    
    February 1,2004
    
    
    2004(Restated)
    
    
    (Restated)Senior credit facility  term loan
    
    $
    255,000
    
    
    $
    255,000Senior credit facility  revolving credit commitment
    
    
    
    
    
    
    12% senior notes
    
    
    14,910
    
    
    
    14,910Unamortized original issue discount on 12% senior notes
    
    
    (135
    )
    
    
    (149
    )7% senior subordinated notes
    
    
    225,000
    
    
    
    225,000Seller financing arrangements
    
    
    6,411
    
    
    
    6,456Notes and loans, including current maturities
    
    
    501,186
    
    
    
    501,217Fair market value adjustment on $100.0 million of 7%
senior subordinated notes
(SFAS No. 133 hedge accounting adjustment)
    
    
    (9,213
    )
    
    
    Fair market value adjustment on remaining balance of
12% senior notes (SFAS No. 133 hedge accounting
adjustment)
    
    
    225
    
    
    
    252Total debt
    
    
    492,198
    
    
    
    501,469Less: current maturities under senior credit facility
    
    
    2,550
    
    
    
    2,550seller financing arrangements
    
    
    230
    
    
    
    193Total long term debt
    
    $
    489,418
    
    
    $
    498,726
 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. 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 May 2, 2004, the
fair value of the interest rate swap approximated $9.2 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 7  Earnings Per Share Calculation of the numerator and denominator used in computing per share amounts is summarized
as follows (in thousands): Thirteen Weeks EndedMay 2, 2004
    
    
    May 4, 2003(Restated)
    
    
    (Restated)Numerator for basic and diluted EPS:Net income (loss)
    
    $
    12,815
    
    
    $
    (210
    )Denominator for basic EPS:Weighted average shares outstanding (basic)
    
    
    46,517
    
    
    
    45,149Denominator for diluted EPS:Weighted average shares outstanding (basic)
    
    
    46,517
    
    
    
    45,149
 18




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##### Table of Contents



Thirteen Weeks EndedMay 2, 2004
    
    
    May 4, 2003(Restated)
    
    
    (Restated)Effect of dilutive stock options
    
    
    368
    
    
    
    Weighted average shares outstanding (diluted)
    
    
    46,885
    
    
    
    45,149Shares excluded as a result of anti-dilution:Stock options
    
    
    346
    
    
    
    2,969
 Note 8  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 (loss) for the quarters ended May 2, 2004 or May 4,
2003 as the intrinsic value of all options granted under those plans was zero. The following table
illustrates the effect on net income and 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 WeeksEndedMay 2,
    
    
    May 4,2004
    
    
    2003(Restated)
    
    
    (Restated)Net income (loss)  as reported
    
    $
    12,815
    
    
    $
    (210
    )Less: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related income taxes
    
    
    (170
    )
    
    
    (245
    )Net income (loss)  pro forma
    
    $
    12,645
    
    
    $
    (455
    )Earnings per share  basic:As reported
    
    $
    0.28
    
    
    $
    (0.01
    )Pro forma
    
    
    0.27
    
    
    
    (0.01
    )Earnings per share  diluted:As reported
    
    $
    0.27
    
    
    $
    (0.01
    )Pro forma
    
    
    0.27
    
    
    
    (0.01
    )
 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, 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 requesting confirmation of our desire to proceed with the
scheduling of an appeals conference concerning this matter. We have responded affirmatively to the
Boards letter and anticipate that an appeals conference before an appeals division attorney or
auditor will be scheduled to take place within the next few months. Our practices 19




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CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued) 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. 20




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Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Accounting Change and Restatements of Financial Statements We
implemented a voluntary change in accounting for inventories, which is
effected by a retroactive restatement of our historical financial statements. In addition, we
identified errors in our accounting for leases and vendor allowances, which required a restatement
of our previously issued historical financial statements. Change in inventory accounting method We historically used the last-in, first-out (LIFO) method for accounting for inventories.
In the fourth quarter of fiscal 2004, we changed our method of determining the cost of
inventories to the first-in, first-out (FIFO) method. We have applied this accounting change
retroactively by restating prior period financial statements as required by Accounting Principles
Board Opinion No. 20, Accounting Changes. Our inventory levels over the last five years have increased modestly due to new store
openings and growth. During the same time, we were able to reduce the overall unit costs of our
inventories. In this environment, our LIFO method of accounting was resulting in an increasing
difference between the carrying cost of inventories on our balance sheet and our current product
acquisition costs. The carrying cost on our balance sheet under LIFO reflected the higher prices
paid for inventories in prior periods and also included higher costs paid for inventories purchased
in connection with business acquisitions the last of which occurred in fiscal 1999. Since we do not
expect the pricing environment for most products we purchase to change dramatically in the
foreseeable future, this difference between LIFO cost and replacement cost can be expected to
continue and possibly increase as we continue to pursue strategies to reduce our product
acquisition costs. In the fourth quarter of fiscal 2004, we changed to the FIFO method of
inventory accounting which will result in reported inventory cost on our balance sheet that
approximates replacement costs, which we believe is preferable to continuing to report our
inventories at the higher costs we experienced in prior years. Although the primary effect of the change was a decrease in inventory on our balance sheet, it
also has a significant impact on our determination of cost of sales because of differences in unit
costs and increases in the amount of vendor allowances and inventory purchasing and handling costs
that will remain in inventory at period end under FIFO. The change had the effect of decreasing
our cost of sales and increasing our gross profit by approximately $0.9 million in the thirteen
weeks ended May 2, 2004. The change increased our cost of sales and decreased our gross profit by
approximately $13.8 million in the thirteen weeks ended May 4, 2003. Lease accounting restatement We operate in excess of 1,100 leased locations, primarily consisting of retail stores but also
including warehouses, distribution centers and our corporate office facilities. We identified
accounting errors pertaining to the evaluation of lease terms (thus impacting our amortization of
leasehold improvements), free rent periods (i.e., rent holidays), straight-lining of minimum
escalating lease payments, the classification of landlord incentives/allowances, and the treatment
of costs incurred for certain stores which are constructed and subsequently transferred to our
landlords. We have corrected these errors by restating prior period financial statements. We reevaluated our lease terms for our operating leases, which resulted in a reduction to the
useful life assumption for depreciating leasehold improvements. We previously depreciated leasehold
improvements over the term of the lease which consisted of the initial term and could include one
renewal option period but no more than 15 years in total. We now
include renewal option periods when determining the life of our
leasehold improvements
only if they are included in the lease term as defined in Statement of Financial Accounting
Standards (SFAS) No. 13, Accounting for Leases, as amended. The impact of this increased our
annual depreciation expense for the earlier years of the leases. We previously recorded build-out allowances received from landlords as an offset to the
amounts capitalized as leasehold improvements. We are now recording such allowances as a deferred
rent liability with a related increase in recorded leasehold
improvements or property assets resulting in an increase to
depreciation expense while the amortization of the deferred rent liability reduces operating rent
expense over the lease term. This correction also increases our reported capital expenditures
(investing cash flows) and our operating cash flows we report in our Consolidated Statements of
Cash Flows. We identified a small number of stores where the extent of our monetary involvement in the
construction of the store (based on the excess of our construction costs over the landlords
reimbursement to us of such costs) results in the Company being
considered the owner of the property during the construction period
and in capitalization of the construction costs as an asset
and recording the landlord reimbursement as construction debt under Emerging Issues Task Force
(EITF) No. 97-10, The Effect of Lessee Involvement in Asset Construction (EITF 97-10). We also identified situations where we did not straight-line escalating rent or recognize rent
for free rent periods. The net effect of the required adjustments to address these errors increased
rent expenses in our historical financial statements. The Companys overall cash flow was not impacted by these corrections. 21




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Vendor allowance restatements We
historically recognized estimated vendor allowances in a systematic
manner ratably over our expected
performance period that ran from October through September. This recognition period was initially
selected to match the estimated benefits to be received with
estimated costs the Company was incurring to perform
promotional activities required to earn the vendor allowances. We reevaluated this accounting
convention and concluded that the recognition period should be
corrected to the contractual period which corresponds to a calendar year because
substantially all allowances are determined and collected based on purchases from vendors in the
calendar year. We also identified vendor allowances recorded in fiscal 2003 that will not be collected and
have determined that the amounts were recorded because of errors in earlier periods.
In addition, we identified certain vendor allowances recorded in improper periods. We have applied the changes required retroactively by restating prior period
financial statements. 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 May 2, 2004, through our wholly owned
subsidiary CSK Auto, Inc., we operated 1,117 stores in 19 states under one fully integrated
operating format and three brand names:  
    Checker Auto Parts, founded in 1969, with 415 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 477 stores primarily in California. During the thirteen weeks ended May 2, 2004 (the first quarter of fiscal 2004), we opened 7
stores, relocated 2 stores and closed 4 stores in addition to the 2 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 in fiscal 2004. We compete in the U.S. automotive aftermarket industry. Our primary competitors include
national and regional automotive parts chains, wholesalers, jobber stores, independent operators,
automobile dealers, and discount stores and mass merchandisers that carry automotive parts. We
offer a broad selection of national brand name, private-label and generic automotive products for
domestic and imported cars and light trucks. We serve both the do-it-yourself (DIY) and the
commercial installer, or do-it-for-me (DIFM) markets. During the first quarter of fiscal 2004,
sales to the DIY market represented approximately 83% of our business, while sales to the DIFM
market represented approximately 17% of our business. Due to the competitive nature of our
business, we try to differentiate ourselves from other automotive parts and accessories retailers
by our: (1) ability to make available a broad selection of products on a timely basis, (2)
attractive pricing, (3) innovative product offerings, (4) conveniently located stores, (5) brand
name recognition as a trusted source of automotive parts and accessories, (6) focus on customer
service, and (7) knowledgeable sales associates. Net income for the first quarter of fiscal 2004 increased significantly compared to the
thirteen weeks ended May 4, 2003 (the first quarter of fiscal 2003). Net income was positively
impacted by our increased sales, gross profit and lower interest expense resulting primarily from
our January 2004 refinancing. 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 affect on our 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 quarter ended May 2, 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/A as well as the Consolidated Financial Statements
and related Notes thereto in our Annual Report on Form 10-K, dated January 30, 2005, (2004 Annual
Report), which was filed with the 22




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Securities and Exchange Commission on May 2, 2005. Results of Operations The following table expresses the statements of operations as a percentage of sales for the
periods shown: Thirteen Weeks EndedMay 2,
    
    
    May 4,2004
    
    
    2003(Restated)
    
    
    (Restated)Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    52.5
    
    
    
    56.9Gross profit
    
    
    47.5
    
    
    
    43.1Operating and administrative
    
    
    39.9
    
    
    
    39.4Store closing costs
    
    
    0.1
    
    
    
    0.0Operating profit
    
    
    7.5
    
    
    
    3.7Interest expense, net
    
    
    2.2
    
    
    
    3.8Income (loss) before income tax expense
    
    
    5.3
    
    
    
    (0.1
    )Income tax expense (benefit)
    
    
    2.1
    
    
    
    (0.1
    )Net income (loss)
    
    
    3.2
    %
    
    
    (0.0
    )%
 Thirteen Weeks Ended May 2, 2004 Compared to Thirteen Weeks Ended May 4, 2003 Net sales for the first quarter of fiscal 2004 increased 5.2% to $397.1 million from $377.4
million for the first quarter of fiscal 2003. Same store sales increased approximately 5%
(approximately 5% retail and approximately 6% commercial). All of our regions had comparable store
sales increases and sales were strong in core product categories such as batteries, brakes, shocks
and rotating electric parts. Our core product offerings, as well as our new and innovative
products, have contributed to an increase in our dollar average sale per customer. Gross profit was $188.7 million, or 47.5% of net sales, for the first quarter of fiscal 2004,
as compared to $162.9 million, or 43.1% of net sales, for the first quarter 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. We have also reduced our store inventory shrinkage through improved store
procedures and enhanced inventory control systems. In addition, vendor allowances were slightly
higher in the first quarter of fiscal 2004 than in the first quarter of fiscal 2003. Operating profit for the first quarter of fiscal 2004 totaled $29.7 million, or 7.5% of net
sales, compared to $13.8 million, or 3.7% of net sales, for the first quarter of fiscal 2003.
Operating and administrative expenses were 39.9% of sales in the first quarter of fiscal 2004 as
compared to 39.4% of sales in the same quarter of fiscal 2003. The percentage increase is
primarily attributed to slightly higher incentive payments and benefit costs associated with our
employee compensation programs. Interest expense for the first quarter of fiscal 2004 decreased to $8.6 million from $14.3
million in the first quarter of fiscal 2003, primarily as a result of the lower interest rate
structure as a result of our January 2004 refinancing. Income tax expense for the first quarter of fiscal 2004 was $8.2 million, compared to an
income tax benefit of $0.3 million for the comparable period of fiscal 2003. Our effective tax rate
increased to 39.1% due to our increased earnings and 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. In the first quarter of fiscal 2003 we had an income tax benefit due to our net
loss. As a result of the above factors, net income increased to $12.8 million, or $0.27 per diluted
common share, for the first quarter of fiscal 2004, compared to net loss of $0.2 million, or $(0.1)
per diluted common share, for the first quarter 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 2008 other than payments on capital leases and seller financing arrangements. 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 23




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outlines our liquidity: May 2, 2004
    
    
    February 1, 2004($ in thousands)Cash and cash equivalents
    
    $
    43,561
    
    
    $
    37,221Availability under revolving line of credit
    
    
    113,381
    
    
    
    120,068Working capital (restated)
    
    
    458,694
    
    
    
    453,734Debt (including capital lease obligations)
to equity ratio (restated)
    
    
    2.43
    
    
    
    2.65
 Availability under our revolving line of credit decreased during the first quarter of fiscal
2004 as a result of the issuance of certain letters of credit. Our liquidity has substantially
improved over recent years allowing us to refinance our debt and reduce our overall interest rates. On June 8, 2004, our Board of Directors authorized, effective immediately, the purchase of the
Companys common stock with an aggregate purchase price not to exceed $25.0 million. We may buy
shares in the open market, or in privately negotiated transactions and or otherwise 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.
Any shares of stock repurchased under the plan will be retired and returned to the status of
authorized and unissued shares. This share repurchase program will be in effect until December
2005. 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 the near future. There are no material
changes to the contractual obligations table disclosed in Managements Discussion and Analysis of
Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year
ended February 1, 2004, filed with the SEC on April 15, 2004. Analysis of Cash Flows The following table summarizes our cash flows from operating activities: Thirteen Weeks EndedMay 2, 2004
    
    
    May 4, 2003(Restated)
    
    
    (Restated)($ in thousands)Net income (loss)
    
    $
    12,815
    
    
    $
    (210
    )Non-cash expenses and adjustments
    
    
    17,531
    
    
    
    10,968Change in inventory, net of accounts payable
    
    
    (13,056
    )
    
    
    (8,639
    )Changes in other operating assets and liabilities
    
    
    (2,119
    )
    
    
    13,909Cash flows from operating activities
    
    $
    15,171
    
    
    $
    16,028
 During the first quarter of fiscal 2004, net cash provided by operating activities was $15.2
million compared to $16.0 million of cash provided by operating activities during the first quarter
of fiscal 2003. Net income was $12.8 million the first quarter of fiscal 2004 compared to the net
loss of $0.2 million loss during the comparable period of fiscal 2003. During the first quarter of
fiscal 2004 our non-cash utilization of deferred tax assets was $6.7 million which had a positive
impact on our non-cash expenses and adjustments. In the first quarter of fiscal 2004, we used $4.4
million more cash for inventory increases (net of accounts payable) in support of our spring
selling season than the first quarter of fiscal 2003. The net outflows of changes in other
operating assets and liabilities during the 2004 period relative to the 2003 period primarily
relates to higher accounts receivable balances and lower accrued advertising and accrued interest
amounts. Net cash used in investing activities totaled $5.6 million for the first quarter of fiscal
2004, compared to $2.4 million used during the comparable period of fiscal 2003. Capital
expenditures during the first quarter of fiscal 2004 were $3.3 million higher than in the 24




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first quarter of fiscal 2003 as a result of investments made to support new store growth and
additional capital upgrades to existing stores. Net cash used in financing activities totaled $3.2 million in fiscal 2004 compared to $14.3
million used in financing activities in the comparable period of fiscal 2003. This decrease
primarily relates to lower payments on our senior credit facility, where there were no net payments
made during fiscal 2004 compared to $12.0 million in net payments made during fiscal 2003. In
addition, during the first quarter of fiscal 2004 we paid $0.9 million of debt issuance costs
relating to our refinancing completed in January 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 ceases
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 three 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. Operating expenses, such as utilities and
repairs, are expensed as incurred and no provision is made for employee termination costs. During
the period that they remain open for business, the rent and other operating expenses for the stores
to be closed continue to be reflected in normal operating expenses. As of May 2, 2004, we had a total of 161 store locations included in the allowance for store
closing costs. Of this total, 17 locations were vacant and 144 locations were subleased. In
addition to these stores, we had 56 service centers of which 3 were vacant and 53 were subleased.
Future rental payments will be made through the expiration of the non-cancelable leases, the
longest of which expires January 2018. Activity in the allowance for store closings and the related payments for the first quarter of
fiscal 2004 is as follows ($ in thousands): Balance, beginning of year
    
    $
    12,148Store closing costs:Provision for store closing costs
    
    
    29Revisions in estimates
    
    
    (4
    )Accretion
    
    
    153Operating expenses and other
    
    
    148Store closing costs, net
    
    
    326Payments:Rent expense, net of sublease income
    
    
    (806
    )Occupancy and other expenses
    
    
    (223
    )Lease buyouts and sublease commissions
    
    
    (1,211
    )Total payments
    
    
    (2,240
    )Balance as of May 2, 2004
    
    $
    10,234
 We expect cash outflows for vacant stores, sublease losses and lease buyouts of approximately
$6.0 million during fiscal 2004, 25




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with the remainder of cash outflows relating to these items primarily occurring during fiscal 2005
through 2007. Factors Affecting Liquidity and Capital Resources Sales Trends Our business is somewhat seasonal in nature, with the highest sales 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 5% during the first quarter of fiscal 2004. Since the
beginning of the second quarter of fiscal 2004, same store sales have been slightly lower than
expected, but still remain positive. We believe that the lower sales are primarily the result of
cooler West Coast temperatures and that sales will begin to increase as the temperatures begin to
rise up. As a result, we continue to forecast full year same store sales increases of approximately
3.5% to 4%. 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, 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 May 2,
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 secured 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
is sensitive to changes in interest rates. Our variable rate debt relates to borrowings under our
senior credit facility, which is primarily vulnerable to movements in the LIBOR rate. On April 5,
2004, we entered into an interest rate swap agreement which converted the interest payment
obligation on $100.0 million of our 7% senior subordinated notes to a floating rate, set
semi-annually in arrears, equal to the 6 month LIBOR rate plus 283 basis points. At May 2, 2004, including the $100.0 million of senior subordinated notes that are subject to
the interest rate swap agreement, 26




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69% of our outstanding debt was at variable interest rates and 31% of our outstanding debt was at
fixed interest rates. With $355.0 million in variable rate debt outstanding, a 1% change in the
LIBOR rate to which this variable rate debt is tied would result in a $3.6 million change in our
annual interest expense. This estimate assumes that our debt balance remains constant for an annual
period and the interest rate change occurs at the beginning of the period. Critical Accounting Matters For a discussion of our critical accounting matters, please refer to our 2004 Annual Report. 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. As of May 2, 2004, we have adopted FIN
46 and FIN 46R with no impact on our financial statements. The FASB has released an Exposure Draft, Share-Based Payment  An Amendment to FASB
Statements No. 123 and 95, which revises the rules governing stock option accounting. The exposure
draft requires expense recognition of stock options and certain employee stock purchase plans in
the statements of operations. The comment period ends June 30, 2004. The effective date of this
Statement is expected to be in fiscal 2005. The pro forma impact on the first quarter of fiscal
2004 of expense recognition of unvested stock options is calculated, as required under Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, and
disclosed in Note 8 of these financial statements. Forward-looking Statements The foregoing Managements Discussion and Analysis of Financial Conditions and Results of
Operations contain certain forward-looking statements about the future performance of the Company
that are based on managements assumptions and beliefs in light of the information currently
available. These forward-looking statements are subject to uncertainties and other factors that
could cause actual results to differ materially from those statements. Factors that may cause
differences are identified in our fiscal 2003 Annual Report on Form 10-K, filed with the Securities
and Exchange Commission on April 15, 2004, and are incorporated herein by reference. 
 Item 3.Quantitative and Qualitative Disclosures about Market Risk See Factors Affecting Liquidity and Capital Resources above. 
 Item 4.Controls and Procedures As previously disclosed under Item 8. Consolidated Financial Statements and Supplementary
Data, in our Annual Report on Form 10-K for the fiscal year ended January 30, 2005 filed with the
Securities and Exchange Commission on May 2, 2005, management concluded that as of January 30, 2005
the Company did not maintain effective internal control over financial reporting based on the
criteria established in Internal Control  Integrated Framework issued by the Committee of
Sponsoring Organizations (COSO), as the Company had identified the following material weaknesses:  
    The Company did not maintain
effective controls over the
completeness and accuracy of its
accounting for lease related
assets, liabilities and expenses.
Specifically, the Companys
controls over the selection,
application and monitoring of its
accounting policies related to the
effect of the amortization periods
for leasehold improvements, rent
holidays, straight-lining of
minimum lease payments, lease
incentives and lessee involvement
in asset construction practices
were ineffective to ensure that
such transactions were accounted
for in conformity with generally
accepted accounting principles.
This control deficiency resulted
in the restatement of our
consolidated financial statements
for the fiscal years ended
February 1, 2004 and February 2,
2003, the restatement of each of
the quarters in the fiscal year
ended February 1, 2004, and the
restatement of each of the first
three quarters in and an
adjustment to the consolidated
financial statements for the
fiscal year ended January 30,
2005.
    The Company did not maintain
effective controls over the
completeness and valuation of our
vendor allowance receivable
account and related cost of sales.
Specifically, the Company did not
maintain effective controls over
the review and approval process
for initial vendor allowance
agreements; the monitoring of
modifications to existing vendor
allowance agreements; and the
accuracy of our recording of
various vendor allowance
transactions. This control
deficiency resulted in the
restatement of our consolidated
financial statements for the
fiscal years ended February 1,
2004 and February 2, 2003, the
restatement of each of the
quarters in the fiscal year ended
February 1, 2004, and the
restatement of each of the first
three quarters in and an
adjustment to the consolidated
financial statements for the
fiscal year ended January 30,
2005.
    The Company did not maintain
effective controls over the
valuation of our inventory
allowance accounts for shrinkage
and obsolescence and related cost
of sales. Specifically, the
Company did not have effective
supervisory and review controls
over our process to determine the
inventory shrinkage allowance and
the method of valuing certain
slow-moving inventory in
accordance with generally accepted
accounting principles. This
control deficiency resulted in
audit adjustments to the
consolidated financial statements
for the fiscal year ended January
30, 2005.
    The Company did not maintain
effective controls over certain
aspects of the financial reporting
process because we lacked a
sufficient complement of personnel
with a level of accounting
expertise and an adequate
supervisory review structure that
is commensurate with the Companys
financial reporting requirements.
Specifically, this control
deficiency directly contributed to
each of the above described
material weaknesses and also
resulted in audit adjustments to
our consolidated financial
statements for the fiscal year
ended January 30, 2005 related to
the return to vendor accounts
receivable and self-insurance
accrued liability accounts. These material weaknesses could result in a misstatement of the Companys accounts in a future
period that would result in a material misstatement to the Companys annual or interim financial
statements that would not be prevented or detected. 27




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In our fiscal 2004 Annual Report, management outlined the following plan for remediation of
the material weaknesses: The Company has made and will continue to make improvements to internal control over financial
reporting that we believe will remediate the material weaknesses described above. Specifically,
with regard to our lease accounting practices, management intends to:  
    Require a formal accounting review
of each new or amended lease
transaction by a management level
associate;
    Provide additional educational
resources to accounting personnel
regarding lease accounting
guidance applicable to the various
lease accounting matters that
arise in the course of the
Companys business;
    Implement additional processes and
procedures to (i) enhance the
communication between the real
estate/property management
departments and accounting
personnel concerning various
aspects of the Companys lease
transactions, and (ii) have key
accounting personnel more closely
monitor the Companys lease
transactions; and
    Hire additional or reassign staff
to facilitate the additional
workload needed to handle lease
accounting requirements, which go
well beyond the approval and
processing of lease payments. With regard to our accounting for vendor allowances, management intends to address the
material weaknesses in the accounting and estimation for vendor allowances as follows:  
    Improve the training of personnel in the accounting and
merchandising departments with respect to the Companys contract
review and approval procedures and vendor allowance policies;
    Enhance the staffing of personnel in the merchandising department;
    Clarify the duties and responsibilities of the Company personnel
who interact directly with vendors to reinforce accountability;
    Monitor closely vendor agreements with allowances tied to specific
purchase volumes to determine when specified criteria are met and
when allowances have been earned by the Company; and
    Implement a more formalized quarterly process for updating of
estimates by vendor including reconciliation to the general ledger
accounts. With regard to our estimation and calculation of the required inventory shrink and
obsolescence allowances, management will reassign the review responsibility to permit a more
complete review and require that certain data inputs be verified by the reviewer. With regard to the capabilities and experience of our accounting organization, we intend to:  
    Implement the organizational structure changes required to facilitate effective supervisory review;
    Evaluate the necessity of additional key finance and accounting personnel to facilitate a more
effective monitoring and review process; and
    Provide for greater review and oversight for key significant accounts. Although the Company has begun to implement certain of the above-described actions, it is
still evaluating the appropriate remediation measures required in order to address the
above-described deficiencies. Progress relative to our remediation measures with respect to the
above material weaknesses will be disclosed in our subsequent Exchange Act reports. Nevertheless, in light of the material weaknesses described above, the Company has implemented
additional processes and procedures and performed additional analysis and other post-closing
procedures to ensure that our consolidated financial statements were prepared in accordance with
generally accepted accounting principles. With regard to accounting for lease related assets in
particular, we changed our procedures regarding the review, analysis and recording of new and
amended leases, including the selection and monitoring of appropriate assumptions and factors
affecting lease accounting and leasehold depreciation practices. Accordingly, management believes
that the financial statements included in this Form 10-Q/A fairly present in all material respects
our financial position, results of operations and cash flows for the periods presented. Evaluation of Effectiveness of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chairman and
Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our
disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under
the Securities Exchange Act of 1934, as amended. In making this evaluation, we considered the
material weaknesses in our internal control over financial reporting
that we previously identified (as more
fully described above). Based on that evaluation, our Chairman and Chief Executive Officer and our
Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as
of the end of the period covered by this quarterly report. Changes in Internal Control Over Financial Reporting During the fiscal quarter ended May 2, 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. 28




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PART IIOTHER 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 future potential 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, 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 requesting confirmation of our desire to proceed with the
scheduling of an appeals conference concerning this matter. We have responded affirmatively to the
Boards letter and anticipate that an appeals conference before an appeals division attorney or
auditor will be scheduled to take place within the next few months. 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 and Use of Proceeds NONE 
 Item 3.Defaults upon Senior Securities NONE 
 Item 4.Submission of Matters to a Vote of Security Holders NONE 
 Item 5.Other Information NONE 29




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Item 6.Exhibits and Reports on Form 8-K (a) Exhibits:  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: On March 18, 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 operating
results for the fourth quarter and full year of fiscal 2003. 30




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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 CorporationBy:
    
    /s/ DON W. WATSONDon W. WatsonChief Financial Officerand Duly Authorized Officer
 June 10, 2005 31




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EXHIBIT INDEX ExhibitNumber
    
    
    Description31.1
    
    
    
    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.