##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

FORM 10-Q

(Mark One)



|  |                                                                                            
|- | -------------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 4,
2002

or



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

For the transition period
from                     to

Commission File Number 001-13927

CSK AUTO CORPORATION

(Exact name of registrant as specified in its
charter)


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


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.

Yes     x     No     o

As of September 13, 2002, CSK Auto
Corporation had 45,156,696 shares of common stock outstanding.



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TABLE OF CONTENTS



|                                                                                                                                    |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION                                                                                                       
|                                                                                                                                    | Item 1. Financial Statements                                                                 
|CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS                                                                  
|CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS                                                        
|CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY                                              
|CSK AUTO CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)                             
|CSK AUTO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Thirteen and Twenty-six Weeks Ended August 4, 2002
|                                                                                                                                    | Note 1 -- Basis of Presentation                                                              
|                                                                                                                                    | Note 2 -- Inventories                                                                        
|                                                                                                                                    | Note 3 -- Issuance of Common Stock and Earnings Per Share                                    
|                                                                                                                                    | Note 4 -- Recent Accounting Pronouncements                                                   
|                                                                                                                                    | Note 5 -- Interest Rate Swap                                                                 
|                                                                                                                                    | Note 6 -- Legal Matters                                                                      
|                                                                                                                                    | Note 7 -- Store Closing Costs                                                                
|                                                                                                                                    | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                                                                    | Forward-looking Statements                                                                   
|PART II OTHER INFORMATION                                                                                                          
|                                                                                                                                    | Item 1. Legal Proceedings                                                                    
|                                                                                                                                    | Item 2. Changes in Securities and Use of Proceeds                                            
|                                                                                                                                    | Item 3. Defaults upon Senior Securities                                                      
|                                                                                                                                    | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                                                                                                    | Item 5. Other Information                                                                    
|                                                                                                                                    | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                                                                                                          
|CERTIFICATIONS                                                                                                                     
|Exhibit Index                                                                                                                      
|EX-3.2.1                                                                                                                           
|EX-10.01                                                                                                                           
|EX-10.02                                                                                                                           
|EX-10.03                                                                                                                           
|EX-99.1                                                                                                                            
|EX-99.2                                                                                                                            



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##### Table of Contents






PART I

FINANCIAL INFORMATION




Item 1.     Financial
Statements




CSK AUTO CORPORATION AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |          |           | 
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | --------- | - | ------- | -------- | --------- | 
|                                                                      |                                                                                                                                                                                       | August 4,                                  |         | February 3,
|                                                                      |                                                                                                                                                                                       | 2002                                       |         | 2002       
|                                                                      |                                                                                                                                                                                       |                                            |         |            
|                                                                      |                                                                                                                                                                                       | (Unaudited)                                |         |            
|ASSETS                                                               
|Cash and cash equivalents                                             |                                                                                                                                                                                       | $                                          | 16,519  |             |           | $ | 16,084  |         
|Receivables, net of allowances of $3,775 and
    $5,230, respectively |                                                                                                                                                                                       |                                            | 89,167  |             |           |   | 84,793  |         
|Inventories                                                           |                                                                                                                                                                                       |                                            | 652,810 |             |           |   | 619,629 |         
|Deferred income taxes                                                 |                                                                                                                                                                                       |                                            |        |             |           |   | 2,718   |         
|Assets held for sale                                                  |                                                                                                                                                                                       |                                            |        |             |           |   | 1,710   |         
|Prepaid expenses and other current assets                             |                                                                                                                                                                                       |                                            | 17,717  |             |           |   | 19,847  |         
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                       | Total current assets                       |         |             | 776,213   |   |         |          | 744,781   | 
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Property and equipment, net                                           |                                                                                                                                                                                       |                                            | 139,920 |             |           |   | 150,381 |         
|Leasehold interests, net                                              |                                                                                                                                                                                       |                                            | 15,679  |             |           |   | 16,581  |         
|Goodwill, net                                                         |                                                                                                                                                                                       |                                            | 127,069 |             |           |   | 126,846 |         
|Deferred income taxes                                                 |                                                                                                                                                                                       |                                            | 6,075   |             |           |   | 739     |         
|Other assets, net                                                     |                                                                                                                                                                                       |                                            | 26,659  |             |           |   | 29,249  |         
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                       | Total assets                               |         | $           | 1,091,615 |   |         | $        | 1,068,577 | 
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY                             
|Accounts payable                                                      |                                                                                                                                                                                       | $                                          | 173,553 |             |           | $ | 157,284 |         
|Accrued payroll and related expenses                                  |                                                                                                                                                                                       |                                            | 30,904  |             |           |   | 33,055  |         
|Accrued expenses and other current liabilities                        |                                                                                                                                                                                       |                                            | 40,398  |             |           |   | 44,529  |         
|Current maturities of capital lease obligations                       |                                                                                                                                                                                       |                                            | 9,932   |             |           |   | 10,999  |         
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                       | Total current liabilities                  |         |             | 254,787   |   |         |          | 245,867   | 
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Amounts due under senior credit facility                              |                                                                                                                                                                                       |                                            | 220,000 |             |           |   | 227,000 |         
|Obligations under 12% Senior Notes                                    |                                                                                                                                                                                       |                                            | 278,768 |             |           |   | 275,416 |         
|Obligations under 11% Senior Subordinated Notes                       |                                                                                                                                                                                       |                                            | 9,547   |             |           |   | 81,250  |         
|7% Convertible Subordinated Debentures                                |                                                                                                                                                                                       |                                            |        |             |           |   | 49,100  |         
|Obligations under capital leases                                      |                                                                                                                                                                                       |                                            | 26,442  |             |           |   | 27,078  |         
|Deferred income taxes                                                 |                                                                                                                                                                                       |                                            | 6,529   |             |           |   |        |         
|Other liabilities                                                     |                                                                                                                                                                                       |                                            | 7,808   |             |           |   | 8,580   |         
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                       | Total non-current liabilities              |         |             | 549,094   |   |         |          | 668,424   | 
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Commitments and contingencies                                         |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|Stockholders equity:                                                 |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                      | Common stock, $0.01 par value, 58,000,000 shares
    authorized; 45,154,457 and 32,370,746 shares issued and
    outstanding at August 4, 2002 and February 3, 2002,
    respectively |                                            |         | 452         |           |   |         | 324      |          
|                                                                      | Additional paid-in capital                                                                                                                                                            |                                            |         | 448,371     |           |   |         | 322,667  |          
|                                                                      | Stockholder receivable                                                                                                                                                                |                                            |         | (537        | )         |   |         | (686     | )        
|                                                                      | Accumulated deficit                                                                                                                                                                   |                                            |         | (160,552    | )         |   |         | (168,019 | )        
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                       | Total stockholders equity                 |         |             | 287,734   |   |         |          | 154,286   | 
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                       | Total liabilities and stockholders equity |         | $           | 1,091,615 |   |         | $        | 1,068,577 | 
|                                                                      |                                                                                                                                                                                       |                                            |         |             |           |   |         |         

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

1



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##### Table of Contents






CSK AUTO CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

(Unaudited)


(In thousands, except share and per share
data)


|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |         |         |  
|----------------------------------------------------------- | ------------------------------------------- | -------------------- | ---------- | ---------------------- | ----- | --------- | ---------- | --------- | ------- | - | ---------- | ------- | ----- | - | ---------- | ------- | ------- | -
|                                                            |                                             |                      |            |                       
|                                                            |                                             | Thirteen Weeks Ended |            | Twenty-six Weeks Ended
|                                                            |                                             |                      |            |                       
|                                                            |                                             | August 4,            |            | August 5,              |       | August 4, |            | August 5,
|                                                            |                                             | 2002                 |            | 2001                   |       | 2002      |            | 2001     
|                                                            |                                             |                      |            |                        |       |           |            |          
|Net sales                                                   |                                             | $                    | 398,306    |                        |       | $         | 381,722    |           |         | $ | 773,856    |         |       | $ | 737,843    |        
|Cost of sales                                               |                                             |                      | 216,238    |                        |       |           | 234,648    |           |         |   | 426,658    |         |       |   | 422,183    |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Gross profit                                                |                                             |                      | 182,068    |                        |       |           | 147,074    |           |         |   | 347,198    |         |       |   | 315,660    |        
|Other costs and expenses:                                   |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|                                                            | Operating and administrative                |                      |            | 152,565                |       |           |            | 146,322   |         |   |            | 294,203 |       |   |            | 291,243 |        
|                                                            | Store closing and other restructuring costs |                      |            | 239                    |       |           |            | 21,476    |         |   |            | 539     |       |   |            | 23,771  |        
|                                                            | Legal settlement                            |                      |            |                       |       |           |            | 2,000     |         |   |            |        |       |   |            | 2,000   |        
|                                                            | Loss on sale of stores                      |                      |            | 847                    |       |           |            |          |         |   |            | 847     |       |   |            |        |        
|                                                            | Secondary stock offering costs              |                      |            | 265                    |       |           |            |          |         |   |            | 265     |       |   |            |        |        
|                                                            | Goodwill amortization                       |                      |            |                       |       |           |            | 1,235     |         |   |            |        |       |   |            | 2,418   |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Operating profit (loss)                                     |                                             |                      | 28,152     |                        |       |           | (23,959    | )         |         |   | 51,344     |         |       |   | (3,772     | )      
|Interest expense                                            |                                             |                      | 16,240     |                        |       |           | 14,663     |           |         |   | 33,958     |         |       |   | 31,410     |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Income (loss) before income taxes                           |                                             |                      | 11,912     |                        |       |           | (38,622    | )         |         |   | 17,386     |         |       |   | (35,182    | )      
|Income tax expense (benefit)                                |                                             |                      | 4,130      |                        |       |           | (14,785    | )         |         |   | 6,224      |         |       |   | (13,598    | )      
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Income (loss) before extraordinary loss                     |                                             |                      | 7,782      |                        |       |           | (23,837    | )         |         |   | 11,162     |         |       |   | (21,584    | )      
|Extraordinary loss, net of $2,313 of income tax
    benefit |                                             |                      | (3,695     | )                      |       |           |           |           |         |   | (3,695     | )       |       |   |           |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|                                                            |                                             | Net income (loss)    |            | $                      | 4,087 |           |            | $         | (23,837 | ) |            | $       | 7,467 |   |            | $       | (21,584 | )
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Basic earnings (loss) per share:                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|                                                            | Income (loss) before extraordinary loss     |                      | $          | 0.19                   |       |           |            | (0.86     | )       |   | $          | 0.31    |       |   |            | (0.78   | )      
|                                                            | Extraordinary loss, net of income tax       |                      |            | (0.09                  | )     |           |            |          |         |   |            | (0.10   | )     |   |            |        |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|                                                            |                                             | Net income (loss)    |            | $                      | 0.10  |           |            | $         | (0.86   | ) |            | $       | 0.21  |   |            | $       | (0.78   | )
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Shares used in computing per share amounts                  |                                             |                      | 39,826,079 |                        |       |           | 27,841,178 |           |         |   | 36,099,845 |         |       |   | 27,841,178 |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Diluted earnings (loss) per
    share:                      |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|                                                            | Income (loss) before extraordinary loss     |                      | $          | 0.19                   |       |           |            | (0.86     | )       |   | $          | 0.31    |       |   |            | (0.78   | )      
|                                                            | Extraordinary loss, net of income tax       |                      |            | (0.09                  | )     |           |            |          |         |   |            | (0.10   | )     |   |            |        |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|                                                            |                                             | Net income (loss)    |            | $                      | 0.10  |           |            | $         | (0.86   | ) |            | $       | 0.21  |   |            | $       | (0.78   | )
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        
|Shares used in computing per share amounts                  |                                             |                      | 40,138,663 |                        |       |           | 27,841,178 |           |         |   | 36,178,528 |         |       |   | 27,841,178 |        
|                                                            |                                             |                      |            |                        |       |           |            |           |         |   |            |         |       |   |            |        

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

2



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##### Table of Contents






CSK AUTO CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

(In thousands, except share data)


|                                                                          |             |              |            |            |  |             |     |             |  |         |         |         |  |   |      |      |   |   |          |          |   |   |         |         | 
|------------------------------------------------------------------------- | ----------- | ------------ | ---------- | ---------- |  | ----------- | --- | ----------- |  | ------- | ------- | ------- |  | - | ---- | ---- | - | - | -------- | -------- | - | - | ------- | ------- | 
|                                                                          |             |              |            |            |  |             |     |             |  |        
|                                                                          |             | Common Stock |            | Additional |  |             |     |             |  |        
|                                                                          |             |              |            | Paid-in    |  | Stockholder |     | Accumulated |  | Total  
|                                                                          |             | Shares       |            | Amount     |  | Capital     |     | Receivable  |  | Deficit |         | Equity 
|                                                                          |             |              |            |            |  |             |     |             |  |         |         |        
|Balances at February 3, 2002                                              |             |              | 32,370,746 |            |  | $           | 324 |             |  | $       | 322,667 |         |  | $ | (686 | )    |   | $ | (168,019 | )        |   | $ | 154,286 |        
|Conversion of 7% Subordinated Debentures, net of
    costs (unaudited)    |             |              | 5,753,740  |            |  |             | 58  |             |  |         | 46,059  |         |  |   |     |      |   |   |         |          |   |   | 46,117  |        
|Common stock issued in lieu of cash interest
    payable (unaudited)      |             |              | 136,580    |            |  |             | 1   |             |  |         | 1,408   |         |  |   |     |      |   |   |         |          |   |   | 1,409   |        
|Issuance of common stock in public offering, net
    of costs (unaudited) |             |              | 6,878,300  |            |  |             | 69  |             |  |         | 78,073  |         |  |   |      |      |   |   |          |          |   |   | 78,142  |        
|Issuance of loan to stockholder (unaudited)                               |             |              |           |            |  |             |    |             |  |         |        |         |  |   | (125 | )    |   |   |         |          |   |   | (125    | )      
|Recovery of stockholder receivable (unaudited)                            |             |              |           |            |  |             |    |             |  |         |        |         |  |   | 274  |      |   |   |         |          |   |   | 274     |        
|Issuance of restricted stock (unaudited)                                  |             |              | 2,285      |            |  |             |    |             |  |         | 31      |         |  |   |     |      |   |   |         |          |   |   | 31      |        
|Exercise of stock options (unaudited)                                     |             |              | 12,806     |            |  |             |    |             |  |         | 133     |         |  |   |     |      |   |   |         |          |   |   | 133     |        
|Net income (unaudited)                                                    |             |              |           |            |  |             |    |             |  |         |        |         |  |   |     |      |   |   | 7,467    |          |   |   | 7,467   |        
|                                                                          |             |              |            |            |  |             |     |             |  |         |         |         |  |   |      |      |   |   |          |          |   |   |         |        
|Balances at August 4, 2002                                                |             |              |            |            |  |             |     |             |  |         |         |         |  |   |      |      |   |   |          |          |   |   |         |        
|                                                                          | (unaudited) |              |            | 45,154,457 |  |             | $   | 452         |  |         | $       | 448,371 |  |   | $    | (537 | ) |   | $        | (160,552 | ) |   | $       | 287,734 | 
|                                                                          |             |              |            |            |  |             |     |             |  |         |         |         |  |   |      |      |   |   |          |          |   |   |         |        

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

3



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##### Table of Contents






CSK AUTO CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Unaudited)


(In thousands)


|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |          |         |         |         |  
|---------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------- | ------ | -------- | ------- | ------- | ------- | -
|                                                           |                                                                                                 |                                                                              
|                                                           |                                                                                                 | Twenty-six Weeks Ended                                                       
|                                                           |                                                                                                 |                                                                              
|                                                           |                                                                                                 | August 4,                                                                     |                                                                     | August 5,                                              
|                                                           |                                                                                                 | 2002                                                                          |                                                                     | 2001                                                   
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                        
|Cash flows provided by (used in) operating
    activities: |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|                                                           | Net income (loss)                                                                               |                                                                               | $                                                                   | 7,467                                                   |        |         | $      | (21,584  | )      
|                                                           | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                               |                                                                     |                                                         |        |         |        |          |        
|                                                           |                                                                                                 | Depreciation and amortization of property and
    equipment                   |                                                                     |                                                         | 16,122 |         |        |          | 16,659  |        
|                                                           |                                                                                                 | Amortization of other items                                                   |                                                                     |                                                         | 1,836  |         |        |          | 4,165   |        
|                                                           |                                                                                                 | Amortization of debt issuance costs                                           |                                                                     |                                                         | 2,799  |         |        |          | 1,532   |        
|                                                           |                                                                                                 | Accretion of discount                                                         |                                                                     |                                                         | 469    |         |        |          |        |        
|                                                           |                                                                                                 | Provision for write down of inventory                                         |                                                                     |                                                         |       |         |        |          | 17,292  |        
|                                                           |                                                                                                 | Write downs on disposals of property, equipment
    and other assets          |                                                                     |                                                         | 427    |         |        |          | 7,427   |        
|                                                           |                                                                                                 | Extraordinary loss on early retirement of debt,
    net of income tax benefit |                                                                     |                                                         | 3,695  |         |        |          |        |        
|                                                           |                                                                                                 | Premium paid on early retirement of debt                                      |                                                                     |                                                         | (4,368 | )       |        |          |        |        
|                                                           |                                                                                                 | Loss on sale of stores                                                        |                                                                     |                                                         | 847    |         |        |          |        |        
|                                                           |                                                                                                 | Deferred income taxes                                                         |                                                                     |                                                         | 6,224  |         |        |          | (13,749 | )      
|                                                           |                                                                                                 | Change in operating assets and liabilities:                                   |                                                                     |                                                         |        |         |        |          |         |        
|                                                           |                                                                                                 |                                                                               | Receivables                                                         |                                                         |        | (4,374  | )      |          |         | (7,122  | )      
|                                                           |                                                                                                 |                                                                               | Inventories                                                         |                                                         |        | (36,854 | )      |          |         | (21,420 | )      
|                                                           |                                                                                                 |                                                                               | Prepaid expenses and other current assets                           |                                                         |        | 2,130   |        |          |         | (1,407  | )      
|                                                           |                                                                                                 |                                                                               | Accounts payable                                                    |                                                         |        | 16,269  |        |          |         | 25,958  |        
|                                                           |                                                                                                 |                                                                               | Accrued payroll, accrued expenses and other
    current liabilities |                                                         |        | (5,298  | )      |          |         | 12,376  |        
|                                                           |                                                                                                 |                                                                               | Other operating activities                                          |                                                         |        | (1,355  | )      |          |         | 7,079   |        
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|                                                           |                                                                                                 |                                                                               |                                                                     | Net cash provided by operating activities               |        |         | 6,036  |          |         |         | 27,206  |  
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|Cash flows provided by (used in) investing
    activities: |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|                                                           | Capital expenditures                                                                            |                                                                               |                                                                     | (3,617                                                  | )      |         |        | (7,873   | )      
|                                                           | Proceeds from sales of property and equipment and
    assets held for sale                      |                                                                               |                                                                     | 2,186                                                   |        |         |        | 5,259    |        
|                                                           | Proceeds from sale of stores                                                                    |                                                                               |                                                                     | 4,217                                                   |        |         |        |         |        
|                                                           | Other investing activities                                                                      |                                                                               |                                                                     | (1,936                                                  | )      |         |        | (2,271   | )      
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|                                                           |                                                                                                 |                                                                               |                                                                     | Net cash provided by (used in) investing
    activities |        |         | 850    |          |         |         | (4,885  | )
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|Cash flows provided by (used in) financing
    activities: |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|                                                           | Borrowings under senior credit facility                                                         |                                                                               |                                                                     | 191,000                                                 |        |         |        | 142,000  |        
|                                                           | Payments under senior credit facility                                                           |                                                                               |                                                                     | (198,000                                                | )      |         |        | (154,320 | )      
|                                                           | Issuance of common stock in public offering                                                     |                                                                               |                                                                     | 82,540                                                  |        |         |        |         |        
|                                                           | Underwriters discount and other offering
    costs                                             |                                                                               |                                                                     | (4,398                                                  | )      |         |        |         |        
|                                                           | Partial retirement of 11% Senior Subordinated
    Notes                                         |                                                                               |                                                                     | (71,703                                                 | )      |         |        |         |        
|                                                           | Payment of debt issuance costs                                                                  |                                                                               |                                                                     | (937                                                    | )      |         |        | (2,102   | )      
|                                                           | Payments on capital lease obligations                                                           |                                                                               |                                                                     | (5,184                                                  | )      |         |        | (4,782   | )      
|                                                           | Loan to stockholder                                                                             |                                                                               |                                                                     | (125                                                    | )      |         |        |         |        
|                                                           | Recovery of stockholder receivable                                                              |                                                                               |                                                                     | 274                                                     |        |         |        |         |        
|                                                           | Exercise of options                                                                             |                                                                               |                                                                     | 133                                                     |        |         |        |         |        
|                                                           | Other financing activities                                                                      |                                                                               |                                                                     | (51                                                     | )      |         |        | (141     | )      
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|                                                           |                                                                                                 |                                                                               |                                                                     | Net cash used in financing activities                   |        |         | (6,451 | )        |         |         | (19,345 | )
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|                                                           |                                                                                                 |                                                                               |                                                                     | Net increase in cash and cash equivalents               |        |         | 435    |          |         |         | 2,976   |  
|Cash and cash equivalents, beginning of period             |                                                                                                 |                                                                               | 16,084                                                              |                                                         |        |         | 11,131 |         
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         
|Cash and cash equivalents, end of period                   |                                                                                                 | $                                                                             | 16,519                                                              |                                                         |        | $       | 14,107 |         
|                                                           |                                                                                                 |                                                                               |                                                                     |                                                         |        |         |        |         

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

4



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##### Table of Contents






CSK AUTO CORPORATION AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Thirteen and Twenty-six Weeks Ended
August 4, 2002


CSK Auto Corporation is a holding company. At
August 4, 2002, CSK Auto Corporation had no business
activity other than its investment in CSK Auto, Inc., a
wholly-owned subsidiary (Auto). On a consolidated
basis, CSK Auto Corporation and Auto are referred to herein as
the Company.

Auto is a specialty retailer of automotive
aftermarket parts and accessories. At August 4, 2002, the
Company operated 1,114 stores in 19 Western and Northern Plains
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.

Auto also operates Automotive Information
Systems, Inc. (AIS) as a wholly-owned subsidiary.
AIS, based in St. Paul, Minnesota, is a leading provider of
diagnostic vehicle repair information to automotive technicians,
automotive replacement parts manufacturers, automotive test
equipment manufacturers and the do-it-yourself consumer.




Note 1  Basis of
Presentation

The unaudited consolidated financial statements
included herein were prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission,
but do not include all information and footnotes required by
generally accepted accounting principles. 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 the Companys financial position
and the results of its 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 3, 2002, as included in the
Companys Annual Report on Form 10-K/ A filed on
May 10, 2002.




Note 2  Inventories

Inventories are valued at the lower of cost or
market, cost being determined utilizing the last-in, first-out
(LIFO) method. An actual valuation of inventory under the LIFO
method can only be calculated at the end of a fiscal year based
upon the inventory levels and costs at that time. Accordingly,
interim LIFO calculations reflected herein are based upon
managements estimates of year-end inventory levels and
costs. The replacement cost of inventories approximated
$549 million and $528 million at August 4, 2002
and February 3, 2002, respectively.

The carrying value of the inventory exceeds the
current replacement cost primarily as a result of the
application of the LIFO inventory method of accounting. The
Companys costs of acquiring inventories through normal
purchasing activities have been decreasing in recent years as
the Companys increased size and cash flows have enabled it
to take advantage of volume discounts and lower product
acquisition costs resulting in a lower current replacement cost
of inventory.

From time to time, the Company performs an
analysis of the net realizable value of the inventory, after
consideration of expected disposal costs and normal profit
margins, to determine if the LIFO carrying value of the
inventory is impaired. Should an impairment be indicated, the
carrying value of the inventory would be reduced. No such
impairment is indicated based on current market conditions.
Historically, the net realizable value of the inventory has
exceeded its carrying value. The Companys analysis for the
first half of fiscal 2002 indicated that the net realizable
value approximated the carrying value of inventories at
August 4, 2002. This was a result of the Companys
program to increase promotional pricing (temporarily reducing
selling prices of its products) in order to attract customers,
resulting in the lowering of gross profit margins in the first
half of fiscal 2002. The Company reduced promotional activity
during the second quarter and plans to continue this trend
throughout the remainder of fiscal 2002. Accordingly, the
Company expects the net realizable value of

5



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the inventories to be higher than the carrying
values at the end of fiscal 2002. Should the Company be unable
to increase gross profit margins as planned, an impairment of
the carrying amount of inventories could result.




Note 3  Issuance of Common Stock
and Earnings Per Share



| |                    
| | -------------------
| | Conversion of Notes

On May 20, 2002, at the option of the
Company, the $50 million 7% Convertible Subordinated
Debentures issued in December 2001 were converted into
approximately 5.75 million shares of CSK Auto Corporation
common stock. Pursuant to the agreements relating to the
debentures, interest on the debentures was paid in shares of the
Companys common stock in lieu of cash. In the first
quarter of 2002, interest was paid on the debentures in the form
of 105,708 shares of CSK Auto Corporation common stock. The
Company elected to pay interest accrued on the debentures, for
the period April 1, 2002 to the date of conversion, in the
form of 30,872 additional shares of CSK Auto Corporation common
stock. The following table illustrates the book value of the
notes at the time of conversion ($ in thousands):

|                                                  |                            |   |        |        | 
|------------------------------------------------- | -------------------------- | - | ------ | ------ | 
|Face value of Convertible Subordinated Debentures |                            | $ | 50,000 |       
|Unamortized debt discount                         |                            |   | (838   | )     
|Unamortized debt issuance costs                   |                            |   | (3,045 | )     
|                                                  |                            |   |        |       
|                                                  | Amount converted to equity |   | $      | 46,117 | 
|                                                  |                            |   |        |       



| |               
| | --------------
| | Stock Offering

On July 2, 2002, CSK Auto Corporation sold
6,878,300 primary shares of common stock in an underwritten
public offering at $12 per share. In addition, a selling
stockholder sold an additional 2,600,000 shares in the offering.
The Company received no proceeds from the shares sold by the
selling stockholder. Issuance costs related to the stock
offering approximated $0.7 million. These costs included
approximately $0.4 million of legal, accounting and
printing fees charged to additional paid in capital for the
primary offering and approximately $0.3 million of costs
charged to operating expense for the secondary offering.
Proceeds from the primary offering were used to retire
approximately $71.7 million of Autos outstanding 11%
Senior Subordinated Notes due 2006. The early extinguishment of
this debt resulted in an extraordinary loss of approximately
$3.7 million, net of approximately $2.3 million of
income tax benefit, primarily as a result of the payment of an
early redemption premium and the write off of deferred debt
issuance costs. The components of this transaction are as
follows ($ in thousands):

|                                                               |                    |   |         |         |  
|-------------------------------------------------------------- | ------------------ | - | ------- | ------- | -
|Proceeds:                                                      |                    |   |         |        
|Gross proceeds at $12 per share                                |                    | $ | 82,540  |        
|Underwriting discount                                          |                    |   | (3,921  | )      
|                                                               |                    |   |         |        
|                                                               | Net proceeds       |   | $       | 78,619  |  
|                                                               |                    |   |         |        
|                                                              
|Uses:                                                          |                    |   |         |        
|Partial retirement of 11% Senior Subordinated
    Notes        |                    | $ | (71,703 | )      
|Premium on note retirement  charged to
    extraordinary loss |                    |   | (3,943  | )      
|Accrued interest on note retirement                            |                    |   | (1,972  | )      
|Issuance costs                                                 |                    |   | (741    | )      
|General corporate purposes                                     |                    |   | (260    | )      
|                                                               |                    |   |         |        
|                                                               | Total use of funds |   | $       | (78,619 | )
|                                                               |                    |   |         |        

6



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                   
| | ------------------
| | Earnings per Share

Calculation of shares used in computing per share
amounts is summarized as follows (unaudited):

|                                                             |                                                   |                      |            |                        |  |           |            |           |  |  |            |           |  |  |            |           | 
|------------------------------------------------------------ | ------------------------------------------------- | -------------------- | ---------- | ---------------------- |  | --------- | ---------- | --------- |  |  | ---------- | --------- |  |  | ---------- | --------- | 
|                                                             |                                                   |                      |            |                       
|                                                             |                                                   | Thirteen Weeks Ended |            | Twenty-six Weeks Ended
|                                                             |                                                   |                      |            |                       
|                                                             |                                                   | August 4,            |            | August 5,              |  | August 4, |            | August 5,
|                                                             |                                                   | 2002                 |            | 2001                   |  | 2002      |            | 2001     
|                                                             |                                                   |                      |            |                        |  |           |            |          
|Weighted average number of shares outstanding
    (Basic)    |                                                   |                      | 39,826,079 |                        |  |           | 27,841,178 |           |  |  | 36,099,845 |           |  |  | 27,841,178 |          
|Effects of dilutive securities                               |                                                   |                      | 312,584    |                        |  |           |           |           |  |  | 78,683     |           |  |  |           |          
|                                                             |                                                   |                      |            |                        |  |           |            |           |  |  |            |           |  |  |            |          
|Weighted average number of shares outstanding
    (Dilutive) |                                                   |                      | 40,138,663 |                        |  |           | 27,841,178 |           |  |  | 36,178,528 |           |  |  | 27,841,178 |          
|                                                             |                                                   |                      |            |                        |  |           |            |           |  |  |            |           |  |  |            |          
|Shares excluded as a result of anti-dilution:                |                                                   |                      |            |                        |  |           |            |           |  |  |            |           |  |  |            |          
|                                                             | Stock options                                     |                      |            | 694,591                |  |           |            | 2,854,691 |  |  |            | 2,156,554 |  |  |            | 2,914,620 | 
|                                                             | Conversion of convertible subordinated debentures |                      |            | 958,957                |  |           |            |          |  |  |            | 3,369,594 |  |  |            |          | 




Note 4  Recent Accounting
Pronouncements

In June 2001, the Financial Accounting Standards
Board (the FASB) issued Statement of Financial
Accounting Standards No. 141 (SFAS 141),
Business Combinations, and No. 142 (SFAS 142),
Goodwill and Other Intangible Assets. SFAS 141
supersedes Accounting Principles Board Opinion (APB)
No. 16, Business Combinations. The provisions
of SFAS 141: (1) require that the purchase method of
accounting be used for all business combinations initiated after
June 30, 2001; (2) provide specific criteria for the
initial recognition and measurement of intangible assets apart
from goodwill; and (3) generally require that unamortized
negative goodwill be written off immediately as an extraordinary
gain instead of being deferred and amortized. SFAS 141 also
requires that upon adoption of SFAS 142, the Company reclassify
the carrying amounts of certain intangible assets into or out of
goodwill, based on certain criteria. SFAS 142 supersedes
APB 17, Intangible Assets, and is effective for fiscal
years beginning after December 15, 2001. SFAS 142
primarily addresses the accounting for goodwill and intangible
assets subsequent to their initial recognition. The provisions
of SFAS 142: (1) prohibit the amortization of goodwill
and indefinite-lived intangible assets; (2) require that
goodwill and indefinite-lived intangibles assets be tested
annually for impairment (and in interim periods if certain
events occur indicating that the carrying value of goodwill
and/or indefinite-lived intangible assets may be impaired);
(3) require that reporting units be identified for the
purpose of assessing potential future impairments of goodwill;
and (4) remove the forty-year limitation on the
amortization period of intangible assets that have finite lives.

SFAS 142 requires that goodwill be tested
annually for impairment using a two-step process. The first step
is to identify a potential impairment and, in transition, this
step must be measured as of the beginning of the fiscal year.
However, a company has six months from the date of adoption to
complete the first step. The second step of the goodwill
impairment test measures the amount of the impairment loss
(measured as of the beginning of the year of adoption), if any,
and must be completed by the end of the fiscal year. Intangible

7



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

assets deemed to have an indefinite life will be
tested for impairment using a one-step process which compares
the fair value to the carrying amount of the asset as of the
beginning of the fiscal year.

The Company adopted the provisions of
SFAS 141 and 142 on February 4, 2002. The Company
completed the transitional impairment test during the second
quarter of 2002 and determined that there was no impairment of
existing goodwill. The remaining balance of goodwill is
$127.1 million. In accordance with SFAS 142, the
Company ceased amortization of its remaining goodwill.

SFAS 142 requires the presentation of net
income and related earnings per share data adjusted for the
effect of goodwill amortization. The following table provides
pro forma net income and earnings per share data for the
thirteen and twenty-six weeks ended August 4, 2002 and
August 5, 2001, to illustrate the impact of goodwill
amortization on the results of the prior year period ($ in
thousands except per share amounts):

|                                       |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |       |  
|-------------------------------------- | -------------------------------------- | -------------- | ----- | ---------------- |  | --------- | ------- | --------- | - | - | ----- | ---- |  | - | ------- | ----- | -
|                                       |                                        |                |       |                 
|                                       |                                        | Thirteen Weeks |       | Twenty-six Weeks
|                                       |                                        | Ended          |       | Ended           
|                                       |                                        |                |       |                 
|                                       |                                        | August 4,      |       | August 5,        |  | August 4, |         | August 5,
|                                       |                                        | 2002           |       | 2001             |  | 2002      |         | 2001     
|                                       |                                        |                |       |                  |  |           |         |          
|Reported net income (loss)             |                                        | $              | 4,087 |                  |  | $         | (23,837 | )         |   | $ | 7,467 |      |  | $ | (21,584 | )    
|Add: goodwill amortization, net of tax |                                        |                |      |                  |  |           | 815     |           |   |   |      |      |  |   | 1,597   |      
|                                       |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|Pro forma net income (loss)            |                                        | $              | 4,087 |                  |  | $         | (23,022 | )         |   | $ | 7,467 |      |  | $ | (19,987 | )    
|                                       |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|Basic earnings per share:              |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Earnings (loss) per share, as reported |                | $     | 0.10             |  |           | $       | (0.86     | ) |   | $     | 0.21 |  |   | $       | (0.78 | )
|                                       | Goodwill amortization, net of tax      |                |       |                 |  |           |         | 0.03      |   |   |       |     |  |   |         | 0.06  |  
|                                       |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Pro forma earnings (loss) per share    |                | $     | 0.10             |  |           | $       | (0.83     | ) |   | $     | 0.21 |  |   | $       | (0.72 | )
|                                       |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|Diluted earnings per share:            |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Earnings (loss) per share, as reported |                | $     | 0.10             |  |           | $       | (0.86     | ) |   | $     | 0.21 |  |   | $       | (0.78 | )
|                                       | Goodwill amortization, net of tax      |                |       |                 |  |           |         | 0.03      |   |   |       |     |  |   |         | 0.06  |  
|                                       |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Pro forma earnings (loss) per share    |                | $     | 0.10             |  |           | $       | (0.83     | ) |   | $     | 0.21 |  |   | $       | (0.72 | )
|                                       |                                        |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS
No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs.
This statement applies to all entities that have legal
obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development or
normal use of the asset. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. The Company does not expect
the adoption of SFAS 143 to have a significant impact on its
financial statements.

In October 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 replaces certain
previously issued accounting guidance, develops a single
accounting model for long-lived assets, and broadens the
framework previously established for assets to be disposed of by
sale (whether previously held or newly acquired). The Company
adopted SFAS No. 144 as of the beginning of fiscal 2002.
The adoption of this standard did not have a material effect on
the Companys financial statements.

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statement No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS 145 updates, clarifies and simplifies
existing accounting pronouncements and addresses the reporting
of debt extinguishments and accounting for certain lease
modifications that have economic effects that are similar to
sale-leaseback transactions. The Company plans to adopt the
provisions of SFAS 145 by February 3, 2003. During the
second

8



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

quarter of fiscal 2002, the Company recorded an
extraordinary loss of $3.7 million (net of income tax
benefit) relating to the early retirement of debt. SFAS
No. 145 will require that this amount be reclassified to
operations.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 nullifies EITF Issue
No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).
SFAS No. 146 requires companies to recognize the present
value of costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an
exit or disposal plan. Examples of costs covered by the standard
include lease rental and termination costs and certain employee
severance costs that are associated with a restructuring,
discontinued operation, store closing, or other exit or disposal
activity. SFAS No. 146 is to be applied prospectively to
exit or disposal activities initiated after December 31,
2002, with early implementation encouraged. The Company is
currently analyzing the impact of this pronouncement on its
financial statements; however, adoption of the pronouncement may
impact the timing of recognition of closed store charges.




Note 5  Interest Rate
Swap

During February 2002, the Company entered into an
interest rate swap agreement to convert the interest rate
payment obligation on $100.0 million of its 12% Senior
Notes to a floating rate, set quarterly, equal to the
3 month LIBOR rate plus 760 basis points. At the time the
agreement commenced, the Companys fixed rate debt was
approximately 66% of its outstanding debt. The Companys
fixed rate debt, on average, carries higher interest rates than
its variable rate debt. The interest rate swap is intended to
provide a better balance of fixed and variable rate debt
instruments and to hedge the fair value of these notes against
potential movements in market interest rates. For accounting
purposes, the interest rate swap is designated and qualifies as
a fair value hedge of a portion of the Companys fixed rate
debt instruments. As the critical terms of the swap match those
of the underlying hedged debt, the change in fair value of the
swap is perfectly offset by changes in fair value of the debt.

At August 4, 2002, the fair value of the
interest rate swap approximated $2.9 million. The
differential to be paid or received under this agreement is
accrued consistently with the terms of the agreement and is
recognized in interest expense over the term of the related
debt. The related amounts payable to or receivable from counter
parties are included in other liabilities or assets. Cash flows
related to the interest rate swap agreement are classified as
operating activities in the Consolidated Statement of Cash
Flows. For the thirteen and twenty-six weeks ended
August 4, 2002, the Company reduced interest expense by
approximately $0.6 million and $1.1 million
respectively, as a result of the interest rate swap. There were
no interest rate swaps in place in the comparable period last
year.




Note 6  Legal Matters

The Company was served on March 8, 2000 with
a complaint filed in Federal Court in the Eastern District of
New York by the Coalition for a Level Playing Field, O.K. and,
based on the current amended complaint, 255 individual auto
parts dealers. The complaint alleges that the Company and seven
other auto parts dealers (AutoZone, Inc., Wal-Mart Stores, Inc.,
Advance Stores Company, Inc., Discount Auto, Inc., The Pep
Boys  Manny, Moe and Jack, Inc., OReilly
Automotive, Inc., and Keystone Automotive Operations, Inc.)
violated the Robinson-Patman Act. Only 15 of the individual
plaintiffs asserted claims against the Company. The complaint,
as amended, alleges that the Company and other defendants
knowingly either induced or received discriminatory prices from
large suppliers, allegedly in violation of Section 2(a) and
2(f) of the Robinson-Patman Act, as well as received
compensation from large suppliers for services not performed for
those suppliers, allegedly in violation of Section 2(c) of the
Robinson-Patman Act. In May 2002, the Company reached a
settlement with all the plaintiffs that provides for the payment
of nominal

9



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

consideration by the Company. As the first step
in the settlement, the attorneys for the Company and the
plaintiffs have filed with the Court a Stipulation and Order for
the dismissal with prejudice of all claims by all plaintiffs
against the Company. This Stipulation and Order has been signed
by the Court.

The Company currently and from time to time is
involved in other litigation incidental to the conduct of its
business. The damages claimed in some of this litigation are
substantial. Although the amount of liability that may result
from these matters cannot be ascertained, the Company does not
currently believe that, in the aggregate, they will result in
liabilities material to its consolidated financial position,
results of operations or cash flows.




Note 7  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, the Company analyzes sales trends and geographical and
competitive factors to determine the viability and future
profitability of its store locations. If a store location does
not meet the Companys required projections, it is
identified for closure. As a result of the Companys
acquisitions over the last several years, the Company has closed
numerous locations as a result of store overlap with previously
existing store locations. In these situations, the Company
negotiates with the landlord to attempt to cancel the lease or
the Company attempts to sublease the closed store to a third
party to reduce the Companys future exposure.

The Company provides an allowance for estimated
costs to be incurred in connection with store closures. The
allowance for store closing costs primarily consists of three
components: (1) future rents to be paid over the remaining
terms of the lease agreements for the stores (net of estimated
probable sublease recoveries); (2) lease commissions
associated with the anticipated store subleases; and
(3) occupancy expenses associated with the closed store
vacancy periods. Such costs are recognized when a store is
specifically identified, costs can be estimated and closure is
planned to be completed within the next twelve months. No
provision is made for employee termination costs. For stores to
be relocated, such costs are recognized when an agreement for
the new location has been reached with a landlord and site plans
meet preliminary municipal approvals. 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. The actual costs of relocating a
store, such as transporting of inventories, are considered a
normal operating expense and are not included in the store
closing reserve.

As of August 4, 2002, the Company had a
total of 239 store locations included in the allowance for store
closing costs. Of this total, 52 locations were vacant, 176
locations were subleased and 11 locations were identified for
closure but remained open. In addition to these store locations,
we had 66 service centers of which 10 were vacant and 56 were
subleased. During the second half of fiscal 2002, the Company
expects cash outflows related to these locations of
approximately $2.5 million for rent on vacant locations,
related occupancy expenses, leasing commissions and net
shortfalls on cash rents from subleased locations.

10



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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the first half of fiscal 2002, the Company
recorded gross store closing costs of $0.5 million relating
to 13 stores identified for closure. Activity in the provision
for store closings and the related store closing costs for the
first half of fiscal 2002, is as follows ($ in thousands):

|                           |                                          |                |       |        |        |  
|-------------------------- | ---------------------------------------- | -------------- | ----- | ------ | ------ | -
|Balance, beginning of year |                                          | $              | 6,771 |       
|Store closing costs, gross |                                          |                | 539   |       
|Payments:                  |                                          |                |       |       
|                           | Rent expense, net of sublease recoveries |                |       | (2,676 | )     
|                           | Occupancy and other expenses             |                |       | (1,106 | )     
|                           | Sublease commissions and buyouts         |                |       | (757   | )     
|                           |                                          |                |       |       
|                           |                                          | Total payments |       |        | (4,539 | )
|                           |                                          |                |       |       
|Balance, end of quarter    |                                          | $              | 2,771 |       
|                           |                                          |                |       |       

On a fiscal year basis, store count activity and
the remaining number of stores to be closed are summarized as
follows:

|                             |  |                               |    |              |  |            |    |               |  |            |    |   |  |  |     |   |  |  |    | 
|---------------------------- |  | ----------------------------- | -- | ------------ |  | ---------- | -- | ------------- |  | ---------- | -- | - |  |  | --- | - |  |  | -- | 
|                             |  |                               |    |             
|                             |  | Number of Stores to be Closed |    |             
|                             |  |                               |    |             
|                             |  | Beginning                     |    |              |  | Plan       |    |               |  | Balance to
|Fiscal Year                  |  | Balance                       |    | Stores Added |  | Amendments |    | Stores Closed |  | be Closed 
|                             |  |                               |    |              |  |            |    |               |  |           
|2000                         |  |                               | 28 |              |  |            | 24 |               |  |            | (1 | ) |  |  | (42 | ) |  |  | 9  | 
|2001                         |  |                               | 9  |              |  |            | 46 |               |  |            | (2 | ) |  |  | (46 | ) |  |  | 7  | 
|2002(through August 4, 2002) |  |                               | 7  |              |  |            | 13 |               |  |            |   |   |  |  | (9  | ) |  |  | 11 | 

At August 4, 2002, there were 11 stores
remaining to be closed under the Companys store closing
plans. The table below details the progress of store closings
under the store closing plans by fiscal year:

|                             |  |              |    |            |  |               |    |            |  |  |     |   |  |  |    | 
|---------------------------- |  | ------------ | -- | ---------- |  | ------------- | -- | ---------- |  |  | --- | - |  |  | -- | 
|                             |  | Stores in    |    | Plan       |  |               |    | Balance to
|Fiscal Year of Accrual       |  | Closing Plan |    | Amendments |  | Stores Closed |    | Be Closed 
|                             |  |              |    |            |  |               |    |           
|1999                         |  |              | 87 |            |  |               | (2 | )          |  |  | (84 | ) |  |  | 1  | 
|2000                         |  |              | 24 |            |  |               |   |            |  |  | (24 | ) |  |  |   | 
|2001                         |  |              | 46 |            |  |               | (2 | )          |  |  | (44 | ) |  |  |   | 
|2002(through August 4, 2002) |  |              | 13 |            |  |               |   |            |  |  | (3  | ) |  |  | 10 | 
|                             |  |              |    |            |  |               |    |            |  |  |     |   |  |  | 11 | 

Note 8  Sale of Stores

During the second quarter of fiscal 2002, the
Company sold 13 stores in Texas. The stores were sold, as
they are geographically remote from the Companys other
operations. This transaction resulted in net cash proceeds of
approximately $4.2 million and a loss on sale of
approximately $0.8 million.

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

Overview

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). Our
business is, in addition, affected by weather conditions. While
unusually severe or inclement weather tends to reduce sales, as
our customers tend 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
products to increase.

Results of Operations

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

|                                            |  |                |       |                  |  |           |       |           |  |  |       |   |  |  |       |   
|------------------------------------------- |  | -------------- | ----- | ---------------- |  | --------- | ----- | --------- |  |  | ----- | - |  |  | ----- | --
|                                            |  |                |       |                 
|                                            |  | Thirteen Weeks |       | Twenty-six Weeks
|                                            |  | Ended          |       | Ended           
|                                            |  |                |       |                 
|                                            |  | August 4,      |       | August 5,        |  | August 4, |       | August 5,
|                                            |  | 2002           |       | 2001             |  | 2002      |       | 2001     
|                                            |  |                |       |                  |  |           |       |          
|Net sales                                   |  |                | 100.0 | %                |  |           | 100.0 | %         |  |  | 100.0 | % |  |  | 100.0 | % 
|Cost of sales                               |  |                | 54.3  |                  |  |           | 61.5  |           |  |  | 55.1  |   |  |  | 57.2  |   
|                                            |  |                |       |                  |  |           |       |           |  |  |       |   |  |  |       |   
|Gross profit                                |  |                | 45.7  |                  |  |           | 38.5  |           |  |  | 44.9  |   |  |  | 42.8  |   
|Operating and administrative expenses       |  |                | 38.3  |                  |  |           | 38.3  |           |  |  | 38.1  |   |  |  | 39.4  |   
|Store closing and other restructuring costs |  |                | 0.1   |                  |  |           | 5.6   |           |  |  | 0.1   |   |  |  | 3.3   |   
|Legal settlement costs                      |  |                |      |                  |  |           | 0.5   |           |  |  |      |   |  |  | 0.3   |   
|Loss on sale of stores                      |  |                | 0.2   |                  |  |           |      |           |  |  | 0.1   |   |  |  |      |   
|Secondary stock offering costs              |  |                |      |                  |  |           |      |           |  |  |      |   |  |  |      |   
|Goodwill amortization                       |  |                |      |                  |  |           | 0.4   |           |  |  |      |   |  |  | 0.3   |   
|                                            |  |                |       |                  |  |           |       |           |  |  |       |   |  |  |       |   
|Operating profit (loss)                     |  |                | 7.1   |                  |  |           | (6.3  | )         |  |  | 6.6   |   |  |  | (0.5  | ) 
|Interest expense                            |  |                | 4.1   |                  |  |           | 3.8   |           |  |  | 4.4   |   |  |  | 4.3   |   
|                                            |  |                |       |                  |  |           |       |           |  |  |       |   |  |  |       |   
|Income (loss) before income taxes           |  |                | 3.0   |                  |  |           | (10.1 | )         |  |  | 2.2   |   |  |  | (4.8  | ) 
|Income tax expense (benefit)                |  |                | 1.0   |                  |  |           | (3.9  | )         |  |  | 0.8   |   |  |  | (1.9  | ) 
|                                            |  |                |       |                  |  |           |       |           |  |  |       |   |  |  |       |   
|Income (loss) before extraordinary loss     |  |                | 2.0   |                  |  |           | (6.2  | )         |  |  | 1.4   |   |  |  | (2.9  | ) 
|Extraordinary loss, net of income tax       |  |                | (0.9  | )                |  |           |      |           |  |  | (0.4  | ) |  |  |      |   
|                                            |  |                |       |                  |  |           |       |           |  |  |       |   |  |  |       |   
|Net income (loss)                           |  |                | 1.1   | %                |  |           | (6.2  | )%        |  |  | 1.0   | % |  |  | (2.9  | )%
|                                            |  |                |       |                  |  |           |       |           |  |  |       |   |  |  |       |   



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Thirteen Weeks Ended August 4, 2002
    Compared to Thirteen Weeks Ended August 5,
    2001

Net sales for the thirteen weeks ended
August 4, 2002 (the second quarter of fiscal
2002) increased 4.3% to $398.3 million from sales of
$381.7 million in the thirteen weeks ended August 5,
2001 (the second quarter of fiscal 2001). Comparable
store sales increased by 7%. During the second quarter of fiscal
2002, we opened 4 stores, relocated 1 store, closed
1 store in addition to the store closed due to relocation
and sold 13 stores in west Texas. At August 4, 2002,
we had 1,114 stores in operation, compared to 1,154 at the end
of the second quarter of fiscal 2001. Sales increased during the
quarter despite our lower store count due to our improved
inventory in-stock position and our new merchandise offerings.

Gross profit was $182.1 million, or 45.7% of
net sales, in the second quarter of fiscal 2002 as compared to
$147.1 million, or 38.5% of net sales, for the second
quarter of fiscal 2001. Gross profit in the second quarter of
fiscal 2001 was negatively impacted by charges of approximately
$23.1 million for our Profitability Enhancement Program
(PEP). In addition, gross profit margin in the
second quarter of fiscal 2002 increased, reflecting our improved
inventory in-stock position and the realization of more cash
discounts and vendor allowances as a result of our increased
liquidity.

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Operating profit for the second quarter of fiscal
2002 totaled $28.2 million, or 7.1% of net sales, compared to an
operating loss of $24.0 million, or 6.3% of net sales, for
the second quarter of fiscal 2001. Operating profit for the
second quarter of fiscal 2001 was negatively impacted by an
additional $21.5 million of costs and charges incurred
largely in connection with our PEP, as well as $2.0 million
of charges incurred in connection with certain legal
settlements. Operating profit for the second quarter of fiscal
2002 was negatively impacted by a $0.8 million loss on the
sale of 13 west Texas stores and $0.3 million of costs
associated with our July 2002 stock offering. Operating profit
for the second quarter of fiscal 2002 increased primarily as a
result of the higher gross profit that was realized plus the
absence of PEP costs and charges.

Interest expense was $16.2 million for the
second quarter of fiscal 2002 compared to $14.7 million in
the second quarter of fiscal 2001. The increased interest
expense is a result of higher amortization of fees associated
with the recent refinancing ($0.8 million) and more
high-yield debt outstanding when compared to the second quarter
of fiscal 2001. Because we used equity proceeds to retire debt
in the second quarter, we expect interest expense to decrease
significantly during the remainder of fiscal 2002. This is more
fully explained under the section titled Liquidity and Capital
Resources.

Income tax expense for the second quarter of
fiscal 2002 was $4.1 million, compared to an income tax
benefit of $14.8 million in the second quarter of fiscal
2001. The income tax benefit in the second quarter of fiscal
2001 was primarily the result of net losses from the previously
described PEP charges that were taken during the quarter. Our
effective tax rate during the second quarter of 2002 was
approximately 34.7% and benefited from the realization of
certain tax credits and the reversal of reserves no longer
considered necessary.

Net income for the second quarter of fiscal 2002
was $4.1 million, or $0.10 per diluted common share, on a
weighted average share base of 40.1 million shares,
compared to a net loss of $23.8 million, or $(0.86) per
diluted common share, on a weighted average share base of
27.8 million shares in the second quarter of fiscal 2001.
The substantial increase in the weighted average number of fully
diluted outstanding common shares is the result of our recent
stock offering that included approximately 6.9 million
shares and the conversion in May 2002 of $50.0 million of
convertible subordinated debentures into approximately
5.8 million shares of common stock. In addition to the
items discussed above, the second quarter of fiscal 2002 was
negatively impacted by an extraordinary loss of
$3.7 million, net of an income tax benefit of
$2.3 million. The extraordinary loss was due to the costs
associated with the early retirement of approximately
$71.7 million of Autos 11% Senior Subordinated Notes
due 2006.



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Twenty-six Weeks Ended August 4, 2002
    Compared to Twenty-six Weeks Ended August 5,
    2001

Net sales for the twenty-six weeks ended
August 4, 2002 (first half of fiscal 2002)
increased 4.9% to $773.9 million from net sales of $737.8
in the comparable twenty-six weeks ended August 5, 2001
(first half of fiscal 2001). Comparable store sales
increased 7% for the first half of fiscal 2002. Sales increased
during the first half of fiscal 2002, despite our lower store
count, due to our improved inventory in-stock position, our new
merchandise offerings and our increased promotional activities,
which occurred primarily in the first quarter of fiscal 2002.

Gross profit was $347.2 million, or 44.9% of
net sales, for the first half of 2002 as compared to
$315.7 million or 42.8% of net sales in the first half of
2001. Gross profit in the fiscal 2001 period was reduced by
approximately $23.1 million of charges incurred in
connection with our PEP. On a comparable basis and excluding the
effect in 2001 of the PEP charges, as a percentage of sales,
gross profit for the first half of fiscal 2001 was 45.9%, which
exceeded the rate of gross profit earned in the first half of
fiscal 2002. This lower gross profit percentage in fiscal 2002
was expected because during the first quarter of fiscal 2002, we
took several steps to encourage former and existing customers to
return to our stores and to attract new customers who may have
never previously shopped in one of our stores. These initiatives
included: (1) an increased emphasis on promotional
activities and promotional pricing to stimulate customer
awareness; (2) the commencement of a new merchandising
program that features garage maintenance and organizational
products, items that we had never previously stocked; and
(3) a replenishment of inventory to return our stores to
more normal levels of product availability. While these steps
were successful in increasing customer counts, average sale
amount and total sales levels, they expectedly produced lower
gross profit margins. We reduced our promotional activity in

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the second quarter of fiscal 2002 and we
anticipate further reductions in future quarters, which should
improve our overall gross profit percentage. Our gross profit
percentage in the first quarter of 2002 was 44.0% compared to
45.7% in the second quarter and 44.9% for the year to date.


Operating profit for the first half of fiscal
2002 totaled $51.3 million, or 6.6% of net sales, compared
to an operating loss of $3.8 million, or 0.5% of net sales
for the first half of fiscal 2001. Operating profit for the
first half of fiscal 2001 was negatively impacted by
approximately $23.1 million of PEP charges that reduced
gross profit and an additional $21.5 million of other PEP
costs and charges. There was also a charge in the first half of
fiscal 2001 of $2.0 million for certain legal settlements.
Operating profit for the first half of fiscal 2002 was
negatively impacted by a $0.8 million loss on the sale of
13 west Texas stores and $0.3 million of costs associated
with our July 2002 stock offering. In addition to the items
mentioned above, operating profit has increased primarily as a
result of cost reductions associated with the PEP and the
leveraging of fixed administrative costs over rising comparable
store sales.

Interest expense for the first half of 2002
increased to $33.9 million from $31.4 million in the
same period last year due to increased amortization of costs
associated with the refinancing, slightly higher outstanding
loan balances and slightly higher interest rates. See Liquidity
and Capital Resources for a discussion of our current
capitalization.

Income tax expense for the first half of fiscal
2002 was $6.2 million compared to an income tax benefit of
$13.6 million in the first half of fiscal 2001. The income
tax benefit in the 2001 period was due to our net loss. The
income tax rate for the first half of fiscal 2002 was 35.8%,
which was slightly lower than our normal income tax rate due to
the availability of certain tax credits during the current
fiscal period.

Net income for the first half of fiscal 2002
increased to $7.5 million or $0.21 per diluted common
share, assuming a share count of 36.2 million shares, from
a loss of $21.6 million, or $(0.78) per diluted common
share, assuming a share count of 27.8 million shares in the
first half of fiscal 2001. The substantial increase in the
weighted average number of fully diluted outstanding common
shares is the result of our recent offering of approximately
6.9 million shares and the conversion in May 2002 of
$50.0 million of convertible subordinated debentures into
approximately 5.8 million shares of common stock. Net
income for the first half of fiscal 2002 includes an
extraordinary charge of $3.7 million, net of an income tax
benefit of $2.3 million, for costs associated with the
retirement of approximately $71.7 million of Autos 11%
Senior Subordinated Notes due 2006.

Liquidity and Capital Resources



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

During fiscal 2001, we completed a refinancing
(the Refinancing) of our capital structure that
resulted in the elimination of scheduled bank debt amortization
payments prior to the end of 2004, the extension of debt
maturities and enhanced liquidity. The Refinancing consisted of
the following: (1) the issuance of a $30.0 million, 7%
convertible subordinated note, which was converted during fiscal
2001 into approximately 4.5 million shares of CSK Auto
Corporation common stock at a conversion price of $6.63 per
share; (2) a new three-year $300.0 million senior
secured, asset-based credit facility due in December 2004
comprised of a $170.0 million non-amortizing term loan and
a $130.0 million revolving credit facility; (3) the
issuance of $280.0 million of 12% Senior Notes due 2006;
and (4) the issuance of $50.0 million of 7%
Convertible Subordinated Debentures due December 2006 and
related make-whole warrants at a conversion price of $8.69 per
share.

On May 20, 2002, the $50 million
Convertible Subordinated Debentures were converted at our
election into approximately 5.75 million shares of our
common stock at the contractual conversion price of $8.69 per
share. In addition, we elected to pay interest on the debentures
in additional shares of our common stock in lieu of cash. Of the
additional interest shares issued, 105,708 were issued during
the first quarter of fiscal 2002 and 30,872 were issued during
the second quarter of fiscal 2002.

On July 2, 2002, we sold 6,878,300 primary
shares of common stock in an underwritten public offering at $12
per share. In addition, a selling stockholder sold an additional
2,600,000 shares in the offering. We

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received no proceeds from the shares sold by the
selling stockholder. Issuance costs related to the stock
offering approximated $0.7 million. These costs included
approximately $0.4 million of legal, accounting and
printing fees charged to additional paid in capital for the
primary offering and approximately $0.3 million of costs
charged to operating expense for the secondary offering.


Proceeds from this offering were used to retire
approximately $71.7 million of Autos outstanding 11%
Senior Subordinated Notes due 2006. The early extinguishment of
this debt resulted in an extraordinary loss of approximately
$3.7 million, net of approximately $2.3 million of
income tax benefit, primarily as a result of the payment of an
early redemption premium and the write off of deferred debt
issuance costs. Redemption of these 11% Senior Subordinated
Notes will reduce the cash needed to fund interest expense by
approximately $3.9 million for the balance of fiscal 2002.
The sources and uses of funds of this transaction are as follows
($ in thousands):

|                                                                        |                    |   |         |         |  
|----------------------------------------------------------------------- | ------------------ | - | ------- | ------- | -
|Proceeds:                                                               |                    |   |         |        
|Gross proceeds at $12 per share                                         |                    | $ | 82,540  |        
|Underwriting discount                                                   |                    |   | (3,921  | )      
|                                                                        |                    |   |         |        
|                                                                        | Net proceeds       |   | $       | 78,619  |  
|                                                                        |                    |   |         |        
|                                                                       
|Uses:                                                                   |                    |   |         |        
|Partial retirement of 11% Senior Subordinated
    Notes                 |                    | $ | (71,703 | )      
|Redemption premium on retired notes 
    charged to extraordinary loss |                    |   | (3,943  | )      
|Accrued interest on retired notes                                       |                    |   | (1,972  | )      
|Issuance costs                                                          |                    |   | (741    | )      
|General corporate purposes                                              |                    |   | (260    | )      
|                                                                        |                    |   |         |        
|                                                                        | Total use of funds |   | $       | (78,619 | )
|                                                                        |                    |   |         |        

Our primary cash requirements include working
capital (primarily inventory), interest on our debt and capital
expenditures. Due to the Refinancing, we will not be required to
make any debt amortization payments prior to December 2004 other
than capital lease payments. We intend to finance our cash
requirements with cash flow from operations and borrowings under
our senior credit facility. The following table outlines our
working capital and liquidity ($ in thousands):

|                                            |  |              |         |              |  |   |         | 
|------------------------------------------- |  | ------------ | ------- | ------------ |  | - | ------- | 
|                                            |  | Aug. 4, 2002 |         | Feb. 3, 2002
|                                            |  |              |         |             
|Net current assets                          |  | $            | 521,426 |              |  | $ | 498,914 | 
|                                            |  |              |         |              |  |   |         | 
|Cash                                        |  | $            | 16,519  |              |  | $ | 16,084  | 
|Availability under revolving line of credit |  |              | 49,124  |              |  |   | 35,885  | 
|                                            |  |              |         |              |  |   |         | 
|Total liquidity                             |  | $            | 65,643  |              |  | $ | 51,969  | 
|                                            |  |              |         |              |  |   |         | 

As of August 4, 2002, we had net working
capital of approximately $521.4 million, an increase of
$22.5 million, or 4.5%, compared to February 3, 2002.
Inventory levels increased to $652.8 million at the end of
the first half of fiscal 2002 from $619.6 million at the
end of fiscal 2001. The increase in working capital primarily
relates to the $33.2 million increase in inventories
consistent with our return to a more normal inventory in-stock
position and the acquisition of new product types in support of
the new merchandise programs offset by an increase in accounts
payable of $16.3 million in connection with the related
inventory purchases and extended payment terms.

As of August 4, 2002, we had total liquidity
(cash plus availability under our existing revolving credit
facility) of approximately $65.6 million. Availability
under our revolving credit agreement is controlled by borrowing
base limitations applicable to that facility. The borrowing base
formula is equal to the lesser of $300.0 million and the
sum of certain percentages of our eligible inventory and
accounts receivable. As a result of the limitations imposed by
the borrowing base formula, at August 4, 2002, we could
only borrow up to

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##### Table of Contents



$282.7 million of the total
$300.0 million facility. Accordingly, we have
$17.3 million of additional borrowing capacity that has not
been included in our liquidity calculation but that may become
available, in the future, subject to the borrowing base
calculation.


Debt is an important part of our overall
capitalization. While we are still highly leveraged, our total
outstanding debt balances have decreased as a result of our
recent conversion of $50.0 million in outstanding
convertible subordinated debentures to common stock, our recent
stock offering and subsequent retirement of approximately
$71.1 million of outstanding 11% Senior Subordinated Notes
due 2006. Our debt to equity ratio continues to improve. The
table below details our debt to equity ratio ($ in thousands):

|                                          |  |              |         |              |  |   |         | 
|----------------------------------------- |  | ------------ | ------- | ------------ |  | - | ------- | 
|                                          |  | Aug. 4, 2002 |         | Feb. 3, 2002
|                                          |  |              |         |             
|Debt, including capital lease obligations |  | $            | 544,689 |              |  | $ | 670,843 | 
|Equity                                    |  | $            | 287,734 |              |  | $ | 154,286 | 
|                                          |  |              |         |              |  |   |         | 
|Debt to equity ratio                      |  |              | 1.9     |              |  |   | 4.3     | 
|                                          |  |              |         |              |  |   |         | 

Analysis of Cash Flows

During the first half of fiscal 2002, net cash
provided by operating activities was $6.0 million compared
to $27.2 million of cash provided by operating activities
during the first half of fiscal 2001. The largest components of
the change in cash flow from operations relate to: (1) an
increase in payments for accounts payable made during the fiscal
2002 period as a result of our improved liquidity arising from
our Refinancing, where $16.3 million of cash was provided
compared to $26.0 million provided during the comparable
2001 period; (2) an increase in inventory where
$36.9 million was used to purchase inventory in the first
half of fiscal 2002 compared to $21.4 million used to
purchase inventory during the comparable 2001 period; and
(3) an increase in payments for accrued expenses of
$17.7 million. Now that inventory and accounts payable
levels have stabilized, we expect higher cash flows from
operating activities for the remainder of the fiscal year.

Net cash provided by investing activities totaled
$0.8 million for the first half of fiscal 2002, compared to
$4.9 million used in investing activities during the
comparable 2001 period. The increase in cash provided by
investing activities during fiscal 2002 was the result of
(1) $4.2 million in proceeds from the sale of
13 stores in west Texas in the first half of fiscal 2002
(no similar sales occurred in the comparable 2001 period); and
(2) $4.2 million less in capital expenditures in the
first half of fiscal 2002 than in the comparable 2001 period.
These sources of cash were offset in part by $3.1 million
less in proceeds from assets held for sale in the 2002 fiscal
period.

Net cash used in financing activities totaled
$6.5 million for fiscal 2002 compared to $19.3 million
in fiscal 2001. This decrease relates primarily to lower
payments on our senior credit facility, where $7.0 million
in net payments were made during fiscal 2002 compared to
$12.3 million in net payments made during fiscal 2001.

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 projections, it is identified for closure.
As a result of our acquisitions over the last several years, we
have closed numerous locations due to store overlap with
previously existing store locations. In these situations, we
negotiate with the landlord to attempt to cancel the lease or we
attempt to sublease the store to a third party to reduce our
future exposure.

We provide an allowance for estimated costs to be
incurred in connection with store closures. The allowance for
store closing costs primarily consists of three components:
(1) future rents to be paid over the remaining terms of the
lease agreements for the stores (net of estimated probable
sublease recoveries); (2) lease commissions associated with
the anticipated store subleases; and (3) occupancy expenses
associated

16



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##### Table of Contents



with the closed store vacancy periods. Such costs
are recognized when a store is specifically identified, costs
can be estimated and closure is planned to be completed within
the next twelve months. No provision is made for employee
termination costs. For stores to be relocated, such costs are
recognized when an agreement for the new location has been
reached with a landlord and site plans meet preliminary
municipal approvals. 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 our normal operating
expenses. The actual costs of relocating a store, such as
transporting of inventories, are considered a normal operating
expense and are not included in the store closing reserve.


As of August 4, 2002, we had a total of
239 store locations included in the allowance for store
closing costs. Of this total, 52 locations were vacant,
176 locations were subleased and 11 locations were
identified for closure but remained open. In addition to these
store locations, we had 66 service centers of which 10 were
vacant and 56 were subleased. During the second half of fiscal
2002, we expect cash outflows related to these locations of
approximately $2.5 million for rent on vacant locations,
related occupancy expenses, leasing commissions and net
shortfalls on cash rents from subleased locations.

During the first half of fiscal 2002, we recorded
gross store closing costs of $0.5 million relating to
13 stores identified for closure. Activity in the provision
for store closings and the related store closing costs for the
first half of fiscal 2002, is as follows ($ in thousands):

|                           |                                          |                |       |        |        |  
|-------------------------- | ---------------------------------------- | -------------- | ----- | ------ | ------ | -
|Balance, beginning of year |                                          | $              | 6,771 |       
|Store closing costs, gross |                                          |                | 539   |       
|Payments:                  |                                          |                |       |       
|                           | Rent expense, net of sublease recoveries |                |       | (2,676 | )     
|                           | Occupancy and other expenses             |                |       | (1,106 | )     
|                           | Sublease commissions and buyouts         |                |       | (757   | )     
|                           |                                          |                |       |       
|                           |                                          | Total payments |       |        | (4,539 | )
|                           |                                          |                |       |       
|Balance, end of quarter    |                                          | $              | 2,771 |       
|                           |                                          |                |       |       

On a fiscal year basis, store count activity and
the remaining number of stores to be closed are summarized as
follows:

|                             |  |                               |    |        |  |            |    |        |  |            |    |   |  |  |     |   |  |  |    | 
|---------------------------- |  | ----------------------------- | -- | ------ |  | ---------- | -- | ------ |  | ---------- | -- | - |  |  | --- | - |  |  | -- | 
|                             |  |                               |    |       
|                             |  | Number of Stores to be Closed |    |       
|                             |  |                               |    |       
|                             |  | Beginning                     |    | Stores |  | Plan       |    | Stores |  | Balance to
|Fiscal Year                  |  | Balance                       |    | Added  |  | Amendments |    | Closed |  | be Closed 
|                             |  |                               |    |        |  |            |    |        |  |           
|2000                         |  |                               | 28 |        |  |            | 24 |        |  |            | (1 | ) |  |  | (42 | ) |  |  | 9  | 
|2001                         |  |                               | 9  |        |  |            | 46 |        |  |            | (2 | ) |  |  | (46 | ) |  |  | 7  | 
|2002(through August 4, 2002) |  |                               | 7  |        |  |            | 13 |        |  |            |   |   |  |  | (9  | ) |  |  | 11 | 

At August 4, 2002, there were 11 stores
remaining to be closed under our store closing plans. The table
below details the progress of store closings under the store
closing plans by fiscal year:

|                             |  |              |    |            |  |        |    |            |  |  |     |   |  |  |    | 
|---------------------------- |  | ------------ | -- | ---------- |  | ------ | -- | ---------- |  |  | --- | - |  |  | -- | 
|                             |  | Stores in    |    | Plan       |  | Stores |    | Balance to
|Fiscal Year of Accrual       |  | Closing Plan |    | Amendments |  | Closed |    | be Closed 
|                             |  |              |    |            |  |        |    |           
|1999                         |  |              | 87 |            |  |        | (2 | )          |  |  | (84 | ) |  |  | 1  | 
|2000                         |  |              | 24 |            |  |        |   |            |  |  | (24 | ) |  |  |   | 
|2001                         |  |              | 46 |            |  |        | (2 | )          |  |  | (44 | ) |  |  |   | 
|2002(through August 4, 2002) |  |              | 13 |            |  |        |   |            |  |  | (3  | ) |  |  | 10 | 
|                             |  |              |    |            |  |        |    |            |  |  |     |   |  |  | 11 | 

17



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##### Table of Contents



Sale of Stores

During the second quarter of fiscal 2002, we sold
13 stores in Texas. The stores were sold, as they are
geographically remote from the Companys other operations.
This transaction resulted in net cash proceeds of approximately
$4.2 million and a loss on sale of approximately
$0.8 million.

Risk 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 products to increase.

As a result of our Refinancing during fiscal
2001, we were able to improve relationships with our vendors and
eliminate many out-of-stock conditions that we believe had
resulted in dissatisfaction amongst our customers and decreased
sales in late fiscal 2001. Since the completion of our
Refinancing, our same-store sales increases have been in the
mid-single digits. In addition, our same store retail customer
counts have become positive. This improved sales performance
reflects our improved inventory position and the generally
favorable dynamics in the U.S. automotive aftermarket sector.

Considering our improved financial position, we
expect net sales for the remainder of fiscal 2002 to increase by
approximately 4% to 6% on a same-store basis. However, any
unusual weather conditions, competitive pressures, or other
adverse changes to our business or the economy in general could
materially affect our financial position and results of
operations.



| |          
| | ---------
| | 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 Covenant Compliance

Our senior credit facility contains negative
covenants and restrictions on actions by us and our subsidiaries
including, without limitation, restrictions on indebtedness,
liens, guarantee obligations, mergers, asset dispositions not in
the ordinary course of business, investments, loans, advances
and acquisitions, dividends and other restricted junior
payments, transactions with affiliates, change in business
conducted, and certain prepayments and amendments of
subordinated indebtedness. Our revolving credit facility
requires that we meet certain financial covenants, ratios and
tests, including a maximum leverage ratio and a minimum interest
coverage ratio. The Leverage Ratio is consolidated total
funded debt, as defined in the debt agreement, divided by
consolidated EBITDA as defined in the debt
agreement. The Interest Coverage Ratio is consolidated
EBITDA, as defined in the debt agreement, divided by
cash interest expense, as defined in the debt
agreement. At August 4, 2002 our Leverage Ratio was 4.05 to
1.00; and our Interest Coverage Ratio was 2.39 to 1.00 both of
which were in compliance with the related covenants. The
following table shows the ratios that we need to meet through
the life of our debt agreement.

18



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##### Table of Contents



|            |  |         |        |                 |  |                 |              |  |  |  |              | 
|----------- |  | ------- | ------ | --------------- |  | --------------- | ------------ |  |  |  | ------------ | 
|            |  |         |        |                 |  | Interest       
|            |  |         |        | Leverage        |  | Coverage       
|            |  | Fiscal  |        | Ratio           |  | Ratio          
|Fiscal Year |  | Quarter |        | (must be below) |  | (must be above)
|            |  |         |        |                 |  |                
|2002        |  |         | Third  |                 |  |                 | 4.50 to 1.00 |  |  |  | 2.00 to 1.00 | 
|2002        |  |         | Fourth |                 |  |                 | 4.25 to 1.00 |  |  |  | 2.00 to 1.00 | 
|2003        |  |         | First  |                 |  |                 | 4.25 to 1.00 |  |  |  | 2.00 to 1.00 | 
|2003        |  |         | Second |                 |  |                 | 3.75 to 1.00 |  |  |  | 2.25 to 1.00 | 
|2003        |  |         | Third  |                 |  |                 | 3.75 to 1.00 |  |  |  | 2.25 to 1.00 | 
|2003        |  |         | Fourth |                 |  |                 | 3.75 to 1.00 |  |  |  | 2.25 to 1.00 | 
|2004        |  |         | First  |                 |  |                 | 3.75 to 1.00 |  |  |  | 2.25 to 1.00 | 
|2004        |  |         | Second |                 |  |                 | 3.50 to 1.00 |  |  |  | 2.50 to 1.00 | 
|2004        |  |         | Third  |                 |  |                 | 3.50 to 1.00 |  |  |  | 2.50 to 1.00 | 
|2004        |  |         | Fourth |                 |  |                 | 3.50 to 1.00 |  |  |  | 2.50 to 1.00 | 

A breach of the covenants, ratios, or
restrictions contained in our senior credit facility could
result in an event of default thereunder. Upon the occurrence of
such an event of default, the lenders under our new senior
credit facility could elect to declare all amounts outstanding
under the new senior credit facility, 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 new senior credit facility 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.

We are 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 affected by movements in the LIBOR
rate. During February 2002, we entered into an interest rate
swap agreement which converted the interest payment obligation
on $100.0 million of our 12% Senior Notes to a floating
rate, set quarterly, equal to the 3 month LIBOR rate plus
760 basis points.

At August 4, 2002, including the
$100.0 million of notes that are part of the interest rate
swap agreement, 59% of our outstanding debt was at variable
interest rates and 41% of our outstanding debt was at fixed
interest rates. With $320.0 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 $3.2 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.

Currently our debt instruments are rated by the
major debt rating agencies. A downgrade of our ratings would
make it more difficult and more costly for us to obtain
additional financing.

Critical Accounting Matters

For a discussion of our critical accounting
matters, please refer to our Annual Report on Form 10K/ A
filed on May 10, 2002.

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##### Table of Contents



Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board (the FASB) issued Statement of Financial
Accounting Standards No. 141 (SFAS 141),
Business Combinations, and No. 142
(SFAS 142), Goodwill and Other Intangible
Assets. SFAS 141 supersedes Accounting Principles
Board Opinion (APB) No. 16, Business
Combinations. The provisions of SFAS 141:
(1) require that the purchase method of accounting be used
for all business combinations initiated after June 30,
2001; (2) provide specific criteria for the initial
recognition and measurement of intangible assets apart from
goodwill; and (3) generally require that unamortized
negative goodwill be written off immediately as an extraordinary
gain instead of being deferred and amortized. SFAS 141 also
requires that upon adoption of SFAS 142 we reclassify the
carrying amounts of certain intangible assets into or out of
goodwill, based on certain criteria. SFAS 142 supersedes
APB 17, Intangible Assets, and is effective for fiscal years
beginning after December 15, 2001. SFAS 142 primarily
addresses the accounting for goodwill and intangible assets
subsequent to their initial recognition. The provisions of
SFAS 142: (1) prohibit the amortization of goodwill
and indefinite-lived intangible assets; (2) require that
goodwill and indefinite-lived intangibles assets be tested
annually for impairment (and in interim periods if certain
events occur indicating that the carrying value of goodwill
and/or indefinite-lived intangible assets may be impaired);
(3) require that reporting units be identified for the
purpose of assessing potential future impairments of goodwill;
and (4) remove the forty-year limitation on the
amortization period of intangible assets that have finite lives.

SFAS 142 requires that goodwill be tested
annually for impairment using a two-step process. The first step
is to identify a potential impairment and, in transition, this
step must be measured as of the beginning of the fiscal year.
However, a company has six months from the date of adoption to
complete the first step. The second step of the goodwill
impairment test measures the amount of the impairment loss
(measured as of the beginning of the year of adoption), if any,
and must be completed by the end of our fiscal year. Intangible
assets deemed to have an indefinite life will be tested for
impairment using a one-step process, which compares the fair
value to the carrying amount of the asset as of the beginning of
the fiscal year.

We adopted the provisions of SFAS 142 on
February 4, 2002. We completed the transitional impairment
test during the second quarter of 2002 and determined that there
was no impairment of existing goodwill. The remaining balance of
goodwill is $127.1 million. In accordance with
SFAS 142, we ceased amortization of this remaining goodwill.

SFAS 142 requires the presentation of net
income and related earnings per share data adjusted for the
effect of goodwill amortization. The following table provides
pro forma net income and earnings per share data for the
thirteen and twenty-six weeks ended August 4, 2002 and
August 5, 2001, to illustrate the impact of goodwill
amortization on the results of the prior year period ($ in
thousands except per share amounts).

|                                       |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |       |  
|-------------------------------------- | ------------------------------------- | -------------- | ----- | ---------------- |  | --------- | ------- | --------- | - | - | ----- | ---- |  | - | ------- | ----- | -
|                                       |                                       |                |       |                 
|                                       |                                       | Thirteen Weeks |       | Twenty-six Weeks
|                                       |                                       | Ended          |       | Ended           
|                                       |                                       |                |       |                 
|                                       |                                       | August 4,      |       | August 5,        |  | August 4, |         | August 5,
|                                       |                                       | 2002           |       | 2001             |  | 2002      |         | 2001     
|                                       |                                       |                |       |                  |  |           |         |          
|Reported net income (loss)             |                                       | $              | 4,087 |                  |  | $         | (23,837 | )         |   | $ | 7,467 |      |  | $ | (21,584 | )    
|Add: goodwill amortization, net of tax |                                       |                |      |                  |  |           | 815     |           |   |   |      |      |  |   | 1,597   |      
|                                       |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|Pro forma net income (loss)            |                                       | $              | 4,087 |                  |  | $         | (23,022 | )         |   | $ | 7,467 |      |  | $ | (19,987 | )    
|                                       |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|Basic earnings per share:              |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Earnings (loss) per share as reported |                | $     | 0.10             |  |           | $       | (0.86     | ) |   | $     | 0.21 |  |   | $       | (0.78 | )
|                                       | Goodwill amortization, net of tax     |                |       |                 |  |           |         | 0.03      |   |   |       |     |  |   |         | 0.06  |  
|                                       |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Pro forma earnings (loss) per share   |                | $     | 0.10             |  |           | $       | (0.83     | ) |   | $     | 0.21 |  |   | $       | (0.72 | )
|                                       |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|Diluted earnings per share:            |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Earnings (loss) per share as reported |                | $     | 0.10             |  |           | $       | (0.86     | ) |   | $     | 0.21 |  |   | $       | (0.78 | )
|                                       | Goodwill amortization, net of tax     |                |       |                 |  |           |         | 0.03      |   |   |       |     |  |   |         | 0.06  |  
|                                       |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      
|                                       | Pro forma earnings (loss) per share   |                | $     | 0.10             |  |           | $       | (0.83     | ) |   | $     | 0.21 |  |   | $       | (0.72 | )
|                                       |                                       |                |       |                  |  |           |         |           |   |   |       |      |  |   |         |      

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In June 2001, the FASB issued
SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 addresses financial
accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated
asset retirement costs. This statement applies to all entities
that have legal obligations associated with the retirement of
long-lived assets that result from the acquisition,
construction, development or normal use of the asset.
SFAS 143 is effective for fiscal years beginning after
June 15, 2002. We do not expect the adoption of
SFAS 143 to have a significant impact on our financial
statements.

In October 2001, the FASB issued
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144
replaces certain previously issued accounting guidance, develops
a single accounting model for long-lived assets, and broadens
the framework previously established for assets to be disposed
of by sale (whether previously held or newly acquired). We
adopted SFAS No. 144 as of the beginning of fiscal
2002. The adoption of this standard did not have a material
effect on our financial statements.

In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statement
No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections. SFAS No. 145 updates,
clarifies and simplifies existing accounting pronouncements and
addresses the reporting of debt extinguishments and accounting
for certain lease modifications that have economic effects that
are similar to sale-leaseback transactions. We plan to adopt the
provisions of SFAS No. 145 by February 3, 2003.
During the second quarter of fiscal 2002, we recorded an
extraordinary loss of $3.7 million (net of income tax
benefit) relating to the early retirement of debt.
SFAS No. 145 will require that this amount be
reclassified to operations.

In July 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146
nullifies EITF Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS No. 146 requires companies
to recognize the present value of costs associated with exit or
disposal activities when they are incurred rather than at the
date of a commitment to an exit or disposal plan. Examples of
costs covered by the standard include lease rental and
termination costs and certain employee severance costs that are
associated with a restructuring, discontinued operation, store
closing, or other exit or disposal activity.
SFAS No. 146 is to be applied prospectively to exit or
disposal activities initiated after December 31, 2002, with
early implementation encouraged. We are currently analyzing the
impact of this pronouncement on our financial statements;
however, adoption of the pronouncement may impact the timing of
recognition of closed store charges.




Forward-looking Statements

The foregoing Managements Discussion and
Analysis contains 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 Annual Report on Form 10-K/ A, and are incorporated
herein by reference.

Item 3.     Quantitative
and Qualitative Disclosures about Market Risk

See Risk Factors Affecting Liquidity and
Capital Resources above.

Item 4.     Controls
and Procedures

Not applicable

21



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##### Table of Contents






PART II

OTHER INFORMATION




Item 1.     Legal
Proceedings

We were served on March 8, 2000 with a
complaint filed in Federal Court in the Eastern District of New
York by the Coalition for a Level Playing Field, O.K. and, based
on the current amended complaint, 255 individual auto parts
dealers. The complaint alleges that we and seven other auto
parts dealers (AutoZone, Inc., Wal-Mart Stores, Inc., Advance
Stores Company, Inc., Discount Auto, Inc., The Pep
Boys  Manny, Moe and Jack, Inc., OReilly
Automotive, Inc., and Keystone Automotive Operations, Inc.)
violated the Robinson-Patman Act. Only 15 of the individual
plaintiffs asserted claims against us. The complaint, as
amended, alleges that we and other defendants knowingly either
induced or received discriminatory prices from large suppliers,
allegedly in violation of Section 2(a) and 2(f) of the
Robinson-Patman Act, as well as received compensation from large
suppliers for services not performed for those suppliers,
allegedly in violation of Section 2(c) of the
Robinson-Patman Act.. In May 2002, we reached a settlement with
all of the plaintiffs that provides for the payment of nominal
consideration by us. As the first step in the settlement, we and
the attorneys for the plaintiffs have filed with the Court a
Stipulation and Order for the dismissal with prejudice of all
claims by all plaintiffs against us. The Court has executed this
Stipulation and Order.

We currently and from time to time are involved
in other litigation incidental to the conduct of our business.
The damages claimed in some of this litigation are substantial.
Although the amount of liability that may result from these
matters cannot be ascertained, we do not currently believe that,
in the aggregate, they 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

We held our annual meeting of stockholders on
June 12, 2002. The following are the results of the matters
voted upon at the meeting:



| |    |                                                                                                                                               
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------
| | I. | Stockholders elected thirteen directors to serve
    until the 2003 Annual Meeting of the Stockholders. The
    stockholders voted as follows:

|                       |  |          |            |          |  |  |         | 
|---------------------- |  | -------- | ---------- | -------- |  |  | ------- | 
|Directors              |  | Vote for |            | Withheld
|                       |  |          |            |         
|Maynard L. Jenkins Jr. |  |          | 31,403,985 |          |  |  | 109,507 | 
|James G. Bazlen        |  |          | 31,403,435 |          |  |  | 110,057 | 
|James O. Egan          |  |          | 31,091,475 |          |  |  | 422,017 | 
|Morton Godlas          |  |          | 31,092,675 |          |  |  | 420,817 | 
|Terilyn A. Henderson   |  |          | 31,393,025 |          |  |  | 120,467 | 
|Charles K. Marquis     |  |          | 30,946,234 |          |  |  | 567,258 | 
|Simon Moore            |  |          | 31,394,135 |          |  |  | 119,357 | 
|Frederick J. Rowan II  |  |          | 31,403,935 |          |  |  | 109,557 | 
|Robert Smith           |  |          | 31,068,125 |          |  |  | 445,367 | 
|Christopher J. Stadler |  |          | 31,407,235 |          |  |  | 106,257 | 
|Jules Trump            |  |          | 31,377,875 |          |  |  | 135,617 | 

22



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##### Table of Contents



|              |  |          |            |          |  |  |         | 
|------------- |  | -------- | ---------- | -------- |  |  | ------- | 
|Directors     |  | Vote for |            | Withheld
|              |  |          |            |         
|Eddie Trump   |  |          | 31,377,875 |          |  |  | 135,617 | 
|Savio W. Tung |  |          | 30,980,392 |          |  |  | 533,100 | 



| |     |                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | II. | Stockholders ratified the appointment of
    PricewaterhouseCoopers LLP as independent accountants for the
    fiscal year ending February 2, 2003. The stockholders voted
    as follows:

|                |  |                  |  |                |  |  |  | 
|--------------- |  | ---------------- |  | -------------- |  |  |  | 
|For: 31,070,587 |  | Against: 436,188 |  | Abstain: 6,717



| |      |                                                                                                                                                          
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | III. | Stockholders approved the adoption of the 2002
    Executive Incentive Program covering certain senior executives.
    The stockholders voted as follows:

|                |  |                  |  |                |  |  |  | 
|--------------- |  | ---------------- |  | -------------- |  |  |  | 
|For: 31,239,433 |  | Against: 266,137 |  | Abstain: 7,922



| |     |                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | IV. | Stockholders approved an amendment to the
    Companys Restated Certificate of Incorporation to increase
    the number of authorized shares of common stock. The
    stockholders voted as follows:

|                |  |                 |  |                |  |  |  | 
|--------------- |  | --------------- |  | -------------- |  |  |  | 
|For: 31,472,952 |  | Against: 33,088 |  | Abstain: 7,452




Item 5.     Other
Information

NONE




Item 6.     Exhibits
and Reports on Form 8-K

(a)     Exhibits:

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.01   |  | Restated Certificate of Incorporation of the
    Company, incorporated herein by reference to Exhibit 3.01
    of the Companys annual report on Form 10-K, filed on
    May 4, 1998 (File No. 001-13927).                                                                                                                                                                                                             
|3.02   |  | Certificate of Correction to the restated
    certificate of incorporation of the Company, incorporated herein
    by reference to Exhibit 3.02 of the Companys annual
    report on Form 10-K, filed on May 4, 1998 (File
    No. 001-13927).                                                                                                                                                                        
|3.02.1 |  | Certificate of Amendment of the Restated
    Certificate of Incorporation of CSK Auto Corporation, filed on
    June 13, 2002.                                                                                                                                                                                                                                                                                         
|3.03   |  | Amended and Restated By-Laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of the
    Companys annual report on Form 10-K, filed on
    April 28, 1999 (File No. 001-13927).                                                                                                                                                                                                                   
|3.03.1 |  | First Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our annual report on Form 10-K,
    filed on May 1, 2001 (File No. 001-13927).                                                                                                                                                                                                           
|4.01   |  | Securities Purchase Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., including form of
    Debenture and form of Make Whole Warrant, incorporated herein by
    reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed December 11, 2001.                                                                            
|4.01.1 |  | Registration Rights Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., incorporated herein
    by reference to Exhibit 99.3 of our Current Report on
    Form 8-K, filed December 11, 2001.                                                                                                                                            
|4.01.2 |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc., as Guarantors;
    and Credit Suisse First Boston Corporation, J.P. Morgan
    Securities Inc. and UBS Warburg LLC as Purchasers, incorporated
    herein by reference to Exhibit 99.4 of our Current Report
    on Form 8-K, filed January 18, 2002.
|4.01.3 |  | Amendment No. 1 to Securities Purchase
    Agreement dated as of May 16, 2002 by and between CSK Auto
    Corporation, LB I Group Inc. and Investcorp CSK Holdings L.P.,
    incorporated herein by reference to Exhibit 4.04.01 to our
    Registration Statement on Form S-3, filed May 17, 2002
    (File No. 333-77008).                                                                                           

23



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.01.4 |  | Amended and Restated Registration Rights
    Agreement, dated May 16, 2002, by and between CSK Auto
    Corporation, LB I Group Inc. and Investcorp CSK Holdings L.P.,
    incorporated herein by reference to Exhibit 4.05.01 to our
    Registration Statement on Form S-3, filed May 17, 2002
    (File No. 333-77008).                                                                                                                                                                                                                      
|4.02   |  | Credit Agreement, dated as of December 21,
    2001, by and among CSK Auto, Inc., the lenders from time to time
    a party thereto, and JP Morgan Chase Bank, Credit Suisse
    First Boston, and UBS AG, Stamford Branch, incorporated herein
    by reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed January 18, 2002.                                                                                                                                                                                                 
|4.02.1 |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc., as
    subsidiary guarantors; and the Bank of New York, as Trustee,
    incorporated herein by reference to Exhibit 99.3 of our
    Current Report on Form 8-K, filed January 18, 2002.                                                                                                                                                                                
|4.02.2 |  | Registration Rights Agreement, dated
    December 21, 2001, by and among CSK Auto, Inc; CSK Auto
    Corporation, Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First Boston
    Corporation, J.P. Morgan Securities Inc. and UBS Warburg
    LLC as Purchasers, incorporated herein by reference to
    Exhibit 99.5 of our Current Report on Form 8-K, filed
    January 18, 2002.                                                                                                         
|4.02.3 |  | Amendment No. 1 to the December 21,
    2001 Credit Agreement, dated June 5, 2002, by and among CSK
    Auto, Inc., the several lenders from time to time parties to the
    Credit Agreement (the Lenders), JPMORGAN CHASE BANK,
    as administrative agent for the Lenders, CREDIT SUISSE FIRST
    BOSTON, as syndication agent for the Lenders and UBS AG,
    STAMFORD BRANCH, as documentation agent for the Lenders,
    incorporated herein by reference to Exhibit 99.2 of our
    Current Report on Form 8-K filed on June 6, 2002.
|4.03   |  | ISDA master agreement executed as of March 2002
    between Lehman Brothers Special Financing Inc. and CSK Auto,
    Inc., incorporated herein by reference to our Annual Report on
    Form 10-K, filed on April 23, 2002 (File
    No. 001-13927).                                                                                                                                                                                                                                                                                            
|10.01  |  | Promissory Note, dated May 14, 2002, between
    CSK Auto Corporation and Martin Fraser.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.02  |  | Stock Pledge Agreement, dated May 14, 2002,
    between CSK Auto Corporation and Martin Fraser.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.03  |  | Purchase Agreement, dated June 27, 2002, by
    and between CSK Auto Corporation, MERRILL LYNCH & CO.
    Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS
    WARBURG LLC, CREDIT SUISSE FIRST BOSTON CORPORATION, and
    GOLDMAN, SACHS & CO. as Representatives of the several
    Underwriters.                                                                                                                                                                                                                                     
|10.04  |  | Third Amendment to Stockholders Agreement,
    incorporated herein by reference to Exhibit 10.18.6 to our
    Registration Statement on Form S-4, filed on June 6,
    2002 (File No. 333-82492).                                                                                                                                                                                                                                                                                                                                              
|99.1   |  | Certification by the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                  
|99.2   |  | Certification by the 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 June 7, 2002 we filed a current report on
    Form 8-K, to report under item 5 thereof, the issuance
    of a press release reporting that CSK Auto Corporation filed a
    registration statement with the Securities and Exchange
    Commission for a proposed offering of up to
    11,283,967 shares of its common stock, 5,642,000 of which
    will be newly issued shares offered by CSK Auto Corporation and
    the other 5,641,967 of which are currently owned by certain
    minority stockholders. Also reported was an amendment to CSK
    Auto, Inc.s December 21, 2001 credit agreement to
    apply the net proceeds of the above mentioned proposed offering
    to redeem up to $81.25 million in principal of CSK Auto,
    Inc.s 11% Senior Subordinated Notes.
|
| | On July 17, 2002 we filed a current report
    on Form 8-K to report under item 5 thereof, the
    issuance of a press release reporting the extension of time
    related to an exchange offer. The offer was to exchange up to
    $280,000,000 of CSK Auto, Inc.s 12% Senior Notes due 2006,
    Series A for an equal amount of its outstanding 12% Senior
    Notes due 2006, Series B.                                                                                                                                                                                                                                                                                                                                                                                              

24



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##### Table of Contents






SIGNATURE

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



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



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

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

DATED: September 18, 2002

25



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##### Table of Contents






CERTIFICATIONS

I, Maynard L. Jenkins, certify that:



| |                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this quarterly report on Form 10-Q of CSK Auto Corporation;                                                                                                                                                                                                                                                                           
|
| | 2.     Based on my
    knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this quarterly
    report; and
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this quarterly report.                           



| |                        
| | -----------------------
| | /s/ MAYNARD L. JENKINS 
| |                        
| | Maynard L. Jenkins     
| | Chief Executive Officer
| | September 18, 2002     

I, Don W. Watson, certify that:



| |                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this quarterly report on Form 10-Q of CSK Auto Corporation;                                                                                                                                                                                                                                                                           
|
| | 2.     Based on my
    knowledge, this quarterly report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this quarterly
    report; and
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this quarterly report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this quarterly report.                           



| |                        
| | -----------------------
| | /s/ DON W. WATSON      
| |                        
| | Don W. Watson          
| | Chief Financial Officer
| | September 18, 2002     

26



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Exhibit Index

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3.01    |  | Restated Certificate of Incorporation of the
    Company, incorporated herein by reference to Exhibit 3.01
    of the Companys annual report on Form 10-K, filed on
    May 4, 1998 (File No. 001-13927).                                                                                                                                                                                                                             
|3.02    |  | Certificate of Correction to the restated
    certificate of incorporation of the Company, incorporated herein
    by reference to Exhibit 3.02 of the Companys annual
    report on Form 10-K, filed on May 4, 1998 (File
    No. 001-13927).                                                                                                                                                                                        
|3.02.1  |  | Certificate of Amendment of the Restated
    Certificate of Incorporation of CSK Auto Corporation, filed on
    June 13, 2002.                                                                                                                                                                                                                                                                                                         
|3.03    |  | Amended and Restated By-Laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of the
    Companys annual report on Form 10-K, filed on
    April 28, 1999 (File No. 001-13927).                                                                                                                                                                                                                                   
|3.03.1  |  | First Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our annual report on Form 10-K,
    filed on May 1, 2001 (File No. 001-13927).                                                                                                                                                                                                                           
|4.01    |  | Securities Purchase Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., including form of
    Debenture and form of Make Whole Warrant, incorporated herein by
    reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed December 11, 2001.                                                                                            
|4.01.1  |  | Registration Rights Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., incorporated herein
    by reference to Exhibit 99.3 of our Current Report on
    Form 8-K, filed December 11, 2001.                                                                                                                                                            
|4.01.2  |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc., as Guarantors;
    and Credit Suisse First Boston Corporation, J.P. Morgan
    Securities Inc. and UBS Warburg LLC as Purchasers, incorporated
    herein by reference to Exhibit 99.4 of our Current Report
    on Form 8-K, filed January 18, 2002.                
|4.01.3  |  | Amendment No. 1 to Securities Purchase
    Agreement dated as of May 16, 2002 by and between CSK Auto
    Corporation, LB I Group Inc. and Investcorp CSK Holdings L.P.,
    incorporated herein by reference to Exhibit 4.04.01 to our
    Registration Statement on Form S-3, filed May 17, 2002
    (File No. 333-77008).                                                                                                           
|4.01.4  |  | Amended and Restated Registration Rights
    Agreement, dated May 16, 2002, by and between CSK Auto
    Corporation, LB I Group Inc. and Investcorp CSK Holdings L.P.,
    incorporated herein by reference to Exhibit 4.05.01 to our
    Registration Statement on Form S-3, filed May 17, 2002
    (File No. 333-77008).                                                                                                             
|4.02    |  | Credit Agreement, dated as of December 21,
    2001, by and among CSK Auto, Inc., the lenders from time to time
    a party thereto, and JP Morgan Chase Bank, Credit Suisse
    First Boston, and UBS AG, Stamford Branch, incorporated herein
    by reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed January 18, 2002.                                                                                        
|4.02.1  |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc., as
    subsidiary guarantors; and the Bank of New York, as Trustee,
    incorporated herein by reference to Exhibit 99.3 of our
    Current Report on Form 8-K, filed January 18, 2002.                                                                       
|4.02.2  |  | Registration Rights Agreement, dated
    December 21, 2001, by and among CSK Auto, Inc; CSK Auto
    Corporation, Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First Boston
    Corporation, J.P. Morgan Securities Inc. and UBS Warburg
    LLC as Purchasers, incorporated herein by reference to
    Exhibit 99.5 of our Current Report on Form 8-K, filed
    January 18, 2002.



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.02.3  |  | Amendment No. 1 to the December 21,
    2001 Credit Agreement, dated June 5, 2002, by and among CSK
    Auto, Inc., the several lenders from time to time parties to the
    Credit Agreement (the Lenders), JPMORGAN CHASE BANK,
    as administrative agent for the Lenders, CREDIT SUISSE FIRST
    BOSTON, as syndication agent for the Lenders and UBS AG,
    STAMFORD BRANCH, as documentation agent for the Lenders,
    incorporated herein by reference to Exhibit 99.2 of our
    Current Report on Form 8-K filed on June 6, 2002.
|4.03    |  | ISDA master agreement executed as of March 2002
    between Lehman Brothers Special Financing Inc. and CSK Auto,
    Inc., incorporated herein by reference to our Annual Report on
    Form 10-K, filed on April 23, 2002 (File
    No. 001-13927).                                                                                                                                                                                                                                                                                            
|10.01   |  | Promissory Note, dated May 14, 2002, between
    CSK Auto Corporation and Martin Fraser.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.02   |  | Stock Pledge Agreement, dated May 14, 2002,
    between CSK Auto Corporation and Martin Fraser.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.03   |  | Purchase Agreement, dated June 27, 2002, by
    and between CSK Auto Corporation, MERRILL LYNCH & CO.
    Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS
    WARBURG LLC, CREDIT SUISSE FIRST BOSTON CORPORATION, and
    GOLDMAN, SACHS & CO. as Representatives of the several
    Underwriters.                                                                                                                                                                                                                                     
|10.04   |  | Third Amendment to Stockholders Agreement,
    incorporated herein by reference to Exhibit 10.18.6 to our
    Registration Statement on Form S-4, filed on June 6,
    2002 (File No. 333-82492).                                                                                                                                                                                                                                                                                                                                              
|99.1    |  | Certification by the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                  
|99.2    |  | Certification by the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.