##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-K

|  |  |                                                                                             
|- |  | --------------------------------------------------------------------------------------------
|  |  |                                                                                             
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended January 30,
    2005.                                             
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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              |  | (I.R.S. Employer   
|incorporation or organization)               |  | Identification No.)
|                                            
|                                            
|                                            
|                                            
|                                            
|645 E. Missouri Ave.
    Suite 400,          |  | 85012              
|                                            
|                                            
|                                            
|                                            
|Phoenix, Arizona                             |  | (Zip Code)         
|(Address of principal executive
    offices) |  |                    

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

|                             |  |                                           
|---------------------------- |  | ------------------------------------------
|Title of Each Class          |  | Name of Each Exchange on Which Registered:
|                             |  |                                           
|Common Stock, $.01 par value |  | New York Stock Exchange                   

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

None


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

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of the
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.     o

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

As of August 1, 2004, the aggregate market value of our
voting and non-voting common stock held by non-affiliates was
approximately $621.4 million. For purposes of the above
statement only, all directors and executive officers of the
registrant are assumed to be affiliates. As of April 28,
2005, there were 45,147,742 shares of our common stock
outstanding.

Documents Incorporated by Reference



|  |                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Portions of our definitive Proxy Statement on Schedule 14A,
    with respect to our 2005 Annual Meeting of Stockholders, are
    incorporated by reference into Part III of this
    Form 10-K.



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TABLE OF CONTENTS

|         |  |                                                                                                                     |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                                                     |  | Page
|         |  |                                                                                                                     |  |     
|        
|        
|        
|        
|PART I  
|        
|        
|        
|        
|Item 1.  |  | Business                                                                                                            |  |      | 2  | 
|        
|        
|        
|        
|Item 2.  |  | Properties                                                                                                          |  |      | 10 | 
|        
|        
|        
|        
|Item 3.  |  | Legal Proceedings                                                                                                   |  |      | 10 | 
|        
|        
|        
|        
|Item 4.  |  | Submission of Matters to a
    Vote of Security Holders                                                             |  |      | 11 | 
|        
|        
|        
|        
|        
|PART II 
|        
|        
|        
|        
|Item 5.  |  | Market for Registrants
    Common Stock, Related Stockholder Matters and Issuer Purchases
    of Equity Securities |  |      | 11 | 
|        
|        
|        
|        
|Item 6.  |  | Selected Consolidated
    Financial Data                                                                            |  |      | 13 | 
|        
|        
|        
|        
|Item 7.  |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                           |  |      | 17 | 
|        
|        
|        
|        
|Item 7A. |  | Quantitative and Qualitative
    Disclosures About Market Risk                                                      |  |      | 32 | 
|        
|        
|        
|        
|Item 8.  |  | Consolidated Financial
    Statements and Supplementary Data                                                        |  |      | 33 | 
|        
|        
|        
|        
|Item 9.  |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                            |  |      | 80 | 
|        
|        
|        
|        
|Item 9A. |  | Controls and Procedures                                                                                             |  |      | 80 | 
|        
|        
|        
|        
|Item 9B. |  | Other Information                                                                                                   |  |      | 80 | 
|        
|        
|        
|        
|        
|PART III
|        
|        
|        
|        
|Item 10. |  | Directors and Executive
    Officers of the Registrant                                                              |  |      | 80 | 
|        
|        
|        
|        
|Item 11. |  | Executive Compensation                                                                                              |  |      | 81 | 
|        
|        
|        
|        
|Item 12. |  | Security Ownership of
    Certain Beneficial Owners and Management                                                  |  |      | 81 | 
|        
|        
|        
|        
|Item 13. |  | Certain Relationships and
    Related Transactions                                                                  |  |      | 81 | 
|        
|        
|        
|        
|Item 14. |  | Principal Accountant Fees
    and Services                                                                          |  |      | 81 | 
|        
|        
|        
|        
|        
|PART IV 
|        
|        
|        
|        
|Item 15. |  | Exhibits and Financial
    Statement Schedules                                                                      |  |      | 81 | 
|EX-10.21
|EX-10.36
|EX-10.37
|EX-18.01
|EX-21.01
|EX-23.01
|EX-31.1 
|EX-31.2 
|EX-32.0 



Note Concerning Forward-Looking Information

Some of the information in this Report on Form 10-K
contains forward-looking statements that involve substantial
risks and uncertainties. You can identify these statements by
forward-looking words such as may, will,
expect, anticipate, believe,
estimate and continue or similar words.
You should read statements that contain these words carefully
because they: (1) discuss our future expectations;
(2) contain projections of our future results of operations
or of our financial condition; or (3) state other
forward-looking information. We believe that it is important to
communicate our future expectations to our investors. However,
there may be events in the future that we are not able to
accurately predict or over which we have no control, the
occurrence of which could have a material adverse effect on our
business, operating results and financial condition. Factors
that might cause actual results to differ materially from those
in such forward-looking statements include, but are not limited
to, competitive pressures and impacts, demand for our products,
factors impacting procurement of import products, fluctuations
in and the overall condition of the economy, inflation, consumer
debt levels, factors impacting consumer spending and driving
habits, conditions affecting new store development, weather
conditions, the possibility that we may discover additional
material weaknesses in our internal control over financial
reporting in the future, and litigation and regulatory matters.
Please review our discussion in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations.





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PART I






|        |         
|------- | --------
|Item 1. | Business

General

We are the largest specialty retailer of automotive parts and
accessories in the Western United States and one of the largest
such retailers in the United States, based on store count. We
have the number one market position in 23 of the 28 geographic
markets in which we operate, based on store count. As of
January 30, 2005, we operated 1,134 stores in
19 states under one fully integrated operating format and
three brand names:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Checker Auto Parts, founded in 1969, with 425 stores in the
    Southwestern, Rocky Mountain and Northern Plains states and
    Hawaii;
|
| |  | Schucks Auto Supply, founded in 1917, with 225 stores in the
    Pacific Northwest and Alaska; and                                     
|
| |  | Kragen Auto Parts, founded in 1947, with 484 stores primarily in
    California.                                                       

We offer a broad selection of national brand name, private-label
and generic automotive products for domestic and imported cars
and light trucks. Our products include new and remanufactured
automotive replacement parts, maintenance items and accessories.
Our stores average approximately 7,200 square feet in size
and typically offer a store specific mix averaging approximately
17,500 stock-keeping units, or SKUs. We also operate a highly
efficient network of strategically located depots to provide
approximately 75% of our stores an additional 60,000 SKUs on a
same-day delivery basis. Through our extensive on-line vendor
network, we make available up to an additional 250,000 SKUs on a
same-day delivery basis to approximately 75% of our stores and
up to 1,000,000 additional SKUs on a next-day delivery basis to
substantially all of our stores.

We serve both the do-it-yourself (DIY) and the
commercial installer, or do-it-for-me (DIFM),
markets. The DIY market, which is comprised of consumers who
typically repair and maintain vehicles themselves, is the
foundation of our business. Sales to the DIY market represented
approximately 83% of our net sales for fiscal 2004. The DIFM
market is comprised of auto repair professionals, fleet owners,
governments and municipalities and accounted for over 68% of the
annual sales in the U.S. automotive aftermarket industry in
2003, according to statistics published by the Automotive
Aftermarket Industry Association. Sales to the DIFM market
represented approximately 17% of our net sales for fiscal 2004.
In 1994, we began targeting the DIFM market to leverage our
existing store base, fixed costs, inventory and in-store
personnel. We believe we are well positioned to effectively and
profitably further penetrate the highly fragmented DIFM market
because of our sales force dedicated to DIFM customers,
experienced in-store sales associates, level of customer
service, conveniently located stores, efficient depot delivery
network, attractive pricing, and ability to provide timely
availability of a broad selection of national brand name
products.

As used herein, the terms CSK, CSK Auto,
the Company, Auto, we,
us, and our refer to CSK Auto
Corporation and its subsidiaries, including CSK Auto, Inc. and
its subsidiaries.

You may obtain, free of charge, copies of this Annual Report on
Form 10-K as well as our Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K (and
amendments to those reports) filed with or furnished to the SEC
as soon as reasonably practicable after such reports have been
filed or furnished by accessing our website at www.cskauto.com,
clicking on Company, then Investors.
Information contained on our website is not part of this Report.

Industry Overview

We compete in the U.S. automotive aftermarket industry,
which has annual sales in excess of $110 billion. This
industry includes replacement parts (excluding tires),
accessories, maintenance items, batteries and automotive fluids
for cars and light trucks. The industry is comprised of the DIY
market and the

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| |   |                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the size and age of automotive vehicles in use;                                                                                                                                                                                                         
|
| |  | the number of miles driven annually per vehicle;                                                                                                                                                                                                        
|
| |  | the number of licensed drivers;                                                                                                                                                                                                                         
|
| |  | the percentage of the total light vehicle fleet represented by
    light trucks (including SUVs), which generate higher average
    aftermarket product purchases versus such purchases generated
    per car; and                                      
|
| |  | the number of light vehicles coming off warranty, particularly
    leased vehicles, which we believe are often under-maintained
    and, therefore, may require higher than-average maintenance and
    repair expenditures in the post-warranty period.

While consolidation of automotive aftermarket retailers
continues to occur, the industry remains highly fragmented. Our
primary competitors include national and regional automotive
parts chains, wholesalers, jobber stores, independent operators,
automobile dealers, and discount stores and mass merchandisers
that carry automotive products.

Competitive Strengths and Strategies

We believe that our competitive strengths and strategies include
the following:

Leading Market Position in the Western United States. We
are the largest specialty retailer of automotive parts and
accessories in the Western United States and have the number one
market position in 23 of the 28 geographic markets in which we
operate, based on store count. We believe that we have better
brand name recognition than many of our competitors due to the
long operating history of our stores, our advertising and
marketing programs, the breadth of our product selection and our
reputation for superior customer service.

As the largest specialty retailer of automotive parts and
accessories in the Western United States, we believe we have
certain competitive advantages over smaller retail chains and
independent operators. These advantages include: (1) our
brand name recognition as a trusted source of automotive parts
and accessories, (2) our ability to make available a broad
selection of products on a timely basis, (3) marketing and
distribution efficiencies due to economies of scale, and
(4) our advanced store level information and distribution
systems, which are the result of our significant investments in
recent years. We also believe that we enjoy a competitive
advantage over mass merchandisers due to our focus on automotive
parts and accessories and our knowledgeable sales associates.

Focus on Customer Service. As part of our promise of
G.R.E.A.T. service, our internally developed
customer service initiative, we aim to provide the highest level
of customer service in our industry in order to generate repeat
business. Recruiting, training and retaining high quality sales
associates is a major component of our focus on customer
service. Our training programs and incentives encourage our
sales associates to develop technical expertise, which enables
them to effectively advise customers on product selection and
use. We have an average of two National Institute for Automotive
Service Excellence, or ASE, certified parts professionals per
store. To further satisfy our customers needs, we also
offer free testing of certain parts, no hassle
return policies, electronically maintained warranties and a
customer service call center.

Sophisticated Store-Level Information and Distribution
Systems. In recent years, we have made significant
investments in sophisticated store-level information systems and
warehouse and distribution systems in order to more effectively
manage our inventory and increase the availability of products
to our customers. Our sophisticated inventory management systems
provide inventory movement forecasting based on history, trends
and seasonality. Our systems have enhanced our ability to
predict the size and timing of product requirements by closely
monitoring service level goals, vendor lead times and cost of
inventory assumptions. Our store level replenishment system
generates orders based upon store on-hand and store model stock
quantities. Store model stock quantities are determined by an
automatic model stock adjustment system that utilizes historical
sales patterns, seasonality and store presentation requirements.
Our fully integrated

3



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We also maintain a store specific precision pricing program that
seeks to optimize margins while maintaining price
competitiveness. Our pricing philosophy is that we should not
lose a customer because of price. Our pricing strategy is to
offer everyday competitive prices at each of our stores. As a
result, we closely monitor our competitors pricing levels
through our precision pricing program, which analyzes prices at
the store level rather than at the market or chain level. This
initiative enables us to establish pricing levels at each store
based upon that stores local market competition. Our
entry-level products offer excellent value by meeting standard
quality requirements at low prices. In addition, our sales
associates are encouraged to offer alternative products at
slightly higher price points. These products typically provide
extra features, improved performance, an enhanced warranty, or
are nationally branded items.

Drive Customer Traffic and Increase Sales Base. Our
marketing and merchandising strategy is designed to drive
customer traffic and build market share. Our strategy is to make
available to our customers one of the broadest selections of
quality brand name products on a timely basis in order to
maximize customer satisfaction and generate loyal repeat
customers. We also strive to be the industry leader in
introducing new and innovative product offerings, supported by
our 52-week promotional print advertising programs that includes
color circulars and newspaper advertisements. We offer our
products at competitive prices, in conveniently located and
attractively designed stores. Our advertising programs are
specifically tailored to target our various customer
constituencies for maximum appeal and effectiveness.

Highly Experienced and Proven Management Team. We are led
by an innovative management team with a wealth of automotive
aftermarket and retail industry experience. Maynard Jenkins, our
Chairman and Chief Executive Officer, has served in his current
position since January 1997 and has 39 years of retail
management experience, including 18 years as a Chief
Executive Officer. Martin Fraser, our President and Chief
Operating Officer, has been with us for 27 years, serving
in a number of key positions prior to his current role,
including Executive Vice President  Merchandising,
Distribution and Commercial and Sr. Vice President 
Merchandising, Transportation, Replenishment and Marketing. Our
senior management team averages over 29 years of retail
industry experience. We believe the strength and experience of
our management team has enabled us to deliver exceptional
operating and financial results and to emerge as a leader in our
highly competitive industry.

Store Operations

Our stores are divided into nine geographic regions: Southwest,
Rocky Mountain, Northwest, Northern Plains, Southern California,
Coastal California, Los Angeles, Bay Area and Northern
California. A regional manager, each of whom oversees seven to
eleven district managers, administers each region. Each of our
district managers has responsibility for between 8 and 19 stores.

4



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The table below sets forth, as of January 30, 2005, the
geographic distribution of our stores and the trade names under
which they operate.

|             |       |            |     |             |  |            |     |         |  |  |     |     |  |  |     |       | 
|------------ | ----- | ---------- | --- | ----------- |  | ---------- | --- | ------- |  |  | --- | --- |  |  | --- | ----- | 
|             |       | Checker    |     | Schucks     |  | Kragen     |     | Company
|             |       | Auto Parts |     | Auto Supply |  | Auto Parts |     | Total  
|             |       |            |     |             |  |            |     |        
|California   |       |            | 1   |             |  |            | 2   |         |  |  | 468 |     |  |  | 471 |      
|            
|            
|            
|            
|Washington   |       |            |    |             |  |            | 143 |         |  |  |    |     |  |  | 143 |      
|            
|            
|            
|            
|Arizona      |       |            | 110 |             |  |            |    |         |  |  |    |     |  |  | 110 |      
|            
|            
|            
|            
|Colorado     |       |            | 70  |             |  |            |    |         |  |  |    |     |  |  | 70  |      
|            
|            
|            
|            
|Minnesota    |       |            | 57  |             |  |            |    |         |  |  |    |     |  |  | 57  |      
|            
|            
|            
|            
|Oregon       |       |            |    |             |  |            | 46  |         |  |  |    |     |  |  | 46  |      
|            
|            
|            
|            
|Utah         |       |            | 43  |             |  |            |    |         |  |  |    |     |  |  | 43  |      
|            
|            
|            
|            
|Nevada       |       |            | 23  |             |  |            |    |         |  |  | 16  |     |  |  | 39  |      
|            
|            
|            
|            
|Idaho        |       |            | 8   |             |  |            | 23  |         |  |  |    |     |  |  | 31  |      
|            
|            
|            
|            
|Wisconsin    |       |            | 29  |             |  |            |    |         |  |  |    |     |  |  | 29  |      
|            
|            
|            
|            
|New Mexico   |       |            | 28  |             |  |            |    |         |  |  |    |     |  |  | 28  |      
|            
|            
|            
|            
|Texas        |       |            | 14  |             |  |            |    |         |  |  |    |     |  |  | 14  |      
|            
|            
|            
|            
|Alaska       |       |            |    |             |  |            | 11  |         |  |  |    |     |  |  | 11  |      
|            
|            
|            
|            
|Montana      |       |            | 10  |             |  |            |    |         |  |  |    |     |  |  | 10  |      
|            
|            
|            
|            
|Wyoming      |       |            | 10  |             |  |            |    |         |  |  |    |     |  |  | 10  |      
|            
|            
|            
|            
|Hawaii       |       |            | 10  |             |  |            |    |         |  |  |    |     |  |  | 10  |      
|            
|            
|            
|            
|North Dakota |       |            | 7   |             |  |            |    |         |  |  |    |     |  |  | 7   |      
|            
|            
|            
|            
|South Dakota |       |            | 4   |             |  |            |    |         |  |  |    |     |  |  | 4   |      
|            
|            
|            
|            
|Michigan     |       |            | 1   |             |  |            |    |         |  |  |    |     |  |  | 1   |      
|             |       |            |     |             |  |            |     |         |  |  |     |     |  |  |     |      
|             | Total |            |     | 425         |  |            |     | 225     |  |  |     | 484 |  |  |     | 1,134 | 
|             |       |            |     |             |  |            |     |         |  |  |     |     |  |  |     |      

Our stores are generally open seven days a week, with hours from
8:00 a.m. to 9:00 p.m. (9:00 a.m. to
6:00 p.m. on Sundays). The average store employs
approximately 10 to 20 employees, including a store manager, two
assistant store managers and a staff of full-time and part-time
associates.

Store Formats

Approximately 64% of our stores are freestanding, with the
balance principally located within strip shopping centers. The
stores, which range in size from 2,600 to 24,000 square
feet, average approximately 7,200 square feet in size and
offer a store specific mix of between 13,000 and 18,000 SKUs.

We have three prototype store designs, which are 6,000, 7,000
and 8,000 square feet in size. The store size for a given
new location is selected generally based upon sales volume
expectations determined through demographics and the detailed
market analysis that we prepare as part of our site selection
process. The following table categorizes our stores by size, as
of January 30, 2005:

|                          |  |                  |       | 
|------------------------- |  | ---------------- | ----- | 
|Store Size                |  | Number of Stores
|                          |  |                 
|10,000 sq. ft. or greater |  |                  | 103   | 
|                         
|                         
|                         
|                         
|8,000 
    9,999 sq. ft. |  |                  | 205   | 
|                         
|                         
|                         
|                         
|6,000 
    7,999 sq. ft. |  |                  | 552   | 
|                         
|                         
|                         
|                         
|5,000 
    5,999 sq. ft. |  |                  | 197   | 
|                         
|                         
|                         
|                         
|Less than 5,000 sq. ft.   |  |                  | 77    | 
|                          |  |                  |       | 
|                          |  |                  | 1,134 | 
|                          |  |                  |       | 

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Approximately 85% to 90% of the square footage in each store is
selling space, of which approximately 40% to 50% is dedicated to
automotive replacement parts inventory. The replacement parts
inventory area is staffed with knowledgeable parts personnel and
is equipped with our electronic parts catalog. The remaining
selling space contains gondolas for accessories and maintenance
items, including oil and air filters, additives, waxes and other
items, together with specifically designed shelving for
batteries and, in many stores, oil products.

Real Estate Strategy

Our real estate strategy is focused on our existing or
contiguous markets and includes:



| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | opening new stores;                                                                 
|
| |  | relocating under-performing stores with expiring leases to
    better locations; and
|
| |  | expanding selected stores.                                                          

Our real estate department utilizes a sophisticated,
market-based approach that identifies and analyzes potential
store locations based on detailed demographic and competitive
studies. These demographic and competitive studies include
analysis of population density, growth patterns, age, per capita
income, vehicle traffic counts and the number and type of
existing automotive-related facilities, such as automotive parts
stores and other competitors within a pre-determined radius of
the potential new location. These potential locations are
compared to our existing locations to determine opportunities
for opening new stores and relocating or expanding existing
stores.

The following table sets forth our store development activities
during the periods indicated:

|                                           |  |             |       |      |  |      |       |   |  |  |       |  
|------------------------------------------ |  | ----------- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                           |  |            
|                                           |  | Fiscal Year
|                                           |  |            
|                                           |  | 2004        |       | 2003 |  | 2002
|                                           |  |             |       |      |  |     
|Beginning stores                           |  |             | 1,114 |      |  |      | 1,109 |   |  |  | 1,130 |  
|                                          
|                                          
|                                          
|                                          
|New stores                                 |  |             | 28    |      |  |      | 18    |   |  |  | 12    |  
|                                          
|                                          
|                                          
|                                          
|Relocated stores                           |  |             | 9     |      |  |      | 7     |   |  |  | 5     |  
|                                          
|                                          
|                                          
|                                          
|Closed stores (including relocated stores) |  |             | (17   | )    |  |      | (20   | ) |  |  | (38   | )
|                                           |  |             |       |      |  |      |       |   |  |  |       |  
|Ending stores                              |  |             | 1,134 |      |  |      | 1,114 |   |  |  | 1,109 |  
|                                           |  |             |       |      |  |      |       |   |  |  |       |  
|Expanded stores                            |  |             | 1     |      |  |      | 2     |   |  |  | 1     |  
|                                          
|                                          
|                                          
|                                          
|Total new, relocated and expanded stores   |  |             | 38    |      |  |      | 27    |   |  |  | 18    |  

We expect to open or relocate approximately 50 stores in fiscal
2005.

Store Merchandising

Our store merchandising program, which classifies our product
mix into separate categories, is designed to determine the
optimal inventory mix at each individual store based on that
stores historical sales. We believe that we can improve
store sales, gross profit margin and inventory turnover by
tailoring individual store inventory mix based on historical
sales patterns for each of the product categories.

Purchasing

Merchandise is selected from over 300 suppliers and purchased
for all stores by personnel at our corporate headquarters in
Phoenix, Arizona. No one class of product and no single supplier
accounted for as much as 10% of our purchases in fiscal years
2004, 2003, or 2002.

Our inventory management systems include the E-3 Trim Buying
System, which provides inventory movement forecasting based upon
history, trend and seasonality. Combined with service level
goals, vendor lead times and cost of inventory assumptions, the
E-3 Trim Buying System determines the timing and size of
purchase orders. The vast majority of the dollar values of
transactions are sent via electronic data interchange,

6



---



##### Table of Contents





Our stores offer products with nationally recognized,
well-advertised brand names, such as Armor All, Autolite,
Castrol, Dayco, Fel Pro, Fram, Havoline, Mobil, Monroe,
Pennzoil, Prestone, Quaker State, RayBestos, Stant, Sylvania,
Turtle Wax and Valvoline. In addition to brand name products,
our stores carry a wide variety of high quality generic
products. Because nationally recognized manufacturers that
produce similar brand name products that enjoy a high degree of
consumer acceptance produce most of our generic products, we
believe that our generic products are of a quality that is
comparable to such brand name products.

Commercial Sales Program

In addition to our primary focus on serving the DIY consumer, we
have significantly increased our marketing directed at the
commercial or DIFM customer in the automotive replacement parts
market. The commercial or DIFM market constitutes in excess of
68% of the annual sales in the automotive aftermarket and is
currently growing at a faster rate than the DIY market. Our
commercial sales program, which is intended to facilitate
penetration of this market, is targeted toward professional
mechanics, auto repair shops, auto dealers, fleet owners, mass
and general merchandisers with auto repair facilities and other
commercial repair outlets located near our stores.

We have made a significant commitment to this portion of our
business and upgraded the information systems capabilities
available to the commercial sales group. In addition, we employ
one district sales manager for approximately every five stores
with a commercial sales center. This district sales manager is
responsible for servicing existing and developing new,
commercial accounts. In addition, at a minimum, each commercial
sales center has a dedicated in-store salesperson, driver and
delivery vehicle.

We believe we are well positioned to effectively and profitably
service commercial customers, who typically require a higher
level of customer service and broad product availability. The
commercial market has traditionally been serviced primarily by
jobbers. However, automotive specialty retailing chains, such as
CSK Auto, Inc., have continued to increase their share of the
commercial market. The chains typically have multiple locations
in given market areas and maintain a broad inventory selection.
We believe we have significant competitive advantages in
servicing the commercial market because of our experienced sales
associates, conveniently located stores, attractive pricing and
ability to consistently deliver a broad product offering with an
emphasis on national brand names.

As of January 30, 2005, we operated commercial service
centers in 587 of our stores. Our sales to commercial accounts
(including sales by stores without commercial service centers)
were $260.8 million in both fiscal 2004 and fiscal 2003. On
a comparable store basis, commercial sales increased 1.8% in
fiscal 2004 over fiscal 2003.

Advertising

We support our marketing and merchandising strategy primarily
through print advertising, in-store promotional displays and
radio and television advertising. The print advertising consists
of color circulars and newspaper advertisements that are
produced by our in-house advertising department. We also
advertise on radio, television and billboards primarily to
reinforce our image and name recognition. Television advertising
is primarily targeted to sports programming and radio
advertising is primarily aired during commuting hours.
Advertising efforts include Spanish language television and
radio as well as bilingual store signage. In-store signs and
displays are used to promote products, identify departments, and
to announce store specials. We also sponsor major league
baseball in major markets throughout our trade area and two
National Hot Rod

7



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##### Table of Contents







| |   |                            
| | - | ---------------------------
| |  | http://www.cskauto.com;    
|
| |  | http://www.checkerauto.com;
|
| |  | http://www.schucks.com; and
|
| |  | http://www.kragen.com.     

Associates

As of January 30, 2005, we employed approximately
8,210 full-time associates and approximately
4,540 part-time associates. Approximately 86% of our
personnel are employed in store level operations, 7% in
distribution and 7% in our corporate headquarters, including our
call center and priority parts operation.

We have never experienced any material labor disruption and
believe that our labor relations are good. Except for a limited
number of associates located at certain stores in the Northern
California market, who have been represented by a union for many
years, none of our personnel are represented by a labor union.

Competition

We compete in both the DIY and DIFM markets of the automotive
aftermarket industry, which is highly fragmented and generally
very competitive. We compete primarily with national and
regional retail automotive parts chains (such as AutoZone, Inc.
and The Pep Boys  Manny, Moe and Jack, Inc.),
wholesalers or jobber stores (some of which are associated with
national automotive parts distributors or associations, such as
NAPA), automobile dealers, and discount stores and mass
merchandisers that carry automotive replacement parts,
maintenance items and accessories (such as Wal-Mart Stores,
Inc.). As the largest specialty retailer of automotive parts and
accessories in the Western United States, we believe we have
certain competitive advantages over smaller retail chains and
independent operators. These advantages include: (1) our
brand name recognition as a trusted source of automotive parts
and accessories, (2) our ability to make available a broad
selection of products on a timely basis, (3) marketing and
distribution efficiencies achieved from economies of scale, and
(4) our advanced store level information and distribution
systems, which are the result of our significant investments in
recent years. We also believe that we enjoy a competitive
advantage over mass merchandisers due to our focus on automotive
parts and accessories and our knowledgeable sales associates.

The principal competitive factors that affect our business are
store location, customer service and product selection,
availability, quality and price. While we believe that we
compete effectively in our various markets, certain competitors
are larger in terms of number of stores and sales volume, have
greater financial and management resources and have been
operating longer in certain geographic areas.

Trade Names, Service Marks and Trademarks

We have the right to exclusively use the trade name Checker
nationwide in connection with the automotive parts retailing
business pursuant to a settlement and use agreement with the
owner of the federal registration for such trademark. We own and
have registered the service mark Schucks with the United
States Patent and Trademark Office for use in connection with
the automotive parts retailing business. We recently renewed the
registration for this mark for an additional ten-year period. We
have common law rights to use the trade name Kragen in
connection with the automotive parts retailing business. In
addition, we own and have registered numerous trademarks with
respect to many of our private label products and advertising
and marketing strategies. We believe that our various trade
names, service marks and trademarks are important to our
merchandising strategy, but that our business is not otherwise
dependent on any particular service mark, trade name or
trademark. There are no infringing uses known by us that
materially affect the use of such items.

8



---



##### Table of Contents



Warehouse and Distribution

Our warehouse and distribution system utilizes bar coding, radio
frequency scanners and sophisticated conveyor and put-to-light
systems. We operate with engineered labor standards and
incentive programs in each of our distribution centers, which
have contributed to improved labor productivity. Each store is
currently serviced by one of our three main distribution
centers, with the regional distribution centers handling bulk
materials, such as oil. All of our merchandise is shipped by
vendors to our distribution centers, with the exception of
batteries and some special order products, which are shipped
directly to stores by the vendor. We have sufficient warehouse
and distribution capacity to meet the requirements of our
expected growth plans for the foreseeable future.

Seasonality

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.

Environmental Matters

We are subject to various federal, state and local laws and
governmental regulations relating to the operation of our
business, including those governing the handling, storage and
disposal of hazardous substances, the recycling of batteries and
used lubricants, and the ownership and operation of real
property. For example, under environmental laws, a current or
previous owner or operator of real property may be liable for
the cost of removal or remediation of hazardous substances in
soil or groundwater. Such laws often impose joint and several
liability and liability may be imposed without regard to whether
the owner or operator knew of, or was responsible for, the
release of such hazardous substances. We have recorded no
liabilities to provide for the cost of environmental remediation
activities, as we do not believe that we have incurred any such
liabilities.

At some of our locations acquired in prior years, automobiles
are serviced in automotive service facilities that we sublease
to third parties. As a result of investigations undertaken in
connection with such acquisitions, we are aware that soil or
groundwater may be contaminated at some of these properties.
Although there can be no assurance, based on current information
and, in some cases, indemnities we obtained from the former
operators of these facilities, we believe that any such
contamination will not result in any liabilities that would have
a material adverse effect on our financial position, results of
operations or cash flows.

As part of our operations, we handle hazardous materials in the
ordinary course of business and our customers may bring
hazardous materials onto our property in connection with, for
example, our oil recycling program. We currently provide a
recycling program for batteries and for the collection of used
lubricants at certain of our stores as a service to our
customers pursuant to agreements with third-party vendors. The
batteries and used lubricants are collected by our associates,
deposited into vendor-supplied containers /pallets and then
disposed of by the third-party vendors. In general, our
agreements with such vendors contain provisions that are
designed to limit our potential liability under applicable
environmental regulations for any damage or contamination that
may be caused by the batteries and lubricants to off-site
properties (including as a result of waste disposal) and to our
properties, when caused by the vendor.

Compliance with environmental laws and regulations has not had a
material impact on our operations to date, but there can be no
assurance that future compliance with such laws and regulations
will not have a material adverse effect on our financial
position, results of operations or cash flows.

9



---



##### Table of Contents








|        |           
|------- | ----------
|Item 2. | Properties

The following table sets forth certain information concerning
our principal leased facilities as of January 30, 2005:

|                             |                     |          |                     |             |  |                                                 |                                   |                             |  |  |         |  |  |  |     |  | 
|---------------------------- | ------------------- | -------- | ------------------- | ----------- |  | ----------------------------------------------- | --------------------------------- | --------------------------- |  |  | ------- |  |  |  | --- |  | 
|                             |                     |          |                     |             |  |                                                 |                                   | Number                     
|                             |                     |          |                     |             |  | Square                                          |                                   | of Stores                  
|Facility                     |                     | Location |                     | Area Served |  | Footage                                         |                                   | Served                     
|                             |                     |          |                     |             |  |                                                 |                                   |                            
|Corporate office             |                     |          | Phoenix, AZ         |             |  |                                                 | All                               |                             |  |  | 114,691 |  |  |  |    | 
|                            
|                            
|                            
|                            
|Distribution center(1)       |                     |          | Dixon, CA           |             |  |                                                 | California, Nevada, Washington,   |                             |  |  | 325,500 |  |  |  | 519 | 
|                             |                     |          |                     |             |  | Oregon, Idaho, Montana, Wyoming, Alaska, Hawaii |                                   |                             |  |  |         |  |  | 
|                            
|                            
|                            
|                            
|Distribution center(2)       |                     |          | Phoenix, AZ         |             |  |                                                 | Arizona, Colorado, Idaho,         |                             |  |  | 273,520 |  |  |  | 518 | 
|                             |                     |          |                     |             |  | Nevada, New Mexico, California, Texas, Utah     |                                   |                             |  |  |         |  |  | 
|Office, warehouse and        |                     |          | Mendota Heights, MN |             |  |                                                 | Minnesota, North Dakota, South    |                             |  |  | 125,000 |  |  |  | 97  | 
|                            
|                            
|                            
|                            
|                             | distribution center |          |                     |             |  |                                                 |                                   | Dakota, Wisconsin, Michigan |  |  |         |  |  |  |     |  | 
|                            
|                            
|                            
|                            
|Regional distribution center |                     |          | Auburn, WA          |             |  |                                                 | Washington, Oregon, Idaho, Alaska |                             |  |  | 160,087 |  |  |  | 198 | 
|                            
|                            
|                            
|                            
|Regional distribution center |                     |          | Aurora, CO          |             |  |                                                 | Colorado, Wyoming, South Dakota   |                             |  |  | 34,800  |  |  |  | 72  | 
|                            
|                            
|                            
|                            
|Regional distribution center |                     |          | Salt Lake City, UT  |             |  |                                                 | Colorado, Utah, Idaho, Wyoming,   |                             |  |  | 60,000  |  |  |  | 81  | 
|                             |                     |          |                     |             |  |                                                 | Montana, Oregon                   |                             |  |  |         |  |  |  |     | 
|                            
|                            
|                            
|                            
|Regional distribution center |                     |          | Commerce, CA        |             |  |                                                 | California                        |                             |  |  | 75,000  |  |  |  | 210 | 



---



|    |                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Subject to time period and other restrictions, we have the
    ability to expand the Dixon distribution center by
    161,000 square feet should the need arise.         
|   
|(2) | We have exercised an option to expand the Phoenix distribution
    center by approximately 80,000 square feet. We expect the
    expansion to be complete in fiscal 2005.

As of January 30, 2005, all but one of our operating stores
was leased. The expiration dates (including renewal options) of
the store leases are summarized as follows:

|                  |  |           |       | 
|----------------- |  | --------- | ----- | 
|                  |  | Number of
|Years             |  | Stores   
|                  |  |          
|2005  2006       |  |           | 22    | 
|                 
|                 
|                 
|                 
|2007  2009       |  |           | 78    | 
|                 
|                 
|                 
|                 
|2010  2011       |  |           | 41    | 
|                 
|                 
|                 
|                 
|2012  2020       |  |           | 408   | 
|                 
|                 
|                 
|                 
|2021  2030       |  |           | 503   | 
|                 
|                 
|                 
|                 
|2031  thereafter |  |           | 81    | 
|                  |  |           |       | 
|                  |  |           | 1,133 | 
|                  |  |           |       | 

Additional information regarding our facilities appears in
Item 1. Business, under the captions Store Operations,
Store Formats, and Warehouse and Distribution.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

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

10



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We believe that we have a strong basis under California law for
disputing the payment of this assessment, and in October 2003 we
timely filed a Petition for Redetermination with the Board. In
May 2004, we received a response from the Board indicating that
the district office that conducted the audit upheld its
position. We attended an appeals conference on April 4,
2005 and are awaiting the decision from the appeals conference.
Our practices through December 2002 relative to the handling of
taxes on battery cores had been consistent for over a decade,
and it is our position that our consistent treatment of battery
core charges, together with prior tax audits and tax
auditors written commentary concerning our handling of
such charges, permits us to rely upon precedent set in prior
audits. Reliance on prior audits is a position that is
supportable under California law. We also have other defenses
and intend to vigorously defend our position with regard to this
matter. A liability for the potential sales tax and related
interest payments has not been recorded in our consolidated
financial statements.

We were served on October 26, 2004 with a lawsuit that was
filed in the Superior Court in San Diego, California. The
case was brought by a former sales associate in California who
resigned in January 2003, and purports to be a class action on
behalf of all current and former California hourly store
employees claiming that plaintiff and those similarly situated
were not paid for: (i) all time worked (i.e. off the
clock work), (ii) the minimum reporting time pay when
they reported to work a second time in a day, (iii) all
overtime due, (iv) all wages due at termination, and
(v) amounts due for late or missed meal periods or rest
breaks. Plaintiff also alleges that we violated certain record
keeping requirements arising out of the foregoing alleged
violations. The lawsuit claims these alleged practices are
unfair business practices, and requests back pay, restitution,
penalties for violations of various Labor Code sections and for
failure to pay all wages due on termination, and interest for
the last four years, plus attorney fees and that the Company be
enjoined from committing further unfair business practices. We
believe we have meritorious defenses to all of these claims and
intend to defend the claims vigorously. If one or more of the
claims is permitted by the court to proceed as a class action
and is decided against us, the aggregate potential financial
exposure could be material to our annual results of operations.
We do not believe an adverse outcome would materially affect our
liquidity or consolidated financial position. However, the
litigation is in its early stages and we cannot predict the
outcome with any certainty. A liability for this matter has not
been recorded in our consolidated financial statements.

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






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

No matters were submitted to a vote of our stockholders during
the fourth quarter of fiscal 2004.




PART II




Item 5.     Market for
Registrants Common Stock, Related Stockholder Matters and
Issuer Purchases of Equity Securities



|    |                           
|--- | --------------------------
|(a) | Market Price and Dividends

Our common stock has been listed on the New York Stock Exchange
under the symbol CAO since March 12, 1998. As of
April 28, 2005, there were 45,147,742 shares of our
common stock outstanding and there were approximately 62 record
holders of our common stock.

11



---



##### Table of Contents



The following table sets forth, for the periods indicated, the
high and low bid prices for our common stock as reported by the
New York Stock Exchange.

|             |                |                |   |       |  |  |   |       | 
|------------ | -------------- | -------------- | - | ----- |  |  | - | ----- | 
|             |                |               
|             |                | Price Range of
|             |                | Common Stock  
|             |                |               
|             |                | High           |   | Low  
|             |                |                |   |      
|Fiscal 2004: |                |                |   |       |  |  |   |      
|            
|            
|            
|            
|             | First Quarter  |                | $ | 20.03 |  |  | $ | 16.25 | 
|            
|            
|            
|            
|             | Second Quarter |                |   | 18.76 |  |  |   | 13.60 | 
|            
|            
|            
|            
|             | Third Quarter  |                |   | 14.89 |  |  |   | 11.55 | 
|            
|            
|            
|            
|             | Fourth Quarter |                |   | 16.74 |  |  |   | 14.70 | 
|            
|            
|            
|            
|Fiscal 2003: |                |                |   |       |  |  |   |      
|            
|            
|            
|            
|             | First Quarter  |                | $ | 10.78 |  |  | $ | 7.75  | 
|            
|            
|            
|            
|             | Second Quarter |                |   | 15.32 |  |  |   | 10.38 | 
|            
|            
|            
|            
|             | Third Quarter  |                |   | 17.62 |  |  |   | 13.56 | 
|            
|            
|            
|            
|             | Fourth Quarter |                |   | 19.69 |  |  |   | 16.50 | 

We have not paid any dividends on our common stock during the
last two fiscal years. We currently do not intend to pay any
dividends on our common stock.

We are a holding company with no business operations of our own.
We therefore depend upon payments, dividends and distributions
from CSK Auto, Inc., our wholly owned subsidiary, for funds to
pay dividends to our stockholders. CSK Auto, Inc. currently
intends to retain its earnings to fund its working capital, debt
repayment and capital expenditure needs and for other general
corporate purposes. CSK Auto, Inc. has no current intention of
paying dividends or making other distributions to us in excess
of amounts necessary to pay our operating expenses and taxes.
CSK Auto, Inc.s senior credit facility and the indentures
governing its senior notes contain restrictions on CSK Auto,
Inc.s ability to pay dividends or make payments or other
distributions to us. See Note 9 to the Consolidated
Financial Statements.

The following table provides information with respect to our
purchases of CSK Auto Corporation common stock:

|                                      |  |                                         |           |                 |  |                     |       |                     |  |  |           |  |  |   |           | 
|------------------------------------- |  | --------------------------------------- | --------- | --------------- |  | ------------------- | ----- | ------------------- |  |  | --------- |  |  | - | --------- | 
|                                      |  |                                        
|                                      |  | Issuer Repurchases of Equity Securities
|                                      |  |                                        
|                                      |  |                                         |           | Total Number of |  | Dollar Value of    
|                                      |  | Total Number                            |           | Average Price   |  | Shares Purchased    |       | Shares That may yet
|                                      |  | of Shares                               |           | Paid per        |  | as Part of Publicly |       | be Purchased Under 
|Period                                |  | Purchased                               |           | Share           |  | Announced Plans     |       | the Plan           
|                                      |  |                                         |           |                 |  |                     |       |                    
|Balance as of October 31, 2004        |  |                                         | 1,574,956 |                 |  | $                   | 15.06 |                     |  |  | 1,574,956 |  |  | $ | 1,275,034 | 
|                                     
|                                     
|                                     
|                                     
|November 1, 2004 to November 28, 2004 |  |                                         |          |                 |  |                     |      |                     |  |  |          |  |  |   |           | 
|                                     
|                                     
|                                     
|                                     
|November 29, 2004 to January 2, 2005  |  |                                         |          |                 |  |                     |      |                     |  |  |          |  |  |   |           | 
|                                     
|                                     
|                                     
|                                     
|January 3, 2005 to January 30, 2005   |  |                                         |          |                 |  |                     |      |                     |  |  |          |  |  |   |           | 
|                                      |  |                                         |           |                 |  |                     |       |                     |  |  |           |  |  |   |           | 
|As of January 30, 2005                |  |                                         | 1,574,956 |                 |  | $                   | 15.06 |                     |  |  | 1,574,956 |  |  | $ | 1,275,034 | 

On June 8, 2004, our Board of Directors approved a share
repurchase program authorizing us to acquire up to
$25.0 million of our common stock. The program expires in
December 2005. During fiscal 2004, we repurchased approximately
1.6 million shares of our common stock at a cost of
approximately $23.7 million pursuant to this program. See
Note 15 to the Consolidated Financial Statements.

The required table and information relating to equity
compensation plans is incorporated by reference from the
information contained under the caption Report of the
Compensation Committee on Executive Compensation in our
definitive proxy statement in connection with the solicitation
of proxies for our 2005 Annual Meeting of Stockholders to be
held on June 16, 2005 (the Proxy Statement).

12



---



##### Table of Contents








|        |                                     
|------- | ------------------------------------
|Item 6. | Selected Consolidated Financial Data

The following table sets forth our selected consolidated
statement of operations, balance sheet and operating data. The
selected statement of operations and balance sheet data are
derived from our consolidated financial statements and have been
restated to reflect adjustments discussed in Note 2 below.
You should read the data presented below together with our
consolidated financial statements and related notes, the other
financial information contained herein, and Managements
Discussion and Analysis of Financial Condition and Results of
Operations.

|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |         | 
|-------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------------------------- | --------- | ----------- |  | ---- | --------- | ------- |  | ---- | --------- | ------- |  | - | --------- | ------- |  | - | --------- | ------- | 
|                                                                     |                                                |                                                                 
|                                                                     |                                                | Fiscal Year(1)                                                  
|                                                                     |                                                |                                                                 
|                                                                     |                                                | 2004                                                             |           | 2003        |  | 2002 |           | 2001    |  | 2000
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |     
|                                                                     |                                                |                                                                  |           |            
|                                                                     |                                                |                                                                  |           | Restated(2)
|                                                                     |                                                |                                                                  |           |            
|                                                                     |                                                |                                                                 
|                                                                     |                                                | (In thousands, except per share amounts and selected store data)
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Statement of Operations Data                                         |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Net sales                                                            |                                                | $                                                                | 1,577,460 |             |  | $    | 1,578,056 |         |  | $    | 1,506,646 |         |  | $ | 1,438,585 |         |  | $ | 1,452,109 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cost of sales(3)(4)                                                  |                                                |                                                                  | 843,600   |             |  |      | 860,952   |         |  |      | 835,298   |         |  |   | 813,448   |         |  |   | 786,902   |        
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Gross profit                                                         |                                                |                                                                  | 733,860   |             |  |      | 717,104   |         |  |      | 671,348   |         |  |   | 625,137   |         |  |   | 665,207   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Other costs and expenses:                                            |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Operating and administrative(4)(5)             |                                                                  |           | 635,541     |  |      |           | 619,932 |  |      |           | 594,698 |  |   |           | 582,587 |  |   |           | 595,369 | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Store closing and other restructuring costs(6) |                                                                  |           | 2,191       |  |      |           | 12,669  |  |      |           | 5,026   |  |   |           | 22,392  |  |   |           | 6,060   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Legal settlement(7)                            |                                                                  |           |            |  |      |           |        |  |      |           |        |  |   |           | 2,000   |  |   |           | 8,800   | 
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Goodwill amortization(8)                       |                                                                  |           |            |  |      |           |        |  |      |           |        |  |   |           | 4,807   |  |   |           | 4,799   | 
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Operating profit                                                     |                                                |                                                                  | 96,128    |             |  |      | 84,503    |         |  |      | 71,624    |         |  |   | 13,351    |         |  |   | 50,179    |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Interest expense                                                     |                                                |                                                                  | 33,460    |             |  |      | 52,418    |         |  |      | 63,544    |         |  |   | 62,812    |         |  |   | 63,417    |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Loss on debt retirement(9)                                           |                                                |                                                                  | 1,026     |             |  |      | 49,494    |         |  |      | 6,008     |         |  |   | 5,101     |         |  |   |          |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Equity in loss on joint venture(10)                                  |                                                |                                                                  |          |             |  |      |          |         |  |      |          |         |  |   |          |         |  |   | 3,168     |        
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Income (loss) before income taxes                                    |                                                |                                                                  | 61,642    |             |  |      | (17,409   | )       |  |      | 2,072     |         |  |   | (54,562   | )       |  |   | (16,406   | )      
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Income tax expense (benefit)                                         |                                                |                                                                  | 24,761    |             |  |      | (7,854    | )       |  |      | (324      | )       |  |   | (21,373   | )       |  |   | (8,377    | )      
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Net income (loss)                                                    |                                                | $                                                                | 36,881    |             |  | $    | (9,555    | )       |  | $    | 2,396     |         |  | $ | (33,189   | )       |  | $ | (8,029    | )      
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Basic earnings (loss) per share                                      |                                                | $                                                                | 0.81      |             |  | $    | (0.21     | )       |  | $    | 0.06      |         |  | $ | (1.17     | )       |  | $ | (0.29     | )      
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Diluted earnings (loss) per share                                    |                                                | $                                                                | 0.80      |             |  | $    | (0.21     | )       |  | $    | 0.06      |         |  | $ | (1.17     | )       |  | $ | (0.29     | )      
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Shares used in computing basic per share amounts                     |                                                |                                                                  | 45,713    |             |  |      | 45,658    |         |  |      | 40,635    |         |  |   | 28,391    |         |  |   | 27,839    |        
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Shares used in computing diluted per share amounts                   |                                                |                                                                  | 46,002    |             |  |      | 45,658    |         |  |      | 40,752    |         |  |   | 28,391    |         |  |   | 27,839    |        
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Other Data                                                           |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Commercial sales(11)                                                 |                                                | $                                                                | 260,781   |             |  | $    | 260,842   |         |  | $    | 262,773   |         |  | $ | 259,096   |         |  | $ | 249,314   |        
|                                                                     |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|Selected Store Data                                                  |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Number of stores (end of period)                                     |                                                |                                                                  | 1,134     |             |  |      | 1,114     |         |  |      | 1,109     |         |  |   | 1,130     |         |  |   | 1,152     |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Percentage increase (decrease) in comparable
    store net sales(12) |                                                |                                                                  | (1        | )%          |  |      | 6         | %       |  |      | 7         | %       |  |   | 1         | %       |  |   | 2         | %      
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Balance Sheet Data (end of period)                                   |                                                |                                                                  |           |             |  |      |           |         |  |      |           |         |  |   |           |         |  |   |           |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and cash equivalents                                            |                                                | $                                                                | 56,548    |             |  | $    | 37,221    |         |  | $    | 15,519    |         |  | $ | 16,084    |         |  | $ | 11,131    |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Total assets                                                         |                                                |                                                                  | 1,042,118 |             |  |      | 1,047,992 |         |  |      | 1,015,503 |         |  |   | 1,012,303 |         |  |   | 1,022,262 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Total debt (including current maturities)                            |                                                |                                                                  | 497,313   |             |  |      | 526,726   |         |  |      | 530,453   |         |  |   | 676,414   |         |  |   | 652,328   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Stockholders equity                                                 |                                                |                                                                  | 214,284   |             |  |      | 198,411   |         |  |      | 189,387   |         |  |   | 60,908    |         |  |   | 62,231    |        

See accompanying notes on page 14

13



---



##### Table of Contents



Notes to Selected Consolidated Financial Data

(1) Our fiscal year consists of 52 or 53 weeks, ends
on the Sunday nearest to January 31 and is named for the
calendar year just ended. All fiscal years presented had
52 weeks except for fiscal 2000, which had 53 weeks.

(2) As set forth below, we have restated our previously
reported annual financial statements to reflect certain errors
in our accounting for leases and vendors allowances and an
accounting change for inventory as discussed in Item 7 and
Note 1 of the Notes to the Consolidated Financial
Statements of this Form 10-K.

|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |        |         |  
|----------------------------------------- | --------------------------------------------- | ---------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------ | ------- | -
|                                          |                                               |                                         
|                                          |                                               | Fiscal Year                             
|                                          |                                               |                                         
|                                          |                                               | 2003                                     |         | 2002    |         | 2001 |         | 2000   
|                                          |                                               |                                          |         |         |         |      |         |        
|                                          |                                               |                                         
|                                          |                                               | (In thousands, except per share amounts)
|                                         
|                                         
|                                         
|                                         
|Statement of Operations Data              |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                         
|                                         
|                                         
|                                         
|Cost of sales, as previously reported     |                                               | $                                        | 829,900 |         |         | $    | 806,461 |         |         | $ | 790,585 |         |         | $ | 769,043 |       
|                                         
|                                         
|                                         
|                                         
|                                          | Change in vendor allowance recognition period |                                          |         | 1,169   |         |      |         | 161     |         |   |         | 2,194   |         |   |         | 8,543  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Other vendor allowances adjustments           |                                          |         | 5,982   |         |      |         | 8,883   |         |   |         | (1,721  | )       |   |         | 1,200  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustments                  |                                          |         | 31      |         |      |         | 43      |         |   |         | 73      |         |   |         | 82     |        
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | As corrected                             |         |         | 837,082 |      |         |         | 815,548 |   |         |         | 791,131 |   |         |        | 778,868 |  
|                                         
|                                         
|                                         
|                                         
|                                          | Inventory accounting change                   |                                          |         | 23,870  |         |      |         | 19,750  |         |   |         | 22,317  |         |   |         | 8,034  |        
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | Cost of sales, as restated               |         | $       | 860,952 |      |         | $       | 835,298 |   |         | $       | 813,448 |   |         | $      | 786,902 |  
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|Gross profit, as previously reported      |                                               | $                                        | 748,156 |         |         | $    | 700,185 |         |         | $ | 648,000 |         |         | $ | 683,066 |       
|                                         
|                                         
|                                         
|                                         
|                                          | Change in vendor allowance recognition period |                                          |         | (1,169  | )       |      |         | (161    | )       |   |         | (2,194  | )       |   |         | (8,543 | )      
|                                         
|                                         
|                                         
|                                         
|                                          | Other vendor allowance adjustments            |                                          |         | (5,982  | )       |      |         | (8,883  | )       |   |         | 1,721   |         |   |         | (1,200 | )      
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustments                  |                                          |         | (31     | )       |      |         | (43     | )       |   |         | (73     | )       |   |         | (82    | )      
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | As corrected                             |         |         | 740,974 |      |         |         | 691,098 |   |         |         | 647,454 |   |         |        | 673,241 |  
|                                         
|                                         
|                                         
|                                         
|                                          | Inventory accounting change                   |                                          |         | (23,870 | )       |      |         | (19,750 | )       |   |         | (22,317 | )       |   |         | (8,034 | )      
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | Gross profit, as restated                |         | $       | 717,104 |      |         | $       | 671,348 |   |         | $       | 625,137 |   |         | $      | 665,207 |  
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|Operating profit, as previously reported  |                                               | $                                        | 116,608 |         |         | $    | 102,529 |         |         | $ | 38,667  |         |         | $ | 70,716  |       
|                                         
|                                         
|                                         
|                                         
|                                          | Change in vendor allowance recognition period |                                          |         | (1,169  | )       |      |         | (161    | )       |   |         | (2,194  | )       |   |         | (8,543 | )      
|                                         
|                                         
|                                         
|                                         
|                                          | Other vendor allowance adjustments            |                                          |         | (5,982  | )       |      |         | (8,883  | )       |   |         | 1,721   |         |   |         | (1,200 | )      
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustments                  |                                          |         | (1,084  | )       |      |         | (2,111  | )       |   |         | (2,526  | )       |   |         | (2,760 | )      
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | As corrected                             |         | $       | 108,373 |      |         | $       | 91,374  |   |         | $       | 35,668  |   |         | $      | 58,213  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Inventory accounting change                   |                                          |         | (23,870 | )       |      |         | (19,750 | )       |   |         | (22,317 | )       |   |         | (8,034 | )      
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | Operating profit, as restated            |         | $       | 84,503  |      |         | $       | 71,624  |   |         |         | 13,351  |   |         |        | 50,179  |  
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|Interest expense, as previously reported  |                                               | $                                        | 50,991  |         |         | $    | 62,261  |         |         | $ | 61,608  |         |         | $ | 62,355  |       
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustment                   |                                          |         | 1,427   |         |      |         | 1,283   |         |   |         | 1,204   |         |   |         | 1,062  |        
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | Interest expense, as corrected           |         | $       | 52,418  |      |         | $       | 63,544  |   |         | $       | 62,812  |   |         | $      | 63,417  |  
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|Net income (loss), as previously reported |                                               | $                                        | 10,797  |         |         | $    | 21,812  |         |         | $ | (17,192 | )       |         | $ | 5,000   |       
|                                         
|                                         
|                                         
|                                         
|                                          | Error corrections, net of tax                 |                                          |         | (5,864  | )       |      |         | (7,429  | )       |   |         | (2,452  | )       |   |         | (8,148 | )      
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          | Net income (loss) as corrected                |                                          |         | 4,933   |         |      |         | 14,383  |         |   |         | (19,644 | )       |   |         | (3,148 | )      
|                                         
|                                         
|                                         
|                                         
|                                          | Inventory accounting change, net of tax       |                                          |         | (14,488 | )       |      |         | (11,987 | )       |   |         | (13,545 | )       |   |         | (4,881 | )      
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | Net income (loss), as restated           |         | $       | (9,555  | )    |         | $       | 2,396   |   |         | $       | (33,189 | ) |         | $      | (8,029  | )
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|Earnings (loss) per share:                |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                         
|                                         
|                                         
|                                         
|                                          | Basic, as previously reported                 |                                          | $       | 0.24    |         |      | $       | 0.54    |         |   | $       | (0.61   | )       |   | $       | 0.18   |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                               | Error corrections, net of tax            |         |         | (0.13   | )    |         |         | (0.19   | ) |         |         | (0.09   | ) |         |        | (0.29   | )
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | Basic, as corrected                      |         |         | 0.11    |      |         |         | 0.35    |   |         |         | (0.70   | ) |         |        | (0.11   | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                               | Inventory accounting change, net of tax  |         |         | (0.32   | )    |         |         | (0.29   | ) |         |         | (0.47   | ) |         |        | (0.18   | )
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          | Basic, as restated                            |                                          | $       | (0.21   | )       |      | $       | 0.06    |         |   | $       | (1.17   | )       |   | $       | (0.29  | )      
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          | Diluted, as previously reported               |                                          | $       | 0.23    |         |      | $       | 0.54    |         |   | $       | (0.61   | )       |   | $       | 0.18   |        
|                                         
|                                         
|                                         
|                                         
|                                          |                                               | Error corrections, net of tax            |         |         | (0.13   | )    |         |         | (0.19   | ) |         |         | (0.09   | ) |         |        | (0.29   | )
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       
|                                          |                                               | Diluted, as corrected                    |         |         | 0.10    |      |         |         | 0.35    |   |         |         | (0.70   | ) |         |        | (0.11   | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                               | Inventory accounting change, net of tax  |         |         | (0.31   | )    |         |         | (0.29   | ) |         |         | (0.47   | ) |         |        | (0.18   | )
|                                          |                                               |                                          |         |         |         |      |         |         |         |   |         |         |         |   |         |       

14



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##### Table of Contents



|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |         |           | 
|--------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------------------------------- | --------- | -------- | --------- | ---- | --------- | -------- | --------- | - | --------- | -------- | --------- | - | --------- | ------- | --------- | 
|                                                                      |                                               |                                                            
|                                                                      |                                               | Fiscal Year                                                
|                                                                      |                                               |                                                            
|                                                                      |                                               | 2003                                                        |           | 2002     |           | 2001 |           | 2000    
|                                                                      |                                               |                                                             |           |          |           |      |           |         
|                                                                      |                                               |                                                            
|                                                                      |                                               | (In thousands, except per share amounts)                   
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Diluted, as restated                          |                                                             | $         | (0.21    | )         |      | $         | 0.06     |           |   | $         | (1.17    | )         |   | $         | (0.29   | )        
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|Balance Sheet Data                                                    |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Total assets, as previously reported                                  |                                               | $                                                           | 1,153,465 |          |           | $    | 1,101,349 |          |           | $ | 1,068,577 |          |           | $ | 1,066,806 |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Change in vendor allowance recognition period |                                                             |           | (29,147  | )         |      |           | (27,978  | )         |   |           | (27,817  | )         |   |           | (25,623 | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Other vendor allowance adjustments            |                                                             |           | (15,444  | )         |      |           | (9,462   | )         |   |           | (579     | )         |   |           | (2,300  | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Lease accounting adjustments                  |                                                             |           | 15,462   |           |      |           | 16,930   |           |   |           | 21,010   |           |   |           | 23,614  |          
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Deferred taxes                                |                                                             |           | 17,689   |           |      |           | 14,857   |           |   |           | 11,268   |           |   |           | 11,080  |          
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|                                                                      |                                               | As corrected                                                |           |          | 1,142,025 |      |           |          | 1,095,696 |   |           |          | 1,072,459 |   |           |         | 1,073,577 | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Inventory accounting change                   |                                                             |           | (143,414 | )         |      |           | (119,544 | )         |   |           | (99,794  | )         |   |           | (77,477 | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Deferred taxes                                |                                                             |           | 49,381   |           |      |           | 39,351   |           |   |           | 39,638   |           |   |           | 26,162  |          
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|                                                                      |                                               | Total assets, as restated                                   |           | $        | 1,047,992 |      |           | $        | 1,015,503 |   |           | $        | 1,012,303 |   |           | $       | 1,022,262 | 
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|Total debt (including current maturities), as
    previously reported |                                               | $                                                           | 520,270   |          |           | $    | 524,967   |          |           | $ | 670,843   |          |           | $ | 647,881   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Lease accounting adjustments                  |                                                             |           | 6,456    |           |      |           | 5,486    |           |   |           | 5,571    |           |   |           | 4,447   |          
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|                                                                      |                                               | Total debt (including current maturities), as
    corrected |           | $        | 526,726   |      |           | $        | 530,453   |   |           | $        | 676,414   |   |           | $       | 652,328   | 
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|Stockholders equity, as previously reported                          |                                               | $                                                           | 331,558   |          |           | $    | 302,182   |          |           | $ | 154,286   |          |           | $ | 139,613   |        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Change in vendor allowance recognition period |                                                             |           | (29,147  | )         |      |           | (27,978  | )         |   |           | (27,817  | )         |   |           | (25,623 | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Other vendor allowance adjustments            |                                                             |           | (15,444  | )         |      |           | (9,462   | )         |   |           | (579     | )         |   |           | (2,300  | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Lease accounting adjustments                  |                                                             |           | (22,000  | )         |      |           | (19,489  | )         |   |           | (16,094  | )         |   |           | (12,365 | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Related income taxes                          |                                                             |           | 26,305   |           |      |           | 22,590   |           |   |           | 17,578   |           |   |           | 15,901  |          
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|                                                                      |                                               | As corrected                                                |           |          | 291,272   |      |           |          | 267,843   |   |           |          | 127,374   |   |           |         | 115,226   | 
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Inventory accounting change                   |                                                             |           | (153,493 | )         |      |           | (129,623 | )         |   |           | (109,873 | )         |   |           | (87,556 | )        
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Deferred taxes                                |                                                             |           | 60,632   |           |      |           | 51,167   |           |   |           | 43,407   |           |   |           | 34,561  |          
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        
|                                                                      | Stockholders equity, as restated             |                                                             | $         | 198,411  |           |      | $         | 189,387  |           |   | $         | 60,908   |           |   | $         | 62,231  |          
|                                                                      |                                               |                                                             |           |          |           |      |           |          |           |   |           |          |           |   |           |        

(3) In fiscal 2001, we incurred $23.1 million of
charges to cost of sales to review and dispose of excess
inventories identified during our Profitability Enhancement
Program (PEP).

(4) In March 2003, the Emerging Issues Task Force
(EITF) of the Financial Accounting Standards Board
(FASB) reached consensus on certain matters
discussed in EITF 02-16, Accounting by a Customer
(including a Reseller) for Certain Consideration Received from a
Vendor. EITF 02-16 states that allowances
provided by vendors are presumed to be a reduction in the costs
of purchasing inventories (to be recognized in inventory and
cost of sales), except for that portion that is a reimbursement
for costs incurred to sell the vendors products. In order
to qualify as a reimbursement, the costs must be specific,
identifiable and incremental, to be recognized as a reduction to
operating and administrative expenses. Under previous accounting
guidance, we accounted for all non-performance based vendor
allowances as a reduction of inventory cost and allocated
performance-based vendor allowances as a reduction of
advertising expense or cost of goods sold, as appropriate, in
the period the expense was incurred. During the first quarter of
fiscal 2003, we adopted the provisions of EITF 02-16 and
implemented a policy of considering all cooperative advertising
arrangements and other vendor allowances to be a reduction of
product costs, unless we are specifically required to
substantiate costs incurred to the vendor and do so in the
normal course of business. For fiscal 2002, 2001 and 2000,
vendor allowances totaling approximately $19.2 million,
$20.0 million and $17.9 million, respectively, were
classified as a reduction to advertising expense (in operating
and administrative expense) rather than as a reduction to cost
of sales as currently required by EITF 02-16.

(5) During fiscal 2001 and 2000, we incurred transition and
integration costs associated with certain store acquisitions of
$0.2 million and $23.8 million, respectively. These
costs have been included in operating and administrative
expenses.

(6) Amounts relate to costs incurred in connection with the
closure of existing stores. During fiscal 2003, we incurred
$12.2 million associated with our change in closed store
strategy. See discussions under store

15



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##### Table of Contents





(7) During fiscal 2001 and 2000, we incurred charges
associated with certain legal settlements of $2.0 million
and $8.8 million, respectively. The $8.8 million in
fiscal 2000 reflects settlement of a California class action
lawsuit related to overtime pay for store and assistant store
managers.

(8) Consistent with our adoption of Statement of Financial
Accounting Standard (SFAS) No. 142,
Goodwill and Other Intangible Assets, we no longer
incur any goodwill amortization for fiscal years subsequent to
fiscal 2001.

(9) During fiscal 2004, we recorded a loss on debt
retirement of $1.0 million as a result of the redemption of
the $15.0 million remaining balance of our 12% senior
notes. During fiscal 2003, we recorded a loss on debt retirement
of $49.5 million primarily due to the early redemption of
94% of our then existing 12% senior notes. During fiscal
2002, we sold shares of our common stock in an underwritten
public offering and used proceeds from the sale of those shares
to retire approximately $71.7 million of our
11% senior subordinated notes, resulting in a loss on debt
retirement of $6.0 million. During fiscal 2001, we recorded
a loss on debt retirement of $5.1 million, which reflected
the write-off of unamortized deferred financing costs associated
with a previously existing senior credit facility. See
discussions under liquidity and capital resources in
Managements Discussion and Analysis of Financial Condition
and Results of Operations.

(10) On March 1, 2000, we participated in the
formation of a new joint venture, PartsAmerica.com, Inc.
PartsAmerica.com engaged in the sale of automotive parts and
accessories via e-commerce. During fiscal 2000, we invested
approximately $3.2 million in this joint venture and in the
same year we wrote off our investment.

(11) Represents sales to commercial accounts, including
sales from stores without commercial sales centers.

(12) Comparable store net sales data is calculated based on
the change in net sales commencing after the time a new store
has been open twelve months. Therefore, sales for the first
twelve months a new store is open are not included in the
comparable store calculation. Relocations are included in
comparable store net sales from the date of opening.

16



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

General

Our fiscal year ends on the Sunday nearest to January 31 and is
named for the calendar year just ended. Occasionally this
results in a fiscal year that is 53 weeks long. When we
refer to a particular fiscal year we mean the following:



| |   |                                                               
| | - | --------------------------------------------------------------
| |  | Fiscal 2004 means the 52 weeks ended January 30, 2005;        
|
| |  | Fiscal 2003 means the 52 weeks ended February 1,
    2004; and
|
| |  | Fiscal 2002 means the 52 weeks ended February 2, 2003.        

CSK Auto Corporation is the largest specialty retailer of
automotive parts and accessories in the Western United States
and one of the largest retailers of these products in the United
States based, in each case, on our number of stores. We compete
in the U.S. automotive aftermarket industry and sell
replacement parts (excluding tires), accessories, maintenance
items, batteries and automotive fluids for cars and light
trucks. Our customers include people who work on their own car,
the Do-it-Yourself (DIY) market, and commercial
installers who work on other peoples cars, the
Do-it-For-Me (DIFM) market. We believe that the
U.S. automotive aftermarket industry is characterized by
stable demand and is growing because of increases in, among
other things, the age of vehicles in use and the number of miles
driven annually per vehicle. As of January 30, 2005, we
operated 1,134 stores under one fully integrated operating
format and three brand names:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Checker Auto Parts, founded in 1969, with 425 stores in the
    Southwestern, Rocky Mountain and Northern Plains states and
    Hawaii;
|
| |  | Schucks Auto Supply, founded in 1917, with 225 stores in the
    Pacific Northwest and Alaska; and                                     
|
| |  | Kragen Auto Parts, founded in 1947, with 484 stores primarily in
    California.                                                       

During fiscal 2004, we opened 28 stores, relocated 9 stores and
closed 8 stores in addition to the stores closed due to
relocation. We expect to open or relocate approximately 50
stores in fiscal 2005.

Accounting Change and Restatement of Financial Statements

We implemented a voluntary change in our method of accounting
for inventories, which is effected by a retroactive restatement
of our historical financial statements. In addition, we recently
identified errors in our accounting for leases and vendor
allowances, which required a restatement of our historical
financial statements.



| |                                      
| | -------------------------------------
| | Change in inventory accounting method

We historically used the last-in, first-out (LIFO)
method for accounting for inventories. We changed our method of
determining the cost of inventories to the first-in, first-out
(FIFO) method effective the fourth quarter of fiscal
2004. We have applied this accounting change retroactively by
restating prior period financial statements as required by
Accounting Principles Board Opinion No. 20, Accounting
Changes.

Our inventory levels over the last five years have increased
modestly due to new store openings and growth. During the same
time, we were able to reduce the overall unit costs of our
inventories. In this environment, our LIFO method of accounting
was resulting in an increasing difference between the carrying
cost of inventories on our balance sheet and our current product
acquisition costs. The carrying cost on our balance sheet under
LIFO reflected the higher prices paid for inventories in prior
periods and also included higher costs paid for inventories
purchased in connection with our prior business acquisitions.
Since we do not expect the pricing environment for most products
we purchase to change dramatically in the foreseeable future,
this difference between LIFO cost and replacement cost can be
expected to continue and possibly increase as we continue to
pursue strategies to reduce our product acquisition costs. The
FIFO method of inventory accounting will result in reported
inventory cost on our balance sheet that approximates replacement

17



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##### Table of Contents





Although the primary effect of the change was a decrease in
inventory on our balance sheet, it also has a significant impact
on our determination of cost of sales because of differences in
unit costs and increases in the amount of vendor allowances and
inventory purchasing and handling costs that will remain in
inventories at period end under FIFO. The change increased our
cost of sales approximately $3.4 million in fiscal 2004.



| |                             
| | ----------------------------
| | Lease accounting restatement

At January 30, 2005, we operated in excess of 1,100 leased
locations, primarily consisting of our retail stores, but also
including warehouses, distribution centers and our corporate
office facilities. We recently identified accounting errors
pertaining to the evaluation of lease terms (thus impacting our
amortization of leasehold improvements), free rent periods
(i.e., rent holidays), straight-lining of minimum escalating
lease payments, the classification of landlord
incentives/allowances, and the treatment of costs incurred for
certain stores which are constructed and subsequently
transferred to our landlords. We have corrected these errors by
restating prior period financial statements.

We reevaluated our lease terms for our operating leases which
resulted in a reduction to the useful life assumption for
depreciating leasehold improvements. We previously depreciated
leasehold improvements over the term of the lease which
consisted of the initial term and could include one renewal
option period but no more than 15 years in total. We now
include renewal option periods only if they are included in the
lease term as defined in Statement of Financial Accounting
Standards (SFAS) No. 13, Accounting for
Leases, as amended. The impact of this increased our
annual depreciation expense for the earlier years of the lease.

We previously recorded build-out allowances we received from
landlords as an offset to the amounts capitalized as leasehold
improvements. We are now recording such allowances as a deferred
rent liability with a related increase in recorded property
assets resulting in an increase to depreciation expense while
the amortization of the deferred rent liability reduces
operating rent expense over the lease term. This change also
increases our reported capital expenditures (investing cash
flows) and our operating cash flows we report in our
Consolidated Statements of Cash Flows.

We identified a small number of stores where the extent of our
monetary involvement in the construction of the store (based on
the excess of our construction costs over the landlords
reimbursement to us of such costs) results in capitalization of
the construction costs as an asset and recording the landlord
reimbursement as construction debt under Emerging Issues Task
Force No. 97-10 (EITF 97-10), The
Effect of Lessee Involvement in Asset Construction.

We also identified situations where we did not straight-line
escalating rent or recognize rent for free rent periods. The net
effect of the required adjustments to address these errors
increased rent expenses in our historical financial statements.



| |                              
| | -----------------------------
| | Vendor allowance restatements

We historically recognized estimated vendor allowances in a
systematic manner ratably over a performance period that ran
from October through September. This recognition period was
initially selected to match the benefits to be received with
costs we were incurring to perform promotional activities
required to earn the vendor allowances. We recently reevaluated
this accounting convention and concluded that the recognition
period should be corrected to a calendar year because
substantially all allowances are determined and collected based
on purchases from vendors in the calendar year.

We also recently identified vendor allowances recorded in fiscal
2003 that will not be collected and have determined that the
amounts were recorded because of errors in estimation in earlier
periods. In addition, we identified certain vendor allowances
recorded in improper periods. The majority of the adjustments
were made to fiscal 2003 and 2002; however, adjustments were
also made to fiscal 2000, 2001 and first three quarters of
fiscal 2004. By year, we increased (decreased) our cost of sales
by $1.0 million for the nine months of fiscal 2004;
$6.0 million in fiscal 2003; $8.9 million in fiscal
2002; ($1.7) million in fiscal 2001; and $1.2 million
in

18



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##### Table of Contents





Overview

Our sales were basically flat compared to the prior year and our
comparable store sales (sales in stores open at least twelve
months) decreased by 0.7%. We believe our sales were negatively
impacted by, among other things, higher gas prices and milder
summer temperatures in many of our key markets. Our average
transaction size (dollars spent per sale), however, increased
1.2% over the prior year and our inventory management process
allowed us to effectively control our inventory with only a
slight increase compared to the prior year. In light of these
conditions, we will continue to: (1) analyze our operating
and administrative expenses to further reduce our cost
structure; (2) review and refine our core product
categories, such as batteries, brakes, shocks, starters and
alternators, to ensure that we are meeting our customers
expectations; (3) add new product offerings as we deem
appropriate to give our customers additional reasons to shop our
stores; and (4) review our marketing programs, sales
promotions, event marketing and sports sponsorships to build
customer awareness and help drive store traffic. Our goal is to
remain focused on our long-term objectives and continue to
manage our business toward achievement of those objectives.

During the fourth quarter of fiscal 2004, we sold our wholly
owned subsidiary, Automotive Information Systems, Inc.
(AIS) to Mobile Productivity, Inc.
(MPI). AIS provides diagnostic vehicle repair
information to automotive technicians, automotive replacement
parts manufacturers, automotive test equipment manufacturers and
do-it-yourself consumers. The transaction did not have a
material impact on our fiscal 2004 financial statements.

The discussion that follows includes several references to
charges and effects relating to significant events that occurred
during the periods covered:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On August 10, 2004, we amended our senior credit facility
    to provide for an immediate reduction of the interest rate on
    our term loan of 25 basis points and an opportunity for an
    additional 25 basis points reduction of the interest rate
    on such term loan upon the achievement of certain conditions, as
    more particularly set forth in the amendment. The amendment also
    provided for a one-year extension of the term loan maturity to
    August 2010. We refer to these transactions as our 2004
    Amendment.
|
| |  | In January 2004 (fiscal 2003), we redeemed approximately 94% of
    our outstanding $280.0 million 12% senior notes,
    issued $225.0 million of 7% senior subordinated notes,
    and amended our credit facility, increasing the availability and
    reducing the interest rate. We refer to these transactions as
    our 2003 Refinancing.                                                                                                                                                                                                
|
| |  | During the first quarter of fiscal 2003, we adopted Emerging
    Issues Task Force 02-16 (EITF 02-16)
    Accounting by a Customer (including a Reseller) for
    Certain Consideration Received from a Vendor. This
    required us to account for certain vendor allowances as a
    reduction of inventory and cost of sales rather than as a
    reduction of advertising expense in operating and administrative
    expense as in prior fiscal years.                                                                                 
|
| |  | In July 2002, we sold approximately 6.9 million shares of
    common stock in an underwritten public offering at $12 per
    share. In addition, a selling stockholder sold approximately
    2.6 million shares in this offering and, together with
    other affiliated stockholders, this stockholder group sold their
    remaining approximately 3.0 million shares on
    November 20, 2002. These transactions are referred to
    collectively as the 2002 Offering.                                                                    

19



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##### Table of Contents



Results of Operations

The following table sets forth our statement of operations data
expressed as a percentage of net sales for the periods indicated:

|                                      |  |             |       |            |  |            |       |    |  |  |       |  
|------------------------------------- |  | ----------- | ----- | ---------- |  | ---------- | ----- | -- |  |  | ----- | -
|                                      |  |            
|                                      |  | Fiscal Year
|                                      |  |            
|                                      |  | 2004        |       | 2003       |  | 2002      
|                                      |  |             |       |            |  |           
|                                      |  |             |       | (Restated) |  | (Restated)
|                                     
|                                     
|                                     
|                                     
|Net sales                             |  |             | 100.0 | %          |  |            | 100.0 | %  |  |  | 100.0 | %
|                                     
|                                     
|                                     
|                                     
|Cost of sales                         |  |             | 53.5  |            |  |            | 54.6  |    |  |  | 55.4  |  
|                                      |  |             |       |            |  |            |       |    |  |  |       |  
|Gross profit                          |  |             | 46.5  |            |  |            | 45.4  |    |  |  | 44.6  |  
|                                     
|                                     
|                                     
|                                     
|Operating and administrative expenses |  |             | 40.3  |            |  |            | 39.3  |    |  |  | 39.5  |  
|                                     
|                                     
|                                     
|                                     
|Store closing costs                   |  |             | 0.1   |            |  |            | 0.8   |    |  |  | 0.3   |  
|                                      |  |             |       |            |  |            |       |    |  |  |       |  
|Operating profit                      |  |             | 6.1   |            |  |            | 5.3   |    |  |  | 4.8   |  
|                                     
|                                     
|                                     
|                                     
|Interest expense                      |  |             | 2.1   |            |  |            | 3.3   |    |  |  | 4.2   |  
|                                     
|                                     
|                                     
|                                     
|Loss on debt retirement               |  |             | 0.1   |            |  |            | 3.1   |    |  |  | 0.4   |  
|                                      |  |             |       |            |  |            |       |    |  |  |       |  
|Income (loss) before income taxes     |  |             | 3.9   |            |  |            | (1.1  | )  |  |  | 0.2   |  
|                                     
|                                     
|                                     
|                                     
|Income tax expense                    |  |             | 1.6   |            |  |            | (0.5  | )  |  |  | (0.0  | )
|                                      |  |             |       |            |  |            |       |    |  |  |       |  
|Net income (loss)                     |  |             | 2.3   | %          |  |            | (0.6  | )% |  |  | 0.2   | %
|                                      |  |             |       |            |  |            |       |    |  |  |       |  



| |          
| | ---------
| | Net Sales

Net sales and sales data for the prior three years were as
follows (sales $ in thousands):

|                                                |  |                        |           |      |  |      |           |    |  |   |           |  
|----------------------------------------------- |  | ---------------------- | --------- | ---- |  | ---- | --------- | -- |  | - | --------- | -
|                                                |  |                       
|                                                |  | Net Sales & Sales Data
|                                                |  |                       
|                                                |  | 2004                   |           | 2003 |  | 2002
|                                                |  |                        |           |      |  |     
|Retail sales                                    |  | $                      | 1,310,813 |      |  | $    | 1,311,357 |    |  | $ | 1,238,474 |  
|                                               
|                                               
|                                               
|                                               
|Commercial sales                                |  |                        | 260,781   |      |  |      | 260,842   |    |  |   | 262,773   |  
|                                               
|                                               
|                                               
|                                               
|Other sales                                     |  |                        | 5,866     |      |  |      | 5,857     |    |  |   | 5,399     |  
|                                                |  |                        |           |      |  |      |           |    |  |   |           |  
|Total net sales                                 |  | $                      | 1,577,460 |      |  | $    | 1,578,056 |    |  | $ | 1,506,646 |  
|                                                |  |                        |           |      |  |      |           |    |  |   |           |  
|Sales growth  retail sales                     |  |                        |          | %    |  |      | 5.9       | %  |  |   | 5.4       | %
|                                               
|                                               
|                                               
|                                               
|Sales growth  commercial sales                 |  |                        |          | %    |  |      | (0.7      | )% |  |   | 1.4       | %
|                                               
|                                               
|                                               
|                                               
|Sales growth  comparable retail stores         |  |                        | (1.2      | )%   |  |      | 6.0       | %  |  |   | 7.0       | %
|                                               
|                                               
|                                               
|                                               
|Sales growth  comparable commercial
    stores |  |                        | 1.8       | %    |  |      | 4.8       | %  |  |   | 8.0       | %
|                                               
|                                               
|                                               
|                                               
|Number of stores open (at end of year)          |  |                        | 1,134     |      |  |      | 1,114     |    |  |   | 1,109     |  

Retail sales represent sales to the do-it-yourself customer.
Commercial sales represent sales to commercial accounts,
including such sales from stores without commercial sales
centers. We evaluate comparable (or same-store) sales based on
the change in net sales commencing after the time a new or
acquired store has been open for twelve months. Therefore, sales
for the first twelve months a new or acquired store is open are
not included in the comparable store calculation. Stores that
have been relocated are included in comparable store sales.

Retail sales and commercial sales were flat in fiscal 2004 as
compared to fiscal 2003. Fiscal 2004 started strong as our first
quarter total sales and comparable store sales increased 5.2%
and 5.0%, respectively. Sales improved in our core products such
as batteries, brakes, shocks, etc. In our second quarter, sales
began to decline with a 2.3% and 2.5% decrease in total and
comparable store sales, respectively. The decline was primarily
within our heat related categories, which we believe were
negatively impacted by higher gas prices and milder summer
temperatures in many of our key markets. Total sales and
comparable store sales continued to decline in the third and
fourth quarters of fiscal 2004, which we attribute to the
continuing increase in gas prices and general economic
conditions.

20



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##### Table of Contents



Retail sales and comparable store sales increased in fiscal 2003
compared to fiscal 2002 due to an increase in average sale per
customer as a result of our new product offerings (including
performance products, garage maintenance items, the wheel
category and specialty auto related items). Commercial sales
decreased slightly, while comparable commercial sales increased
4.8% in fiscal 2003 compared to fiscal 2002. The increase in
comparable commercial sales reflected sales increases in our
on-going commercial centers, while the overall reduction in
commercial sales reflected our consolidation of certain
commercial sales centers in an effort to improve overall
profitability.



| |             
| | ------------
| | Gross Profit

Gross profit consists primarily of net sales less the cost of
sales and warehouse and distribution expenses. Gross profit as a
percentage of net sales may be affected by variations in our
product mix, price changes in response to competitive factors
and fluctuations in merchandise costs and vendor programs.

Gross profit for fiscal 2004 was $733.9 million, or 46.5%
of net sales, compared to $717.1 million, or 45.4% of net
sales for fiscal 2003. During fiscal 2004, our gross profit
improved relative to the prior year due to lower product
acquisition costs and reduced inventory shrinkage. These margin
improvements were offset by lower vendor allowances in fiscal
2004 than in fiscal 2003. In addition, during the fourth quarter
of fiscal 2004, we recorded charges of $1.5 million
relative to our decision to discontinue offerings of street
scooters and overstocked promotional merchandise, which we
expect to sell below cost in fiscal 2005.

Gross profit for fiscal 2003 was $717.1 million, or 45.4%
of net sales, compared to $671.3 million, or 44.6% of net
sales for fiscal 2002. Adjusting fiscal 2002 for the effects of
EITF 02-16 would have increased fiscal 2002 gross profit by
$19.2 million and gross profit as a percent of net sales to
45.8%, which, as a percent of net sales, is relatively
consistent with fiscal 2003. During fiscal 2003, we began
selling several new product offerings, which resulted in higher
average dollar transactions and higher gross profit dollars, but
carried slightly lower gross profit rates. Sales of these new
products allowed us to further leverage our fixed store level
selling and operational costs. The lower margins on new products
were partially offset by our continued emphasis on lowering
acquisition costs of inventory in our existing product
categories.



| |                                      
| | -------------------------------------
| | Operating and Administrative Expenses

Operating and administrative expenses are comprised of store
payroll, store occupancy, advertising expenses, other store
expenses and general and administrative expenses, including
salaries and related benefits of corporate employees,
administrative office occupancy expenses, data processing,
professional expenses and other related expenses.

Operating expenses increased by approximately $15.6 million
to $635.5 million, or 40.3% of net sales, in fiscal 2004
from $619.9 million, or 39.3% of net sales, in fiscal 2003.
Expenses in fiscal 2004 were higher due primarily to our
increased store count, slightly higher advertising expenses and
increased payroll and benefit related costs.

Operating expenses increased by approximately $25.2 million
to $619.9 million, or 39.3% of net sales, in fiscal 2003
from $594.7 million, or 39.5% of net sales, in fiscal 2002.
The following items impacted the comparability of operating
expenses for the fiscal years indicated:



| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net advertising expense in fiscal 2002 included
    $19.2 million of vendor allowances, which reduced operating
    expenses and, as a result of EITF 02-16, similar allowances
    were classified in cost of sales during fiscal 2003.                                                                                                       
|
| |  | During fiscal 2002, we incurred a charge for workers
    compensation of approximately $4.9 million reflecting
    increased loss reserves for claims incurred during plan years
    1999 through 2001 and claims relating to the acquired PACCAR
    stores, in response to increasing medical and claims costs,
    primarily in California.
|
| |  | Operating expenses as a percent of sales were favorably impacted
    by our ability to leverage our fixed operating costs over our
    increasing sales and our continued focus on expense controls.                                                                                                                                           

21



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##### Table of Contents





| |                    
| | -------------------
| | Store Closing Costs

Store closing costs include amounts for new store closures,
revisions in estimates for stores currently in the closed store
reserve, operating and other expenses and accretion expense,
which is the change in closed store liability due to the passage
of time.

Store closing costs in fiscal 2003 were $10.5 million
higher and $7.6 million higher than in fiscal 2004 and
fiscal 2002, respectively, primarily as a result of the impact
in fiscal 2003 of a new closed store reserve established
relative to our change in exit strategy. In fiscal 2003, we
reversed the existing closed store reserve that was previously
established under EITF 94-3 and establish a new reserve
under the guidance of SFAS No. 146 which resulted in a
charge to the reserve of $12.2 million (see Store Closures
in Liquidity and Capital Resources).



| |                 
| | ----------------
| | Interest Expense

Interest expense for fiscal 2004 decreased to $33.5 million
from $52.4 million for fiscal 2003. The decrease primarily
reflects an approximately $16.7 million reduction in
interest due to lower average interest rates achieved as part of
our 2003 Refinancing.

Interest expense for fiscal 2003 decreased to $52.4 million
from $63.5 million for fiscal 2002. This decrease primarily
reflects an approximately $7.0 million reduction in
interest expense due to lower average outstanding debt levels
throughout the year and an approximate $3.1 million
reduction in interest expense as a result of lower average
interest rates due, in part, to our 2003 Refinancing.



| |                        
| | -----------------------
| | Loss on Debt Retirement

During fiscal 2004, we redeemed the remaining approximately
$15.0 million of our 12% senior notes due 2006. In
conjunction with this transaction, we incurred a loss on debt
retirement of $1.0 million that included early redemption
premiums, the write-off of certain financing fees and other
direct costs.

In conjunction with our 2003 Refinancing, we incurred a loss on
debt retirement of $49.5 million due primarily to the
redemption of 94% of our 12% senior notes, partially offset by a
prorata adjustment representing the unamortized gain on a
terminated interest rate swap.

During fiscal 2002, we redeemed $71.7 million of our
11% senior subordinated notes with proceeds from the 2002
Offering. In conjunction with this transaction, we incurred a
loss on debt retirement of $6.0 million that included early
redemption premiums, the write-off of certain financing fees and
other direct costs.



| |                   
| | ------------------
| | Income Tax Expense

Income tax expense for fiscal 2004 was $24.8 million or
40.2% of income before income taxes, compared to a tax benefit
of $7.9 million or 45.1% for fiscal 2003. The effective tax
rate in fiscal 2004 was impacted by the non-deductibility of
certain expenses and lower credits year over year as a percent
to pre-tax income.

Income tax benefit for fiscal 2003 was $7.9 million or
45.1% of income before income taxes, compared to a tax benefit
of $0.3 million or 15.6% of income before income taxes for
fiscal 2002. The effective tax rate in fiscal 2003 is higher
than the effective tax rate in fiscal 2002 primarily due to the
amount of state income tax credits recognized in 2002.

Liquidity and Capital Resources



| |              
| | -------------
| | Recent Events

On December 15, 2004, we redeemed the approximately
$15.0 million remaining balance of our 12% senior
notes due 2006 at a redemption price equal to 106% of the
principal amount plus accrued and unpaid interest. The
redemption was funded with existing cash on hand. As a result,
we anticipate a reduction in annual interest expense of
approximately $1.8 million.

22



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##### Table of Contents



On June 8, 2004, our Board of Directors approved a share
repurchase program that authorized the purchase of shares of our
common stock with an aggregate purchase price not to exceed
$25.0 million. The program provides that we may buy shares
in the open market or in privately negotiated transactions and
that we will base our decisions on whether to repurchase shares
and the timing of any such repurchases on factors including the
stock price, our cash and debt levels, and general economic and
market conditions. Shares of stock repurchased under the program
will be retired and returned to the status of authorized and
unissued shares. This program will expire in December 2005.
During the fourth quarter of fiscal 2004, we did not repurchase
any shares of our common stock. Since the inception of this
program, we have repurchased approximately 1.6 million
shares of our common stock at a cost of approximately
$23.7 million.

On April 5, 2004, we entered into an interest rate swap
agreement to convert $100.0 million of our 7% senior
subordinated notes due 2014 to a floating rate, set quarterly in
arrears, equal to the 6 month LIBOR + 283 basis
points. The agreement is for the term of the notes. The hedge is
considered to qualify as a fair value hedge;
accordingly, the fair value of the derivative and changes in the
fair value of the underlying debt will be reported on our
balance sheet. Based upon our assessment of effectiveness of the
hedge, changes in the fair value of this derivative and the
underlying debt are not expected to result in a material impact
on net income. The differential to be paid or received under
this agreement was accrued consistent with the terms of the
agreement and was recognized in interest expense over the term
of the related debt. Cash flows related to the interest rate
swap agreement are classified as operating activities in the
Consolidated Statement of Cash Flows. We reduced interest
expense by $1.3 million in fiscal 2004 as a result of this
interest rate swap.

In our 2003 Refinancing, we replaced our then existing
$300.0 million senior credit facility with a new
$325.0 million senior collateralized, asset based credit
facility consisting of a $200.0 million term loan and a
$125.0 million revolving credit commitment. We used
proceeds from our 2003 Refinancing to redeem the remaining
$9.5 million in aggregate principal amount of our
11% senior subordinated notes.



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

Debt is an important part of our overall capitalization. While
we are still highly leveraged, our outstanding debt continues to
decline. Our outstanding debt balance (excluding capital leases)
at the end of fiscal 2004 was $480.4 million, a decrease of
$21.1 million from our outstanding debt of
$501.5 million at the end of fiscal 2003. Our primary cash
requirements include working capital (primarily inventory),
interest and amortization payments on our debt and capital
expenditures. We intend to finance our cash requirements with
cash flow from operations, borrowings under our senior credit
facility and short-term trade credit relating to extended
payment terms for inventory purchases. As of January 30,
2005 and February 1, 2004, there were no borrowings under
our revolving credit facility. The following table outlines
certain key financial measures that impact our liquidity ($ in
thousands):

|                                             |  |             |         |             |  |             |         |  |  |   |         | 
|-------------------------------------------- |  | ----------- | ------- | ----------- |  | ----------- | ------- |  |  | - | ------- | 
|                                             |  |             |         | February 1, |  | February 2,
|                                             |  | January 30, |         | 2004        |  | 2003       
|                                             |  | 2005        |         | (Restated)  |  | (Restated) 
|                                             |  |             |         |             |  |            
|Cash                                         |  | $           | 56,548  |             |  | $           | 37,221  |  |  | $ | 15,519  | 
|                                            
|                                            
|                                            
|                                            
|Availability under revolving credit facility |  |             | 114,035 |             |  |             | 120,068 |  |  |   | 54,698  | 
|                                            
|                                            
|                                            
|                                            
|Working capital                              |  |             | 447,798 |             |  |             | 453,734 |  |  |   | 429,888 | 

Availability under our revolving line of credit decreased as of
January 30, 2005 relative to the prior year, primarily due
to the issuance of letters of credit relating to our increased
purchases of import products.

Analysis of Cash Flows



| |                     
| | --------------------
| | Operating Activities

During fiscal 2004, net cash provided by operating activities
was $101.9 million compared to $52.6 million of cash
provided by operating activities during fiscal 2003. The most
significant components of the change are: (1) net income in
fiscal 2004 of $36.9 million compared to net loss of
$9.6 million in fiscal 2003 and a significant increase in
deferred taxes in fiscal 2004 partially due to the utilization
of a portion of our net

23



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##### Table of Contents





During fiscal 2003, net cash provided by operating activities
was $52.6 million compared to $36.6 million of cash
provided by operating activities during fiscal 2002. The most
significant components of the change are: (1) a cash
outflow of $39.2 million during fiscal 2003 related to
early redemption premiums associated with our 2003 Refinancing;
(2) a cash inflow during fiscal 2003 of $6.0 million
associated with the termination of our interest rate swap
agreement; and (3) a $26.6 million decrease in cash
used to support working capital requirements.



| |                     
| | --------------------
| | Investing Activities

Net cash used in investing activities totaled $29.8 million
in fiscal 2004, compared to $22.2 million used in investing
activities during fiscal 2003. Capital expenditures increased to
$26.3 million during fiscal 2004 as compared to
$19.0 million during fiscal 2003 primarily as a result of
new store improvements, additional capital upgrades to existing
stores, and the purchase of certain leased assets.

Net cash used in investing activities totaled $22.2 million
in fiscal 2003, compared to $7.1 million used in investing
activities during fiscal 2002. Capital expenditures increased to
$19.0 million during fiscal 2003 as compared to
$10.1 million in fiscal 2002. The increase in capital
expenditures related to the upgrade of certain information
systems along with the purchase of certain leased assets. In
addition, during the fiscal 2002 period we received
$2.2 million in proceeds from certain fixed asset sales and
$4.2 million in cash proceeds from the sale of 13 stores in
Texas.

We have budgeted approximately $24 million for capital
expenditures for fiscal 2005, primarily for new stores and
general corporate purposes. We opened, relocated or expanded 38
stores in fiscal 2004 and expect to open or relocate
approximately 50 stores in fiscal 2005. We anticipate that the
majority of these stores will be financed under arrangements
structured as operating leases that require minimal capital
expenditures for fixtures and store equipment. For the remainder
of our planned new, relocated or expanded stores, we expect to
spend approximately $132,000 per store for leasehold
improvements. In addition to capital expenditures, each new
store, except for relocated stores, will require an estimated
investment in working capital, principally for inventories, of
approximately $430,000.



| |                     
| | --------------------
| | Financing Activities

Net cash used in financing activities totaled $52.9 million
in fiscal 2004 compared to $8.7 million used in financing
activities during fiscal 2003. The significant components of the
change are: (1) during fiscal 2004 we utilized
approximately $23.7 million of our cash to repurchase and
subsequently retire approximately 1.6 million shares of our
common stock; no such purchases were made in fiscal 2003;
(2) during fiscal 2003 proceeds from the exercise of stock
options were $13.9 million higher than fiscal 2004 as a
result of significant stock option exercises; (3) we
generated $22.5 million of net financing proceeds in fiscal
2003 as a result of our 2003 Refinancing compared to
$14.9 million paid during fiscal 2004 relating to the
redemption of our remaining balance of our $280.0 million
12% senior notes; and (4) payments for debt issuance
costs were $11.5 million less during fiscal 2004 than in
fiscal 2003 as a result of our 2003 Refinancing.

Net cash used in financing activities totaled $8.7 million
in fiscal 2003 compared to $30.0 million in fiscal 2002. As
a result of our 2003 Refinancing, we generated
$22.5 million of net financing proceeds. In fiscal 2002, we
redeemed a portion of our 11% senior subordinated notes
with proceeds from the 2002 Offering. This resulted in net cash
proceeds of $6.4 million. The most significant components
of the change in financing activities year over year relate to:
(1) net cash received from the 2003 Refinancing, which
provided $16.1 million more in cash than the sale of stock
and note redemption in fiscal 2002; (2) net payments on
normal loan activity during fiscal 2003, which were
$7.0 million higher than net loan payments in fiscal 2002;
(3) payments on capital lease obligations in fiscal 2003,
which were $6.0 million higher than in fiscal 2002

24



---



##### Table of Contents





Off-Balance Sheet Arrangements and Contractual Obligations

We lease our office and warehouse facilities, all but one of our
retail stores, and some of our equipment. Certain of the
equipment leases are classified as capital leases and,
accordingly, the equipment and related obligation are recorded
on our balance sheet. However, substantially all of our store
leases are operating leases with private landlords and provide
for monthly rental payments based on a contractual amount. The
majority of these lease agreements are for base lease periods
ranging from 10 to 20 years, with three to five renewal
options of five years each. Certain store leases also provide
for contingent rentals based upon a percentage of sales in
excess of a stipulated minimum. We believe that the long
duration of our store leases offers security for our store
locations without the risks associated with real estate
ownership.

Our lease for our corporate headquarters was formerly with a
landlord, which, until November 2002, was a related party. We
currently have a lease for a parking lot adjacent to our
headquarters facility with such landlord. Previously we had
entered into sale-leaseback or other financing arrangements with
related parties. We believe that the terms of the transactions
with the related parties were no less favorable than terms we
may have been able to receive from independent third parties at
the time of the applicable transaction. We also believe that
these transactions as a whole are not material to our financial
statements. For more information on related party transactions,
refer to Note 5 of the Consolidated Financial Statements.

We have seller financing arrangements related to debt
established for stores in which we were the seller-lessee and
did not recover substantially all construction costs. In those
situations, we recorded our total cost in property plant and
equipment and amounts funded by the lessor as a debt obligation
on our balance sheet. Rental payments made to the lessor are
charged in part to interest expense and reduce the corresponding
debt based on amortization schedules.

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

|                               |  |                        |           |        |  |           |         |           |  |         |         |  |  |   |         |  |  |   |         | 
|------------------------------ |  | ---------------------- | --------- | ------ |  | --------- | ------- | --------- |  | ------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                               |  |                       
|                               |  | Payments Due by Period
|                               |  |                       
|                               |  |                        |           | Within |  |           |         | After    
|Contractual Obligation         |  | Total                  |           | 1 Year |  | 1-3 Years |         | 3-5 Years |  | 5 Years
|                               |  |                        |           |        |  |           |         |           |  |        
|Long-term debt(1)              |  | $                      | 484,867   |        |  | $         | 2,818   |           |  | $       | 5,930   |  |  | $ | 125,153 |  |  | $ | 350,966 | 
|                              
|                              
|                              
|                              
|Interest on long-term debt(2)  |  |                        | 227,046   |        |  |           | 29,013  |           |  |         | 57,357  |  |  |   | 56,539  |  |  |   | 84,137  | 
|                              
|                              
|                              
|                              
|Capital lease obligations(3)   |  |                        | 19,691    |        |  |           | 7,763   |           |  |         | 8,717   |  |  |   | 1,880   |  |  |   | 1,331   | 
|                              
|                              
|                              
|                              
|Operating lease obligations(4) |  |                        | 715,552   |        |  |           | 121,355 |           |  |         | 213,328 |  |  |   | 141,219 |  |  |   | 239,650 | 
|                              
|                              
|                              
|                              
|Other(5)                       |  |                        | 96,118    |        |  |           | 18,735  |           |  |         | 37,470  |  |  |   | 37,470  |  |  |   | 2,443   | 
|                               |  |                        |           |        |  |           |         |           |  |         |         |  |  |   |         |  |  |   |         | 
|Total contractual obligations  |  | $                      | 1,543,274 |        |  | $         | 179,684 |           |  | $       | 322,802 |  |  | $ | 362,261 |  |  | $ | 678,527 | 
|                               |  |                        |           |        |  |           |         |           |  |         |         |  |  |   |         |  |  |   |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Recent Events for discussion relating to our long-term debt.
    The estimate also assumes no outstanding balance on the revolver.                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) | Interest on the term loan was calculated assuming the current
    interest rate of 4.85% would be in effect through the loan
    expiration date of August 2010. $100.0 million of our
    $225.0 million 7% senior subordinated notes is subject
    to an interest rate swap agreement. The estimate of the effect
    of the interest rate swap on interest was made assuming the
    current interest rate related to the rate swap would be in
    effect for the term of the rate swap.
|   
|(3) | Capital lease payments include both principal and interest.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(4) | Operating lease obligations are not reduced to reflect sublease
    income.                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(5) | Includes service contracts and building mortgages on leased
    property.                                                                                                                                                                                                                                                                                                                                                                                                                    

25



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##### Table of Contents



Other commercial commitments consist of standby letters of
credit totaling $35.9 million, all of which expire in 2005.
Our inventory purchase commitments are cancelable and therefore
not included in the above table.

Store Closures

We provide an allowance for estimated costs to be incurred in
connection with 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
considered for closure.

The allowance for store closing costs is included in accrued
expenses and other long term liabilities in the accompanying
financial statements and 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. Prior to
January 1, 2003, such costs were recognized when a store
was specifically identified, costs could be estimated and
closure was planned to be completed within the next twelve
months in accordance with EITF 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). No provision was made for employee termination
costs. For stores to be relocated, such costs were recognized
when an agreement for the new location had been reached with a
landlord and site plans met preliminary municipal approvals.
During the period that they remained open for business, the rent
and other operating expenses for the stores to be closed
continued to be reflected in normal operating expenses.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities (SFAS No. 146).
SFAS No. 146 requires companies to recognize the fair
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
SFAS No. 146 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. We have applied
SFAS No. 146 prospectively to exit or disposal
activities initiated or exit plans substantially modified after
December 31, 2002 as required.

As a result of the refinancing transactions we completed in
January 2004, we increased our cash flow and financial
flexibility, enabling us to pursue an alternate strategy to
reduce our portfolio of closed stores, which includes lease
buyouts and foregoing lease extensions on locations that we
subleased at a marginal profit. This change in strategy required
us to establish a new closed store reserve based upon the
guidance in SFAS No. 146 and reverse the existing
closed store reserve that was previously established under
EITF 94-3. SFAS No. 146 requires that costs under
a lease contract for a closed store be recognized at fair value
and that the amount of remaining lease payments owed be reduced
by estimated sublease income (but not to an amount less than
zero). This change in methodology resulted in a non-cash charge
of $12.2 million during the fourth quarter of fiscal 2003.
The charge reflects the elimination from the reserve of net
sublease income previously recorded for leases with incremental
estimated sublease income in excess of the cost of the original
lease, partially offset by the discounting of net cash outflow.
Sublease income in excess of costs associated with the lease is
recognized as it is earned.

As of January 30, 2005, we had a total of 141 store
locations included in the allowance for store closing costs. Of
this total, 12 locations were vacant and 129 locations were
subleased. In addition to these stores, we had 54 service
centers also included in the allowance of which 3 were vacant
and 51 were subleased. Future rent expense will be incurred
through the expiration of the non-cancelable leases, the longest
of which runs through March 2018.

26



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##### Table of Contents



Activity in the allowance for store closing costs and the
related payments for the three fiscal years ended
January 30, 2005 is as follows ($ in thousands):

|                           |                              |                                                                              |                     |      |        |        |        |   |        |        |       |   |        |        |  
|-------------------------- | ---------------------------- | ---------------------------------------------------------------------------- | ------------------- | ---- | ------ | ------ | ------ | - | ------ | ------ | ----- | - | ------ | ------ | -
|                           |                              |                                                                             
|                           |                              | Fiscal Year                                                                 
|                           |                              |                                                                             
|                           |                              | 2004                                                                         |                     | 2003 |        | 2002  
|                           |                              |                                                                              |                     |      |        |       
|Balance, beginning of year |                              | $                                                                            | 12,148              |      |        | $      | 4,422  |   |        | $      | 6,771 |  
|                          
|                          
|                          
|                          
|Store closing costs:       |                              |                                                                              |                     |      |        |        |        |   |        |        |       |  
|                          
|                          
|                          
|                          
|                           |                              | Adjustment of allowance to reflect change in exit
    strategy under FAS 146 |                     |      |       |        |        |   | 12,203 |        |       |   |       |       
|                          
|                          
|                          
|                          
|                           |                              | Provision for store closing costs                                            |                     |      | 247    |        |        |   | 152    |        |       |   | 1,314  |       
|                          
|                          
|                          
|                          
|                           |                              | Adjustments to prior plans                                                   |                     |      |       |        |        |   |       |        |       |   | (1,196 | )     
|                          
|                          
|                          
|                          
|                           |                              | Other revisions in estimates                                                 |                     |      | 604    |        |        |   | 314    |        |       |   | 4,908  |       
|                          
|                          
|                          
|                          
|                           | Accretion                    |                                                                              |                     | 552  |        |        |        |  |        |        |       |  |       
|                          
|                          
|                          
|                          
|                           | Operating expenses and other |                                                                              |                     | 788  |        |        |        |  |        |        |       |  |       
|                           |                              |                                                                              |                     |      |        |        |        |   |        |        |       |  
|                           |                              |                                                                              | Store closing costs |      |        | 2,191  |        |   |        | 12,669 |       |   |        | 5,026  |  
|                           |                              |                                                                              |                     |      |        |        |        |   |        |        |       |  
|Payments:                  |                              |                                                                              |                     |      |        |        |        |   |        |        |       |  
|                          
|                          
|                          
|                          
|                           |                              | Rent expense, net of sublease recoveries                                     |                     |      | (2,895 | )      |        |   | (3,303 | )      |       |   | (5,030 | )     
|                          
|                          
|                          
|                          
|                           |                              | Occupancy and other expenses                                                 |                     |      | (787   | )      |        |   | (859   | )      |       |   | (1,837 | )     
|                          
|                          
|                          
|                          
|                           |                              | Sublease commissions and buyouts                                             |                     |      | (2,774 | )      |        |   | (781   | )      |       |   | (508   | )     
|                           |                              |                                                                              |                     |      |        |        |        |   |        |        |       |  
|                           |                              |                                                                              | Total payments      |      |        | (6,456 | )      |   |        | (4,943 | )     |   |        | (7,375 | )
|                           |                              |                                                                              |                     |      |        |        |        |   |        |        |       |  
|Balance, end of year       |                              | $                                                                            | 7,883               |      |        | $      | 12,148 |   |        | $      | 4,422 |  
|                           |                              |                                                                              |                     |      |        |        |        |   |        |        |       |  

Store closing costs in fiscal 2004 were composed of
$0.2 million associated with fiscal 2004 closures,
$0.6 million associated with revisions to estimates,
$0.6 million associated with accretion expense relating to
the discounting of closed store liabilities, and
$0.8 million associated with other operating expenses such
as utilities, repairs and maintenance costs that are expensed as
incurred.

During fiscal 2003, we recorded the following:
(1) $12.2 million in charges associated with the
reversal of the reserve established under EITF 94-3 and the
establishment of a new closed store reserve on the basis of our
change in exit strategy in accordance with the guidance in
SFAS No. 146; (2) $0.2 million in charges
under SFAS No. 146 associated with the closure of 13
stores, with the majority closed at the expiration of the master
lease; and (3) revisions in estimates of $0.3 million
(primarily relating to charges initially recorded in fiscal 2001
(i.e., plan year 2001)) resulting from changes in
estimated vacancy periods and lower realized sublease rates.

During fiscal 2002, we recorded the following: (1) gross
store closing costs of $1.3 million relating to the
identification of 25 stores for closure; (2) an adjustment
to prior plans of $1.2 million primarily due to
managements decision to utilize a warehouse and storage
facility that was previously included within the 1999 plan year
accrual in conjunction with purchase accounting adjustments as a
result of certain acquisitions; and (3) revisions in
estimates of $4.9 million ($3.0 million for plan year
2001, $0.1 million for plan year 2000 and $1.8 million
for plan years prior to 2000) relating to existing closed stores
that have had longer than anticipated vacancy periods as a
result of the continued economic slowdown.

We expect net cash outflows for closed store locations of
approximately $4.0 million during fiscal 2005 and the
remainder of cash outflows to primarily occur during fiscal
years 2006 through 2008. We plan to fund these outflows from
normal operating cash flows. We anticipate that we will close or
relocate approximately 18 stores during fiscal 2005. We
anticipate that the majority of these closures will occur at the
end of the lease terms, resulting in minimal closed store costs.
We anticipate total cash outflows relating to these stores of
$0.3 million, which includes estimated incremental costs to
be measured at fair value when incurred.

27



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##### Table of Contents



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.



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

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



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

Our credit agreement contains negative covenants and
restrictions on actions by us and our subsidiaries including,
without limitation, restrictions and limitations on
indebtedness, liens, guarantees, mergers, asset dispositions not
in the ordinary course of business, investments, loans,
advances, acquisitions, payment of dividends, transactions with
affiliated parties, change in business conducted, certain
prepayments (other than in the ordinary course of business) and
amendments of subordinated indebtedness. Our credit agreement
requires that we meet certain financial covenants, ratios and
tests, including a maximum leverage ratio and a minimum interest
coverage ratio. The Consolidated Leverage Ratio is
Consolidated Total Funded Debt, as defined in the
credit agreement, divided by Consolidated EBITDA as
defined in the credit agreement. The Interest Coverage Ratio is
Consolidated EBITDA, as defined in the credit
agreement, divided by cash interest expense, as
defined in the credit agreement. At January 30, 2005, our
Consolidated Leverage Ratio was 3.11 to 1.00; and our Interest
Coverage Ratio was 5.05 to 1.00, both of which were in
compliance with the related covenants.

As discussed in Item 7 of the Managements Discussion
and Analysis of Financial Condition and Results of Operations
above, we identified a small number of stores where the extent
of our monetary investment in the construction of the stores
requires capitalization of the improvements as assets and
recording of the landlord reimbursement of costs as construction
debt under EITF 97-10. In light of this addition of
incremental debt to our balance sheet required by
EITF 97-10 as well as the reduction in the required
Consolidated Leverage Ratio (i.e., Debt to EBITDA, as
specifically defined in our credit agreement) from 4.0 to 3.0
over the four fiscal quarters ended May 1, 2005, we entered
into a waiver effective May 1, 2005, to our credit
agreement (Waiver). The Waiver provides for the
lenders waiver with respect to the first quarter of fiscal
year 2005 ended May 1, 2005, of the Companys
compliance with the Consolidated Leverage Ratio covenant;
provided that the ratio for the four consecutive fiscal quarters
ended May 1, 2005, does not exceed 3.50 to 1.0. In
addition, the Waiver provides for the exclusion from
Indebtedness (as defined in the credit agreement) of all items
that would be considered indebtedness under EITF 97-10 for
all purposes on and after May 1, 2005, not to exceed
$15 million in the aggregate. With this Waiver, we
anticipate meeting all required covenants under our existing
credit agreement in fiscal 2005.

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

Although we have significantly reduced our outstanding debt over
recent years, we are still highly leveraged. The degree to which
we are leveraged could have important consequences on our
ability to obtain

28



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##### Table of Contents







| |               
| | --------------
| | Credit Ratings

Currently, our debt instruments are rated by the major debt
rating agencies as shown below:

|                    |  |                |     |                   |  |  |    | 
|------------------- |  | -------------- | --- | ----------------- |  |  | -- | 
|Description of Debt |  | Moodys Rating |     | Standard & Poors
|                    |  |                |     |                  
|Term loan           |  |                | Ba2 |                   |  |  | B+ | 
|                   
|                   
|                   
|                   
|Revolver            |  |                | Ba2 |                   |  |  | B+ | 
|                   
|                   
|                   
|                   
|7% notes            |  |                | B2  |                   |  |  | B- | 

With respect to Moodys, a rating of Baa or
above indicates an investment grade rating. A rating below
Baa is considered to have speculative elements. A
Ba ranking indicates an obligation that is judged to
have speculative elements and is subject to substantial credit
risk. A B rating from Moodys signifies an
obligation that is considered speculative and is subject to high
credit risk. The 1, 2 and 3
modifiers show the relative standing within a major category. A
1 indicates that an obligation ranks in the higher
end of the broad rating category, a 2 indicating a
mid-range ranking, and a 3 ranking at the lower end
of the category.

With respect to Standard & Poors, a rating of
BBB or above indicates an investment grade rating. A
rating below BBB indicates that the security has
significant speculative characteristics. A B rating
indicates that Standard and Poors believes the issuer has
the capacity to meet its financial commitment on the obligation,
but that adverse business, financial, or economic conditions
will likely impair the obligors capacity or willingness to
meet its financial commitment to the obligation. Standard and
Poors may modify its ratings with a + or a
- sign to show the obligors relative standing
within a major rating category.



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

Financial market risks relating to our operations result
primarily from changes in interest rates. Interest earned on our
cash equivalents as well as interest paid on our variable rate
debt and amounts received or paid on our interest rate swap are
sensitive to changes in interest rates. Our variable rate debt
relates to borrowings under our senior credit facility and the
$100.0 million amount of our rate swap, which are based on
movements in the LIBOR rate. See item 7A. Quantitative and
Qualitative Disclosures about Market Risk below for a more
detailed explanation about our variable interest rate risk.

Critical Accounting Matters

The preparation of our financial statements requires us to make
critical accounting estimates that affect the amounts reported
in those financial statements. We define a critical accounting
estimate as one that is both significant to the portrayal of our
financial condition and results of operations, and requires
managements most difficult, subjective or complex
judgments. Periodically throughout the fiscal year, we evaluate
our accounting estimates based on historical experience and
other relevant factors and make adjustments as appropriate. The
following estimates involve a high degree of judgment and/or
complexity.



| |                    
| | -------------------
| | Inventory Valuation

Inventories are valued at the lower of cost or market, cost
being determined utilizing the First-in, First-Out
(FIFO) method. Effective the fourth quarter of
fiscal 2004, we changed our inventory accounting method from
Last-in, First-out (LIFO) to FIFO. See Note 1
to the Consolidated Financial Statements for an explanation of
this change as well as the retroactive impact on historical
financial statements.

29



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##### Table of Contents



At each balance sheet date, we adjust our inventory carrying
balances by an estimated allowance for inventory shrinkage that
has occurred since the taking of physical inventories and an
allowance for inventory obsolescence, each of which is discussed
in further detail below.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We reduce the FIFO carrying value of our inventory for estimated
    loss due to shrinkage since the most recent physical inventory.
    Our store shrinkage estimates are determined by dividing the
    shrinkage loss based on the most recent physical inventory by
    the sales for that store since its previous physical inventory.
    That percentage is multiplied by sales since the last physical
    inventory through period end. Our shrinkage expense for the
    fiscal years ended January 30, 2005, February 1, 2004
    and February 2, 2003 was approximately $31.1 million,
    $43.7 million and $39.5 million, respectively. While
    the shrinkage accrual is based on recent experience, there is a
    risk that actual losses will be higher or lower than expected.                                                                                            
|
| |  | In most instances, we retain the right to return damaged,
    obsolete and excess merchandise inventory to our vendors. In
    situations where we do not have a right to return (generally for
    certain imported products), we may from time to time record an
    allowance representing an estimated loss for the difference
    between the cost of any damaged, obsolete or excess inventory
    and the estimated retail selling price. Inventory levels and
    margins earned on all products are monitored monthly. Quarterly,
    we make an assessment if we expect to sell any significant
    amount of inventory below cost and, if so, estimate the amount
    of allowance to record. In the fourth quarter of fiscal 2004, we
    recorded a charge of approximately $1.5 million for
    inventory obsolescence for merchandise which will be sold in
    future periods.



| |                   
| | ------------------
| | Deferred Tax Asset

Included in our net deferred tax asset are deferred tax assets
of $14.1 million as of January 30, 2005, reflecting
the benefit of federal and state tax loss carryforwards
approximating $38.6 million and $12.1 million,
respectively, which begin to expire in 2015 and 2008,
respectively. Realization is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards.
Utilization of certain of the net operating loss carryforwards
may be limited under Section 382 of the Internal Revenue
Code. Although realization is not assured, management believes
it is more likely than not that all of the deferred tax assets
will be realized with the exception of a portion of California
Enterprise Zone credits for which management has determined that
a valuation allowance in the amount of $1.4 million is
necessary.



| |              
| | -------------
| | Legal Matters

We currently and from time to time are involved in litigation
incidental to the conduct of our business, including but not
limited to asbestos and similar product liability claims, slip
and fall and other general liability claims, discrimination and
employment claims, vendor disputes, and miscellaneous
environmental and real estate claims. The damages claimed in
some of this litigation are substantial. Based on an internal
review, we accrue reserves using our best estimate of the
probable and reasonably estimable contingent liabilities. We do
not currently believe that any of these legal claims,
individually or in the aggregate, will result in liabilities
material to our consolidated financial position, results of
operations or cash flows. However, if our estimates related to
these contingent liabilities are incorrect, the future results
of operations for any particular fiscal quarter or year could be
materially adversely affected.



| |                        
| | -----------------------
| | Self-Insurance Reserves

We purchase third-party insurance for workers
compensation, automobile, product and general liability claims
that exceed a certain dollar threshold. However, we are
responsible for the payment of claims under these insured
limits. In estimating the obligation associated with incurred
losses, we utilize loss development factors prepared by
independent third-party actuaries. These development factors
utilize historical data to project the future development of
incurred losses. Loss estimates are adjusted based upon actual
claims settlements and reported claims. Although we do not
expect the amounts ultimately paid to differ significantly from
our estimates, self-insurance reserves could be affected if
future claim experience differs significantly

30



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##### Table of Contents







| |                    
| | -------------------
| | Store Closing Costs

If a store location does not meet our required standards, it is
considered for closure. We provide an allowance for estimated
costs to be incurred in connection with store closures. We
establish this allowance based on an assessment of market
conditions for rents and include assumptions for vacancy periods
and sublease rentals. In fiscal year 2002, we were required to
make adjustments of $4.9 million to the allowance because
actual market and other conditions were different from the
assumptions we made at the time we established the allowance. We
may be required to make further adjustments in future periods.

There are several significant assumptions that underlie the
estimates inherent in the closed store reserve. These
assumptions include: (1) real estate broker estimates for
vacancy periods and estimated sublease rates based on the
brokers experience and expertise; (2) estimates for
occupancy expenses based on historical averages and, in the case
of real estate taxes, subject to changes by taxing authorities;
and (3) credit adjusted discount rates. Accordingly, we
continuously review these assumptions and revise the reserve as
necessary.

In addition, there are certain assumptions that are sensitive to
deviations and could produce actual results significantly
different from managements original assumptions. These
assumptions may be revised as follows: (1) national or
regional economic conditions that can shorten or lengthen
vacancy periods; (2) deterioration of neighborhoods
surrounding store locations resulting in longer than anticipated
vacancy periods; (3) changing subtenant needs resulting in
functional obsolescence of store locations; and
(4) subtenant defaults or bankruptcies resulting in vacant
properties. Historically, we have recorded revisions in
estimates to the closed store reserve that have resulted from
these issues. These revisions usually result from overall longer
vacancy periods on store locations and realized sublease rates
lower than originally anticipated.



| |                               
| | ------------------------------
| | Valuation of long-lived assets

We evaluate the carrying value of long-lived assets whenever
events or changes in circumstances indicate that a potential
impairment has occurred. A potential impairment has occurred if
the projected future undiscounted cash flows are less than the
carrying value of the asset(s). The estimate of cash flows
includes managements assumptions of cash inflows and
outflows directly resulting from the use of that asset in
operations. When a potential impairment has occurred, an
impairment write-down is recorded if the carrying value of the
long-lived asset exceeds its fair value. Our impairment analyses
contain estimates due to the inherently judgmental nature of
forecasting long-term estimated cash flows and determining the
ultimate useful lives and fair values of the assets. Actual
results could differ, which could materially impact our
impairment assessment.



| |                    
| | -------------------
| | Goodwill Impairment

As disclosed in the consolidated financial statements, we have
unamortized goodwill in the amount of $119.0 million. In
connection with the provisions of SFAS No. 142, we
perform an annual impairment test of goodwill. Our test as of
January 30, 2005, resulted in no impairment being
identified. However, the process of evaluating goodwill for
impairment involves the determination of the fair value of our
company. Inherent in such fair value determinations are certain
judgments and estimates, including the interpretation of
economic indicators and market valuations and assumptions about
our strategic plans. To the extent that our strategic plans
change, or that economic and market conditions worsen, it is
possible that our conclusion regarding goodwill impairment could
change and result in a material effect on our financial position
or results of operations.

31



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##### Table of Contents



Recent Accounting Pronouncements

In December 2004, the FASB issued revised
SFAS No. 123R, Share-Based Payment.
SFAS No. 123R sets accounting requirements for
share-based compensation to employees and requires
companies to recognize in the income statement the grant-date
fair value of stock options and other equity-based compensation.
SFAS No. 123R is effective for fiscal years beginning
after June 15, 2005. We will be required to adopt
SFAS No. 123R in our first quarter of fiscal 2006. We
currently disclose the proforma impact on net income (loss) and
earnings (loss) per share under SFAS No. 123,
Accounting for Stock-Based Compensation in
Note 2 of the Consolidated Financial Statements. We are
currently evaluating the impact of the adoption of
SFAS No. 123R on our financial position and results of
operations, including the valuation methods and support for the
assumptions that underlie the valuation of the awards.

In November 2004, the FASB issued SFAS No. 151,
Inventory Costs  an amendment of ARB
No. 43, Chapter 4, which clarifies the
accounting for abnormal amounts of idle facility expense,
freight, handling costs and wasted material (spoilage). The
standard requires that such costs be excluded from the cost of
inventory and expensed when incurred. SFAS No. 151 is
effective for fiscal periods beginning after June 15, 2005.
We do not expect that the adoption of SFAS No. 151
will have a material effect on our consolidated financial
statements.

In December 2004, the FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assets  an amendment
of APB No. 29, Accounting for Nonmonetary
Transactions, which addresses the measurement of exchanges
of nonmonetary assets and eliminates the exception from fair
value measurement for nonmonetary exchanges of similar
productive assets. SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. We do not expect that the
adoption of SFAS No. 153 will have a material effect
on our consolidated financial statements.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk

Financial market risks relating to our operations result
primarily from changes in interest rates. We hold no securities
for purposes of trading. Interest earned on our cash equivalents
as well as interest paid on our variable rate debt and the
amounts received or paid on our rate swap are sensitive to
changes in interest rates.

In April 2004, we entered into an interest rate swap agreement
to convert $100.0 million of our 7% senior
subordinated notes due 2014 to a floating rate, set quarterly in
arrears, equal to the 6 month LIBOR + 283 basis
points. The agreement is for the term of the notes. The hedge is
accounted for and recognized in results of operations as a
fair value hedge; accordingly, the fair value of the
derivative and changes in the fair value of the underlying debt
are reported on our balance sheet. Based upon our assessment of
effectiveness of the hedge, changes in the fair value of this
derivative and the underlying debt are not expected to result in
a material impact on net income.

32



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Our variable rate debt relates to borrowings under our senior
credit facility and our rate swap which was described above,
that are subject to changes in the LIBOR rate. Our variable and
fixed rate debt at January 30, 2005 consisted of the
following ($ in thousands):

|                                                                             |                                                                                                                                     |                   |         |          |   |          |         |    |  |  |          |  | 
|---------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------- | -------- | - | -------- | ------- | -- |  |  | -------- |  | 
|                                                                             |                                                                                                                                     |                   |         | Average  |   |         
|                                                                             |                                                                                                                                     | Balance           |         | Interest |   | Fixed or
|Debt Facility                                                                |                                                                                                                                     | (in U.S. dollars) |         | Rate     |   | Variable
|                                                                             |                                                                                                                                     |                   |         |          |   |         
|Senior credit facility term  matures
    August 2010  $252,450 fair value  |                                                                                                                                     | $                 | 252,450 |          |   |          | 3.7     | %  |  |  | Variable | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Senior credit facility revolver 
    matures June 2008                      |                                                                                                                                     |                   |        |          |   |          | 4.8     | %  |  |  | Variable | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|7% senior subordinated notes 
    mature January 2014  $213,769 fair value |                                                                                                                                     |                   | 225,000 |          |   |          | 6.4     | %* |  |  | Fixed    | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Fair market value of rate swap on
    $100.0 million of 7% senior subordinated notes
    (SFAS No. 133 hedge accounting adjustment) |                   |         | (4,481   | ) |          |         |    |  |  |          |  | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Seller financing arrangements (EITF 97-10)                                   |                                                                                                                                     |                   | 7,417   |          |   |          | Various |    |  |  | Fixed    | 
|                                                                             |                                                                                                                                     |                   |         |          |   |          |         |    |  |  |          | 
|Total debt (less capital leases)                                             |                                                                                                                                     | $                 | 480,386 |          |   |          |         |    |  |  |          | 
|                                                                             |                                                                                                                                     |                   |         |          |   |          |         |    |  |  |          | 



---



|  |                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The coupon rate of these notes is 7%; however the effective
    interest rate is 6.4% due to the reduction in interest expense
    resulting from the interest rate swap.

At January 30, 2005, 70% of our outstanding debt was at
variable interest rates and 30% of our outstanding debt was at
fixed interest rates. With approximately $348.0 million in
variable rate debt outstanding, a 1% change in the LIBOR rate to
which this variable rate debt is indexed would result in a
$3.5 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.






|        |                                                             
|------- | ------------------------------------------------------------
|Item 8. | Consolidated Financial Statements and Supplementary
    Data

MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING

Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting
as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. The Companys internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. The
Companys internal control over financial reporting
includes those policies and procedures that:



| |                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) pertain to the maintenance of records that, in
    reasonable detail, accurately and fairly reflect the
    transactions and dispositions of the assets of the company;                                                                                                                                                                                         
|
| | (ii) provide reasonable assurance that transactions are
    recorded as necessary to permit preparation of financial
    statements in accordance with generally accepted accounting
    principles, and that receipts and expenditures of the company
    are being made only in accordance with authorizations of
    management and directors of the company; and
|
| | (iii) provide reasonable assurance regarding prevention or
    timely detection of unauthorized acquisition, use or disposition
    of the companys assets that could have a material effect
    on the financial statements.                                                                                                                                      

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

Under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial
Officer, we conducted an assessment of the effectiveness of the
Companys internal

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A material weakness is a control deficiency, or combination of
control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.
Management identified the following material weaknesses in its
assessment of the effectiveness of internal control over
financial reporting as of January 30, 2005:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company did not maintain effective controls over the
    completeness and accuracy of its accounting for lease related
    assets, liabilities and expenses. Specifically, the
    Companys controls over the selection, application and
    monitoring of its accounting policies related to the effect of
    the amortization periods for leasehold improvements, rent
    holidays, straight-lining of minimum lease payments, lease
    incentives and lessee involvement in asset construction
    practices were ineffective to ensure that such transactions were
    accounted for in conformity with generally accepted accounting
    principles. This control deficiency resulted in the restatement
    of our consolidated financial statements for the fiscal years
    ended February 1, 2004 and February 2, 2003, the
    restatement of each of the quarters in the fiscal year ended
    February 1, 2004, and the restatement of each of the first
    three quarters in and an adjustment to the consolidated
    financial statements for the fiscal year ended January 30,
    2005.
|
| |  | The Company did not maintain effective controls over the
    completeness and valuation of our vendor allowance receivable
    account and related cost of sales. Specifically, the Company did
    not maintain effective controls over the review and approval
    process for initial vendor allowance agreements; the monitoring
    of modifications to existing vendor allowance agreements; and
    the accuracy of our recording of various vendor allowance
    transactions. This control deficiency resulted in the
    restatement of our consolidated financial statements for the
    fiscal years ended February 1, 2004 and February 2,
    2003, the restatement of each of the quarters in the fiscal year
    ended February 1, 2004, and the restatement of each of the
    first three quarters in and an adjustment to the consolidated
    financial statements for the fiscal year ended January 30,
    2005.                                                                                                                                                                           
|
| |  | The Company did not maintain effective controls over the
    valuation of our inventory allowance accounts for shrinkage and
    obsolescence and related cost of sales. Specifically, the
    Company did not have effective supervisory and review controls
    over our process to determine the inventory shrinkage allowance
    and the method of valuing certain slow-moving inventory in
    accordance with generally accepted accounting principles. This
    control deficiency resulted in audit adjustments to the
    consolidated financial statements for the fiscal year ended
    January 30, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | The Company did not maintain effective controls over certain
    aspects of the financial reporting process because we lacked a
    sufficient complement of personnel with a level of accounting
    expertise and an adequate supervisory review structure that is
    commensurate with the Companys financial reporting
    requirements. Specifically, this control deficiency directly
    contributed to each of the above described material weaknesses
    and also resulted in audit adjustments to our consolidated
    financial statements for the fiscal year ended January 30,
    2005 related to the return to vendor accounts receivable and
    self-insurance accrued liability accounts.                                                                                                                                                                                                                                                                                                                                                                                                   

These material weaknesses could result in a misstatement of the
Companys accounts in a future period that would result in
a material misstatement to the Companys annual or interim
financial statements that would not be prevented or detected.
Because of the material weaknesses described above, management
has concluded that the Company did not maintain effective
internal control over financial reporting as of January 30,
2005, based on criteria established in Internal
Control  Integrated Frameworkissued by the COSO.

Managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
January 30, 2005 has been audited by PricewaterhouseCoopers
LLP, an independent registered public accounting firm, as stated
in their report which appears herein.

34



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##### Table of Contents



PLAN FOR REMEDIATION OF MATERIAL WEAKNESSES

The Company has made and will continue to make improvements to
internal control over financial reporting that we believe will
remediate the material weaknesses described above. Specifically,
with regard to our lease accounting practices, management
intends to:



| |   |                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Require a formal accounting review of each new or amended lease
    transaction by a management level associate;                                                                                                                                                                                                                                     
|
| |  | Provide additional educational resources to accounting personnel
    regarding lease accounting guidance applicable to the various
    lease accounting matters that arise in the course of the
    Companys business;                                                                                                                              
|
| |  | Implement additional processes and procedures to
    (i) enhance the communication between the real
    estate/property management departments and accounting personnel
    concerning various aspects of the Companys lease
    transactions, and (ii) have key accounting personnel more
    closely monitor the Companys lease transactions; and
|
| |  | Hire additional or reassign staff to facilitate the additional
    workload needed to handle lease accounting requirements, which
    go well beyond the approval and processing of lease payments.                                                                                                                                                  

With regard to our accounting for vendor allowances, management
intends to address the material weaknesses in the accounting and
estimation for vendor allowances as follows:



| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Improve the training of personnel in the accounting and
    merchandising departments with respect to the Companys
    contract review and approval procedures and vendor allowance
    policies;   
|
| |  | Enhance the staffing of personnel in the merchandising
    department;                                                                                                                               
|
| |  | Clarify the duties and responsibilities of the Company personnel
    who interact directly with vendors to reinforce accountability;                                                                 
|
| |  | Monitor closely vendor agreements with allowances tied to
    specific purchase volumes to determine when specified criteria
    are met and when allowances have been earned by the
    Company; and
|
| |  | Implement a more formalized quarterly process for updating of
    estimates by vendor including reconciliation to the general
    ledger accounts.                                                   

With regard to our estimation and calculation of the required
inventory shrink and obsolescence allowances, management will
reassign the review responsibility to permit a more complete
review and require that certain data inputs be verified by the
reviewer.

With regard to the capabilities and experience of our accounting
organization, we intend to:



| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Implement the organizational structure changes required to
    facilitate effective supervisory review;                                            
|
| |  | Evaluate the necessity of additional key finance and accounting
    personnel to facilitate a more effective monitoring and review
    process; and
|
| |  | Provide for greater review and oversight for key significant
    accounts.                                                                         

The foregoing notwithstanding, the Company is still evaluating
the appropriate remediation measures required in order to
address the above-described deficiencies. Progress relative to
our remediation measures with respect to the above material
weaknesses will be disclosed in our subsequent Exchange Act
reports.

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##### Table of Contents



Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders



We have completed an integrated audit of CSK Auto
Corporations consolidated financial statements for the
fiscal year ended January 30, 2005 (fiscal
2004) and of its internal control over financial reporting
as of January 30, 2005 and audits of its consolidated
financial statements for the fiscal years ended February 1,
2004 (fiscal 2003) and February 2, 2003
(fiscal 2002) in accordance with the standards of
the Public Company Accounting Oversight Board (United States).
Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement
schedules

In our opinion, the accompanying consolidated financial
statements listed in the index appearing under
Item 15(a)(1) present fairly, in all material respects, the
financial position of CSK Auto Corporation and its subsidiaries
(the Company) at January 30, 2005 and
February 1, 2004, and the results of their operations and
their cash flows for each of the three fiscal years in the
period ended January 30, 2005 in conformity with accounting
principles generally accepted in the United States of America.
In addition, in our opinion, the financial statement schedules
listed in the index appearing under Item 15(a)(2), present
fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial
statement schedules are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on
our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit of financial statements includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

As described in Note 1 to the consolidated financial
statements, the Company has restated its consolidated financial
statements for fiscal 2003 and fiscal 2002.

As described in Note 1 to the consolidated financial
statements, the Company has changed its method of accounting for
inventory from the last-in, first-out
(LIFO) method to the first-in, first-out
(FIFO) method. The consolidated financial
statements for fiscal 2003 and fiscal 2002 have been adjusted to
give retroactive effect to the change.

As described in Note 2 to the consolidated financial
statements, beginning in fiscal 2003 the Company changed its
method of accounting for vendor allowances to comply with the
provisions of Emerging Issues Task Force Issue No. 02-16
which was not retroactively applied.

Internal control over financial reporting

Also, we have audited managements assessment, included in
Managements Report on Internal Control Over Financial
Reporting appearing under Item 8, that CSK Auto Corporation
did not maintain effective internal control over financial
reporting as of January 30, 2005 because of the effect of
material weaknesses relating to the Companys controls
surrounding lease accounting, inventory allowances for shrinkage
and obsolescence, vendor allowances and the Companys
accounting capabilities, experience and resources in the
headquarters accounting function that is commensurate with the
Companys financial reporting requirements, based on
criteria established in Internal Control 
Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express opinions
on managements assessment and on the effectiveness of the
Companys internal control over financial reporting based
on our audit.

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We conducted our audit of internal control over financial
reporting in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material respects. An
audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and
evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.

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

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

A material weakness is a control deficiency, or combination of
control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. The
following material weaknesses have been identified and included
in managements assessment.



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | The Company did not maintain effective controls over the
    completeness and accuracy of its accounting for lease related
    assets, liabilities and expenses. Specifically, the
    Companys controls over the selection, application and
    monitoring of its accounting policies related to the effect of
    the amortization periods for leasehold improvements, rent
    holidays, straight-lining of minimum lease payments, lease
    incentives and lessee involvement in asset construction
    practices were ineffective to ensure that such transactions were
    accounted for in conformity with generally accepted accounting
    principles. This control deficiency resulted in the restatement
    of the Companys consolidated financial statements for
    fiscal 2003 and fiscal 2002, the restatement of each of the
    quarters in fiscal 2003, and the restatement of each of the
    first three quarters in and an adjustment to the consolidated
    financial statements for fiscal 2004.
|
| | 2. | The Company did not maintain effective controls over the
    completeness and valuation of its vendor allowance receivable
    account and related cost of sales. Specifically, the Company did
    not maintain effective controls over the review and approval
    process for initial vendor allowance agreements; the monitoring
    of modifications to existing vendor allowance agreements; and
    the accuracy of the Companys recording of various vendor
    allowance transactions. This control deficiency resulted in the
    restatement of the Companys consolidated financial
    statements for fiscal 2003 and fiscal 2002, the restatement of
    each of the quarters in fiscal 2003, and the restatement of each
    of the first three quarters in and an adjustment to the
    consolidated financial statements for fiscal 2004.                                                                                                                                                                 

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| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. | The Company did not maintain effective controls over the
    valuation of its inventory allowance accounts for shrinkage and
    obsolescence and related cost of sales. Specifically, the
    Company did not have effective supervisory and review controls
    over its process to determine the inventory shrinkage allowance
    and the method of valuing certain slow-moving inventory in
    accordance with generally accepted accounting principles. This
    control deficiency resulted in audit adjustments to the
    consolidated financial statements for fiscal 2004.                                                                                                                
|
| | 4. | The Company did not maintain effective controls over certain
    aspects of the financial reporting process because the Company
    lacked a sufficient complement of personnel with a level of
    accounting expertise and an adequate supervisory review
    structure that is commensurate with the Companys financial
    reporting requirements. Specifically, this control deficiency
    directly contributed to each of the above described material
    weaknesses and also resulted in audit adjustments to the
    Companys consolidated financial statements for fiscal 2004
    related to the return to vendor accounts receivable and
    self-insurance accrued liability accounts.

Additionally, these material weaknesses could result in a
misstatement of the Companys accounts in a future period
that would result in a material misstatement to the
Companys annual or interim financial statements that would
not be prevented or detected. These material weaknesses were
considered in determining the nature, timing, and extent of
audit tests applied in our audit of the fiscal 2004 consolidated
financial statements, and our opinion regarding the
effectiveness of the Companys internal control over
financial reporting does not affect our opinion on those
consolidated financial statements.

In our opinion, managements assessment that CSK Auto
Corporation did not maintain effective internal control over
financial reporting as of January 30, 2005, is fairly
stated, in all material respects, based on criteria established
in Internal Control  Integrated Frameworkissued by the COSO. Also, in our opinion, because of the
effects of the material weaknesses described above on the
achievement of the objectives of the control criteria, CSK Auto
Corporation has not maintained effective internal control over
financial reporting as of January 30, 2005, based on
criteria established in Internal Control 
Integrated Frameworkissued by the COSO.

/s/ PricewaterhouseCoopers LLP

Phoenix, Arizona



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CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |            | 
|--------------------------------- | ------------------------------------------ | ----------------------------------------------- | --------- | ----------- |  | ----------- | --------- | ---------- | - | - | --------- | ---------- | 
|                                  |                                            |                                                
|                                  |                                            | Fiscal Year Ended                              
|                                  |                                            |                                                
|                                  |                                            | January 30,                                     |           | February 1, |  | February 2,
|                                  |                                            | 2005                                            |           | 2004        |  | 2003       
|                                  |                                            |                                                 |           |             |  |            
|                                  |                                            |                                                 |           | (Restated)  |  | (Restated) 
|                                  |                                            |                                                
|                                  |                                            | (In thousands, except share and per share data)
|                                 
|                                 
|                                 
|                                 
|Net sales                         |                                            | $                                               | 1,577,460 |             |  | $           | 1,578,056 |            |   | $ | 1,506,646 |           
|                                 
|                                 
|                                 
|                                 
|Cost of sales                     |                                            |                                                 | 843,600   |             |  |             | 860,952   |            |   |   | 835,298   |           
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|Gross profit                      |                                            |                                                 | 733,860   |             |  |             | 717,104   |            |   |   | 671,348   |           
|                                 
|                                 
|                                 
|                                 
|Other costs and expenses:         |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|                                 
|                                 
|                                 
|                                 
|                                  | Operating and administrative               |                                                 |           | 635,541     |  |             |           | 619,932    |   |   |           | 594,698    | 
|                                 
|                                 
|                                 
|                                 
|                                  | Store closing costs                        |                                                 |           | 2,191       |  |             |           | 12,669     |   |   |           | 5,026      | 
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|Operating profit                  |                                            |                                                 | 96,128    |             |  |             | 84,503    |            |   |   | 71,624    |           
|                                 
|                                 
|                                 
|                                 
|Interest expense                  |                                            |                                                 | 33,460    |             |  |             | 52,418    |            |   |   | 63,544    |           
|                                 
|                                 
|                                 
|                                 
|Loss on debt retirement           |                                            |                                                 | 1,026     |             |  |             | 49,494    |            |   |   | 6,008     |           
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|Income (loss) before income taxes |                                            |                                                 | 61,642    |             |  |             | (17,409   | )          |   |   | 2,072     |           
|                                 
|                                 
|                                 
|                                 
|Income tax expense (benefit)      |                                            |                                                 | 24,761    |             |  |             | (7,854    | )          |   |   | (324      | )         
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|Net income (loss)                 |                                            | $                                               | 36,881    |             |  | $           | (9,555    | )          |   | $ | 2,396     |           
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|Basic earnings per share:         |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|                                 
|                                 
|                                 
|                                 
|                                  | Net income (loss) per share                |                                                 | $         | 0.81        |  |             | $         | (0.21      | ) |   | $         | 0.06       | 
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|                                  | Shares used in computing per share amounts |                                                 |           | 45,713,271  |  |             |           | 45,657,710 |   |   |           | 40,634,522 | 
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|Diluted earnings per share:       |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|                                 
|                                 
|                                 
|                                 
|                                  | Net income (loss) per share                |                                                 | $         | 0.80        |  |             | $         | (0.21      | ) |   | $         | 0.06       | 
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           
|                                  | Shares used in computing per share amounts |                                                 |           | 46,002,376  |  |             |           | 45,657,710 |   |   |           | 40,751,802 | 
|                                  |                                            |                                                 |           |             |  |             |           |            |   |   |           |           

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

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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |          |           | 
|------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | --------- | - | ------- | -------- | --------- | 
|                                                                    |                                                                                                                                                                                         | January 30,                                |         | February 1,
|                                                                    |                                                                                                                                                                                         | 2005                                       |         | 2004       
|                                                                    |                                                                                                                                                                                         |                                            |         |            
|                                                                    |                                                                                                                                                                                         |                                            |         | (Restated) 
|                                                                    |                                                                                                                                                                                         |                                           
|                                                                    |                                                                                                                                                                                         | (In thousands, except share               
|                                                                    |                                                                                                                                                                                         | data)                                     
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|ASSETS                                                             
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Cash and cash equivalents                                           |                                                                                                                                                                                         | $                                          | 56,548  |             |           | $ | 37,221  |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Receivables, net of allowances of $670 and
    $1,577, respectively |                                                                                                                                                                                         |                                            | 73,106  |             |           |   | 91,932  |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Inventories                                                         |                                                                                                                                                                                         |                                            | 538,354 |             |           |   | 522,849 |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Deferred income taxes                                               |                                                                                                                                                                                         |                                            | 46,263  |             |           |   | 67,857  |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Prepaid expenses and other current assets                           |                                                                                                                                                                                         |                                            | 20,657  |             |           |   | 21,123  |         
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                         | Total current assets                       |         |             | 734,928   |   |         |          | 740,982   | 
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Property and equipment, net                                         |                                                                                                                                                                                         |                                            | 139,357 |             |           |   | 140,275 |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Leasehold interests, net                                            |                                                                                                                                                                                         |                                            | 10,393  |             |           |   | 12,278  |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Goodwill                                                            |                                                                                                                                                                                         |                                            | 118,966 |             |           |   | 127,069 |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Other assets, net                                                   |                                                                                                                                                                                         |                                            | 38,474  |             |           |   | 27,388  |         
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                         | Total assets                               |         | $           | 1,042,118 |   |         | $        | 1,047,992 | 
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|LIABILITIES AND STOCKHOLDERS
    EQUITY                           
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Accounts payable                                                    |                                                                                                                                                                                         | $                                          | 178,444 |             |           | $ | 177,150 |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Accrued payroll and related expenses                                |                                                                                                                                                                                         |                                            | 51,396  |             |           |   | 47,498  |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Accrued expenses and other current liabilities                      |                                                                                                                                                                                         |                                            | 47,982  |             |           |   | 49,617  |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Current maturities of long-term debt                                |                                                                                                                                                                                         |                                            | 2,818   |             |           |   | 2,743   |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Current maturities of capital lease obligations                     |                                                                                                                                                                                         |                                            | 6,490   |             |           |   | 10,240  |         
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                         | Total current liabilities                  |         |             | 287,130   |   |         |          | 287,248   | 
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Long-term debt                                                      |                                                                                                                                                                                         |                                            | 477,568 |             |           |   | 498,726 |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Obligations under capital leases                                    |                                                                                                                                                                                         |                                            | 10,437  |             |           |   | 15,017  |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Deferred income taxes                                               |                                                                                                                                                                                         |                                            | 6,341   |             |           |   | 3,333   |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Other liabilities                                                   |                                                                                                                                                                                         |                                            | 46,358  |             |           |   | 45,257  |         
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                         | Total non-current liabilities              |         |             | 540,704   |   |         |          | 562,333   | 
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Commitments and contingencies                                       |                                                                                                                                                                                         |                                            |        |             |           |   |        |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|Stockholders equity:                                               |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Common stock, $0.01 par value,
    58,000,000 shares authorized, 45,116,301 and
    46,497,936 shares issued and outstanding at
    January 30, 2005 and February 1, 2004, respectively |                                            |         | 451         |           |   |         | 465      |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Additional paid-in capital                                                                                                                                                              |                                            |         | 446,537     |           |   |         | 466,576  |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Stockholder receivable                                                                                                                                                                  |                                            |         | (10         | )         |   |         | (73      | )        
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Deferred compensation                                                                                                                                                                   |                                            |         | (1,018      | )         |   |         |         |          
|                                                                   
|                                                                   
|                                                                   
|                                                                   
|                                                                    | Accumulated deficit                                                                                                                                                                     |                                            |         | (231,676    | )         |   |         | (268,557 | )        
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                         | Total stockholders equity                 |         |             | 214,284   |   |         |          | 198,411   | 
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                    |                                                                                                                                                                                         | Total liabilities and stockholders equity |         | $           | 1,042,118 |   |         | $        | 1,047,992 | 
|                                                                    |                                                                                                                                                                                         |                                            |         |             |           |   |         |         

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

40



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |          |   |        |         |  
|---------------------------------------------- | ------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ------------------------------------------------------------------- | - | ----------- | ------- | -------- | - | ------- | ------- | -------- | - | ------ | ------- | -
|                                               |                                                                           |                                                                                             
|                                               |                                                                           | Fiscal Year Ended                                                                           
|                                               |                                                                           |                                                                                             
|                                               |                                                                           | January 30,                                                                                  |                                                                | February 1,                                                         |   | February 2,
|                                               |                                                                           | 2005                                                                                         |                                                                | 2004                                                                |   | 2003       
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |            
|                                               |                                                                           |                                                                                              |                                                                | (Restated)                                                          |   | (Restated) 
|                                               |                                                                           |                                                                                             
|                                               |                                                                           | (In thousands)                                                                              
|                                              
|                                              
|                                              
|                                              
|Cash flows from operating activities:          |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|                                              
|                                              
|                                              
|                                              
|                                               | Net income (loss)                                                         |                                                                                              | $                                                              | 36,881                                                              |   |             | $       | (9,555   | ) |         | $       | 2,396    |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           | Adjustments to reconcile net income (loss) to net
    cash provided by operating activities: |                                                                |                                                                     |   |             |         |          |   |         |         |          |   |       
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Depreciation and amortization of property and
    equipment    |                                                                     |   | 31,081      |         |          |   | 34,623  |         |          |   | 36,333 |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Amortization and accretion of financing items                  |                                                                     |   | 1,883       |         |          |   | 3,634   |         |          |   | 6,194  |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Amortization of other items                                    |                                                                     |   | 4,313       |         |          |   | 3,943   |         |          |   | 3,820  |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Losses on disposal of property, equipment and
    other assets |                                                                     |   | 726         |         |          |   | 791     |         |          |   | 943    |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Premium paid on early retirement of debt                       |                                                                     |   | (895        | )       |          |   | (39,176 | )       |          |   | (4,368 | )      
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Loss on debt retirement                                        |                                                                     |   | 1,026       |         |          |   | 49,494  |         |          |   | 6,008  |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Loss on sale of stores                                         |                                                                     |   |            |         |          |   |        |         |          |   | 847    |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Deferred income taxes                                          |                                                                     |   | 24,602      |         |          |   | (10,316 | )       |          |   | 155    |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Tax benefit relating to stock options                          |                                                                     |   | 390         |         |          |   | 2,333   |         |          |   |       |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Proceeds from interest rate swap termination                   |                                                                     |   |            |         |          |   | 6,031   |         |          |   |       |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              | Change in operating assets and liabilities:                    |                                                                     |   |             |         |          |   |         |         |          |   |        |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              |                                                                | Receivables                                                         |   |             | 19,644  |          |   |         | (8,406  | )        |   |        | (27,131 | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              |                                                                | Inventories                                                         |   |             | (20,960 | )        |   |         | 8,390   |          |   |        | (15,077 | )
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              |                                                                | Prepaid expenses and other current assets                           |   |             | 307     |          |   |         | (6,252  | )        |   |        | 4,976   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              |                                                                | Accounts payable                                                    |   |             | (1,024  | )        |   |         | 3,393   |          |   |        | 16,473  |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              |                                                                | Accrued payroll, accrued expenses and other
    current liabilities |   |             | 3,745   |          |   |         | 13,266  |          |   |        | 6,715   |  
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                           |                                                                                              |                                                                | Other operating activities                                          |   |             | 217     |          |   |         | 385     |          |   |        | (1,730  | )
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|                                               |                                                                           |                                                                                              |                                                                | Net cash provided by operating activities                           |   |             | 101,936 |          |   |         | 52,578  |          |   |        | 36,554  |  
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|Cash flows from investing activities:          |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|                                              
|                                              
|                                              
|                                              
|                                               | Capital expenditures                                                      |                                                                                              |                                                                | (26,331                                                             | ) |             |         | (18,990  | ) |         |         | (10,123  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from sale of property and equipment and
    assets held for sale |                                                                                              |                                                                | 23                                                                  |   |             |         | 26       |   |         |         | 2,188    |  
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from sale of stores                                              |                                                                                              |                                                                |                                                                    |   |             |         |         |   |         |         | 4,217    |  
|                                              
|                                              
|                                              
|                                              
|                                               | Other investing activities                                                |                                                                                              |                                                                | (3,447                                                              | ) |             |         | (3,187   | ) |         |         | (3,384   | )
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|                                               |                                                                           |                                                                                              |                                                                | Net cash used in investing activities                               |   |             | (29,755 | )        |   |         | (22,151 | )        |   |        | (7,102  | )
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|Cash flows from financing activities:          |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|                                              
|                                              
|                                              
|                                              
|                                               | Borrowings under senior credit facility                                   |                                                                                              |                                                                | 20,600                                                              |   |             |         | 561,000  |   |         |         | 297,000  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Payments under senior credit facility                                     |                                                                                              |                                                                | (23,150                                                             | ) |             |         | (508,000 | ) |         |         | (322,000 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Payment of debt issuance costs                                            |                                                                                              |                                                                | (1,412                                                              | ) |             |         | (12,905  | ) |         |         | (1,483   | )
|                                              
|                                              
|                                              
|                                              
|                                               | Retirement of 12% senior notes                                            |                                                                                              |                                                                | (14,910                                                             | ) |             |         | (265,090 | ) |         |         |         |  
|                                              
|                                              
|                                              
|                                              
|                                               | Borrowings under 7% senior subordinated notes                             |                                                                                              |                                                                |                                                                    |   |             |         | 225,000  |   |         |         |         |  
|                                              
|                                              
|                                              
|                                              
|                                               | Partial retirement of 11% senior
    subordinated notes                   |                                                                                              |                                                                |                                                                    |   |             |         | (9,547   | ) |         |         | (71,703  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Payments on capital lease obligations                                     |                                                                                              |                                                                | (13,100                                                             | ) |             |         | (16,153  | ) |         |         | (10,167  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from seller financing arrangements                               |                                                                                              |                                                                | 1,175                                                               |   |             |         | 1,120    |   |         |         |         |  
|                                              
|                                              
|                                              
|                                              
|                                               | Payments on seller financing arrangements                                 |                                                                                              |                                                                | (214                                                                | ) |             |         | (150     | ) |         |         | (85      | )
|                                              
|                                              
|                                              
|                                              
|                                               | Issuance of common stock in public offering                               |                                                                                              |                                                                |                                                                    |   |             |         |         |   |         |         | 82,540   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Underwriters discount and other offering costs                            |                                                                                              |                                                                |                                                                    |   |             |         |         |   |         |         | (4,398   | )
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from exercise of stock options                                   |                                                                                              |                                                                | 2,074                                                               |   |             |         | 15,955   |   |         |         | 168      |  
|                                              
|                                              
|                                              
|                                              
|                                               | Loan to stockholders                                                      |                                                                                              |                                                                |                                                                    |   |             |         |         |   |         |         | (125     | )
|                                              
|                                              
|                                              
|                                              
|                                               | Proceeds from repayment of stockholder receivable                         |                                                                                              |                                                                | 63                                                                  |   |             |         | 269      |   |         |         | 334      |  
|                                              
|                                              
|                                              
|                                              
|                                               | Repurchase of common stock                                                |                                                                                              |                                                                | (23,726                                                             | ) |             |         |         |   |         |         |         |  
|                                              
|                                              
|                                              
|                                              
|                                               | Other financing activities                                                |                                                                                              |                                                                | (254                                                                | ) |             |         | (224     | ) |         |         | (98      | )
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|                                               |                                                                           |                                                                                              |                                                                | Net cash used in financing activities                               |   |             | (52,854 | )        |   |         | (8,725  | )        |   |        | (30,017 | )
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|                                               |                                                                           |                                                                                              |                                                                | Net increase (decrease) in cash and cash
    equivalents            |   |             | 19,327  |          |   |         | 21,702  |          |   |        | (565    | )
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                                           |                                                                                              | 37,221                                                         |                                                                     |   |             | 15,519  |          |   |         | 16,084  |         
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         
|Cash and cash equivalents, end of period       |                                                                           | $                                                                                            | 56,548                                                         |                                                                     |   | $           | 37,221  |          |   | $       | 15,519  |         
|                                               |                                                                           |                                                                                              |                                                                |                                                                     |   |             |         |          |   |         |         |         

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

41



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SUPPLEMENTAL DISCLOSURES

|                                                      |                                                                    |                   |   |             |  |             |   |        |  |  |   |        | 
|----------------------------------------------------- | ------------------------------------------------------------------ | ----------------- | - | ----------- |  | ----------- | - | ------ |  |  | - | ------ | 
|                                                      |                                                                    |                  
|                                                      |                                                                    | Fiscal Year Ended
|                                                      |                                                                    |                  
|                                                      |                                                                    | January 30,       |   | February 1, |  | February 2,
|                                                      |                                                                    | 2005              |   | 2004        |  | 2003       
|                                                      |                                                                    |                   |   |             |  |            
|                                                      |                                                                    |                   |   | (Restated)  |  | (Restated) 
|                                                      |                                                                    |                  
|                                                      |                                                                    | (In thousands)   
|                                                     
|                                                     
|                                                     
|                                                     
|Supplemental Disclosures of Cash Flow
    Information |                                                                    |                   |   |             |  |             |   |        |  |  |   |       
|                                                     
|                                                     
|                                                     
|                                                     
|Cash paid during the year for:                        |                                                                    |                   |   |             |  |             |   |        |  |  |   |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest                                                           |                   | $ | 31,688      |  |             | $ | 53,008 |  |  | $ | 58,598 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Income taxes                                                       |                   |   | 1,878       |  |             |   | 2,166  |  |  |   | 383    | 
|                                                     
|                                                     
|                                                     
|                                                     
|Non-cash investing and financing activities:          |                                                                    |                   |   |             |  |             |   |        |  |  |   |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Fixed assets acquired under capital leases                         |                   | $ | 4,770       |  |             | $ | 9,050  |  |  | $ | 4,450  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Consideration received in business disposition                     |                   |   | 7,114       |  |             |   |       |  |  |   |       | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Conversion of subordinated debt to equity
    (including interest) |                   |   |            |  |             |   |       |  |  |   | 48,070 | 

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

42



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|------------------------------------------------- |  | --------------------------------- | ---------- | ---------- |  | ----------- | --- | ---------- |  | ------------ | ------- | ------- |  | ------ | ---- | - |  | - | ------ | - |  | - | -------- | - |  | - | ------- | -
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |        
|                                                  |  | Common Stock                      |            | Additional |  |             |     |            |  |              |         |        
|                                                  |  |                                   |            | Paid-in    |  | Stockholder |     | Deferred   |  | Accumulated  |         | Total  
|                                                  |  | Shares                            |            | Amount     |  | Capital     |     | Receivable |  | Compensation |         | Deficit |  | Equity
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |       
|                                                  |  |                                  
|                                                  |  | (In thousands, except share data)
|                                                 
|                                                 
|                                                 
|                                                 
|Balances at February 3, 2002
    (Restated)       |  |                                   | 32,370,746 |            |  | $           | 324 |            |  | $            | 322,667 |         |  | $      | (686 | ) |  | $ |       |   |  | $ | (261,398 | ) |  | $ | 60,907  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Conversion of debentures, net of costs            |  |                                   | 5,753,740  |            |  |             | 58  |            |  |              | 46,058  |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 46,116  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Common stock issued in lieu of cash interest paid |  |                                   | 136,580    |            |  |             | 1   |            |  |              | 1,408   |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 1,409   |  
|                                                 
|                                                 
|                                                 
|                                                 
|Stock offering, net of costs                      |  |                                   | 6,878,300  |            |  |             | 69  |            |  |              | 78,073  |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 78,142  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Issuances of loan to stockholder                  |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | (125 | ) |  |   |       |   |  |   |         |   |  |   | (125    | )
|                                                 
|                                                 
|                                                 
|                                                 
|Recovery of stockholder receivable                |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | 469  |   |  |   |       |   |  |   |         |   |  |   | 469     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Retirement of common stock                        |  |                                   | (11,952    | )          |  |             |    |            |  |              | (137    | )       |  |        |     |   |  |   |       |   |  |   |         |   |  |   | (137    | )
|                                                 
|                                                 
|                                                 
|                                                 
|Exercise of options                               |  |                                   | 17,604     |            |  |             |    |            |  |              | 167     |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 167     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Restricted stock                                  |  |                                   | 3,212      |            |  |             |    |            |  |              | 43      |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 43      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net income (restated)                             |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |       |   |  |   | 2,396    |   |  |   | 2,396   |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Balances at February 2, 2003
    (Restated)       |  |                                   | 45,148,230 |            |  | $           | 452 |            |  | $            | 448,279 |         |  | $      | (342 | ) |  | $ |       |   |  | $ | (259,002 | ) |  | $ | 189,387 |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Exercise of options                               |  |                                   | 1,348,279  |            |  |             | 13  |            |  |              | 15,942  |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 15,955  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Tax benefit relating to stock option exercises    |  |                                   |           |            |  |             |    |            |  |              | 2,333   |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 2,333   |  
|                                                 
|                                                 
|                                                 
|                                                 
|Recovery of stockholder receivable                |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | 269  |   |  |   |       |   |  |   |         |   |  |   | 269     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Restricted stock                                  |  |                                   | 1,427      |            |  |             |    |            |  |              | 22      |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 22      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net loss (restated)                               |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |       |   |  |   | (9,555   | ) |  |   | (9,555  | )
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Balances at February 1, 2004
    (Restated)       |  |                                   | 46,497,936 |            |  | $           | 465 |            |  | $            | 466,576 |         |  | $      | (73  | ) |  | $ |       |   |  | $ | (268,557 | ) |  | $ | 198,411 |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Repurchase and retirement of common stock         |  |                                   | (1,574,956 | )          |  |             | (16 | )          |  |              | (23,710 | )       |  |        |     |   |  |   |       |   |  |   |         |   |  |   | (23,726 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Restricted stock                                  |  |                                   | 4,463      |            |  |             |    |            |  |              | 1,209   |         |  |        |     |   |  |   | (1,164 | ) |  |   |         |   |  |   | 45      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Amortization of deferred compensation             |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   | 146    |   |  |   |         |   |  |   | 146     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Recovery of stockholder receivable                |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | 63   |   |  |   |       |   |  |   |         |   |  |   | 63      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Exercise of options                               |  |                                   | 188,858    |            |  |             | 2   |            |  |              | 2,072   |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 2,074   |  
|                                                 
|                                                 
|                                                 
|                                                 
|Tax benefit relating to stock option exercises    |  |                                   |           |            |  |             |    |            |  |              | 390     |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 390     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net income                                        |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |       |   |  |   | 36,881   |   |  |   | 36,881  |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Balances at January 30, 2005                      |  |                                   | 45,116,301 |            |  | $           | 451 |            |  | $            | 446,537 |         |  | $      | (10  | ) |  | $ | (1,018 | ) |  | $ | (231,676 | ) |  | $ | 214,284 |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  

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

43



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CSK Auto Corporation is a holding company. At January 30,
2005, CSK Auto Corporation had no business activity other than
its investment in CSK Auto, Inc. (Auto), a
wholly-owned subsidiary. On a consolidated basis, CSK Auto
Corporation and its subsidiaries are referred to herein as the
Company, we, us or
our.

Auto is a specialty retailer of automotive aftermarket parts and
accessories. At January 30, 2005, we operated 1,134 stores
in 19 states as a fully integrated company and single
business segment under three brand names: Checker Auto Parts,
founded in 1969 and operating in the Southwestern, Rocky
Mountain and Northern Plains states and Hawaii; Schucks Auto
Supply, founded in 1917 and operating in the Pacific Northwest
and Alaska; and Kragen Auto Parts, founded in 1947 and operating
primarily in California.



|         |                                                           
|-------- | ----------------------------------------------------------
|Note 1  | Accounting Change and Restatements of Financial Statements

We implemented a voluntary change in our method of accounting
for inventories, which is effected by a retroactive restatement
of our historical financial statements. In addition, we recently
identified errors in our accounting for leases and vendor
allowances, which required a restatement of our historical
financial statements.



| |                                      
| | -------------------------------------
| | Change in inventory accounting method

We historically used the last-in, first-out (LIFO)
method for accounting for inventories. Effective the fourth
quarter of fiscal 2004, we changed our method of determining the
cost of inventories to the first-in, first-out
(FIFO) method. We have applied this accounting
change retroactively by restating prior period financial
statements as required by Accounting Principles Board Opinion
No. 20, Accounting Changes.

Our inventory levels over the last five years have increased
modestly due to new store openings and growth. During the same
time, we were able to reduce the overall unit costs of our
inventories. In this environment, our LIFO method of accounting
was resulting in an increasing difference between the carrying
cost of inventories on our balance sheet and our current product
acquisition costs. The carrying cost on our balance sheet under
LIFO reflected the higher prices paid for inventories in prior
periods and also included higher costs paid for inventories
purchased in connection with business acquisitions the last of
which occurred in fiscal 1999. Since we do not expect the
pricing environment for most products we purchase to change
dramatically in the foreseeable future, this difference between
LIFO cost and replacement cost can be expected to continue and
possibly increase as we continue to pursue strategies to reduce
our product acquisition costs. Effective the fourth quarter of
fiscal 2004, we changed to the FIFO method of inventory
accounting which will result in reported inventory cost on our
balance sheet that approximates replacement costs, which we
believe is preferable to continuing to report our inventories at
the higher costs we experienced in prior years.

Although the primary effect of the change was a decrease in
inventory on our balance sheet, it also has a significant impact
on our determination of cost of sales because of differences in
unit costs and increases in the amount of vendor allowances and
inventory purchasing and handling costs that will remain in
inventory at period end under FIFO. As shown in the tables
below, the change had the effect of increasing our cost of sales
and reducing our gross profit in the fiscal years ended
February 1, 2004 and February 2, 2003. The change
increased our cost of sales approximately $3.4 million in
the most recent fiscal year ended January 30, 2005.



| |                             
| | ----------------------------
| | Lease accounting restatement

We operate in excess of 1,100 leased locations, primarily
consisting of retail stores but also including warehouses,
distribution centers and our corporate office facilities. We
recently identified accounting errors pertaining to the
evaluation of lease terms (thus impacting our amortization of
leasehold improvements), free

44



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

rent periods (i.e., rent holidays), straight-lining of minimum
escalating lease payments, the classification of landlord
incentives/allowances, and the treatment of costs incurred for
certain stores which are constructed and subsequently
transferred to our landlords. We have corrected these errors by
restating prior period financial statements.

We reevaluated our lease terms for our operating leases, which
resulted in a reduction to the useful life assumption for
depreciating leasehold improvements. We previously depreciated
leasehold improvements over the term of the lease which
consisted of the initial term and could include one renewal
option period but no more than 15 years in total. We now
include renewal option periods only if they are included in the
lease term as defined in Statement of Financial Accounting
Standards (SFAS) No. 13, Accounting for
Leases, as amended. The impact of this increased our
annual depreciation expense for the earlier years of the leases.

We previously recorded build-out allowances we received from
landlords as an offset to the amounts capitalized as leasehold
improvements. We are now recording such allowances as a deferred
rent liability with a related increase in recorded property
assets resulting in an increase to depreciation expense while
the amortization of the deferred rent liability reduces
operating rent expense over the lease term. This correction also
increases our reported capital expenditures (investing cash
flows) and our operating cash flows we report in our
Consolidated Statements of Cash Flows.

We identified a small number of stores where the extent of our
monetary involvement in the construction of the store (based on
the excess of our construction costs over the landlords
reimbursement to us of such costs) results in capitalization of
the construction costs as an asset and recording the landlord
reimbursement as construction debt under Emerging Issues Task
Force (EIFT) No. 97-10, The Effect of
Lessee Involvement in Asset Construction
(EITF 97-10).

We also identified situations where we did not straight-line
escalating rent or recognize rent for free rent periods. The net
effect of the required adjustments to address these errors
increased rent expenses in our historical financial statements.

The Companys overall cash flow was not impacted by these
corrections.



| |                              
| | -----------------------------
| | Vendor allowance restatements

We historically recognized estimated vendor allowances in a
systematic manner ratably over a performance period that ran
from October through September. This recognition period was
initially selected to match the benefits to be received with
costs the Company was incurring to perform promotional
activities required to earn the vendor allowances. We recently
reevaluated this accounting convention and concluded that the
recognition period should be corrected to a calendar year
because substantially all allowances are determined and
collected based on purchases from vendors in the calendar year.

We also recently identified vendor allowances recorded in fiscal
2003 that will not be collected and have determined that the
amounts were recorded because of errors in estimation in earlier
periods. In addition, we identified certain vendor allowances
recorded in improper periods. The majority of the corrections
were made to fiscal 2003 and 2002; however, corrections were
also made to fiscal 2000, 2001 and the first three quarters of
fiscal 2004. By year, we increased (decreased) our cost of sales
by $1.0 million for the first nine months of fiscal 2004;
$6.0 million in fiscal 2003; $8.9 million in fiscal
2002; ($1.7) million in fiscal 2001; and $1.2 million
in fiscal 2000. These errors were primarily the result of
imprecise estimates, bookkeeping errors and recording allowances
in the incorrect periods. We have applied the changes required
retroactively by restating prior period financial statements.

45



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                            
| | -------------------------------------------
| | Effect of restatements on retained earnings

The cumulative effect of the accounting restatements and the
retroactive accounting change increased our accumulated deficit
at February 3, 2002 by approximately $93.4 million and
consisted of approximately $66.3 million attributable to
the inventory method change, approximately $9.7 million for
the lease accounting errors and approximately $17.1 million
for the vendor allowance errors.

46



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The effect of the above mentioned errors and accounting change
on our previously reported February 1, 2004 consolidated
balance sheet is provided below ($ in thousands):

CONSOLIDATED BALANCE SHEET

|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |         |         | 
|----------------------------------------------- | -------------------- | ----------------------------- | --------- | ------- | ------- | ----------------- | ------- | ----- | ------ | --------- | ------- | ---------- | - | -------- | ------- | ------ | - |  | --------- | ------- | ------- |  | -------- | ------- | ------ | - | --------- | ------- | ------- | 
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |           
|                                                |                      |                               |           |         |         | Vendor Allowances |         |       |        |           |         |           
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |           
|                                                |                      |                               |           |         |         | Change in         |         |       |        |           |         | Inventory  |   |         
|                                                |                      | As Previously                 |           |         |         | Recognition       |         | Other |        | As        |         | Accounting |   | As      
|                                                |                      | Reported                      |           | Leases  |         | Period            |         | Items |        | Corrected |         | Change     |   | Restated
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |         
|                                               
|                                               
|                                               
|                                               
|ASSETS                                         
|                                               
|                                               
|                                               
|                                               
|Cash and cash equivalents                       |                      | $                             | 37,221    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 37,221    |         |         |  |          |         |        | $ | 37,221    |        
|                                               
|                                               
|                                               
|                                               
|Receivables, net of allowances                  |                      |                               | 136,523   |         |         |                   |         |       |        |           | (29,147 | )          |   |          | (15,444 | )      |   |  | 91,932    |         |         |  |          |         |        |   | 91,932    |        
|                                               
|                                               
|                                               
|                                               
|Inventories                                     |                      |                               | 666,263   |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 666,263   |         |         |  | (143,414 | )       |        |   | 522,849   |        
|                                               
|                                               
|                                               
|                                               
|Deferred income taxes                           |                      |                               | 787       |         |         |                   |         |       |        |           | 11,562  |            |   |          | 6,127   |        |   |  | 18,476    |         |         |  | 49,381   |         |        |   | 67,857    |        
|                                               
|                                               
|                                               
|                                               
|Prepaid expenses and other current assets       |                      |                               | 21,123    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 21,123    |         |         |  |          |         |        |   | 21,123    |        
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|                                                | Total current assets |                               |           | 861,917 |         |                   |         |       |        |           |         | (17,585    | ) |          |         | (9,317 | ) |  |           | 835,015 |         |  |          | (94,033 | )      |   |           | 740,982 |        
|                                               
|                                               
|                                               
|                                               
|Property and equipment, net                     |                      |                               | 124,813   |         |         |                   | 15,462  |       |        |           |         |            |   |          |         |        |   |  | 140,275   |         |         |  |          |         |        |   | 140,275   |        
|                                               
|                                               
|                                               
|                                               
|Leasehold interests, net                        |                      |                               | 12,278    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 12,278    |         |         |  |          |         |        |   | 12,278    |        
|                                               
|                                               
|                                               
|                                               
|Goodwill                                        |                      |                               | 127,069   |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 127,069   |         |         |  |          |         |        |   | 127,069   |        
|                                               
|                                               
|                                               
|                                               
|Other assets, net                               |                      |                               | 27,388    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 27,388    |         |         |  |          |         |        |   | 27,388    |        
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|Total assets                                    |                      | $                             | 1,153,465 |         |         |                   | 15,462  |       |        |           | (17,585 | )          |   |          | (9,317  | )      |   |  | 1,142,025 |         |         |  | (94,033  | )       |        | $ | 1,047,992 |        
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|                                               
|                                               
|                                               
|                                               
|LIABILITIES AND STOCKHOLDERS
    EQUITY       
|                                               
|                                               
|                                               
|                                               
|Accounts payable                                |                      | $                             | 177,150   |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 177,150   |         |         |  |          |         |        | $ | 177,150   |        
|                                               
|                                               
|                                               
|                                               
|Accrued payroll and related expenses            |                      |                               | 47,498    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 47,498    |         |         |  |          |         |        |   | 47,498    |        
|                                               
|                                               
|                                               
|                                               
|Accrued expenses and other current liabilities  |                      |                               | 49,617    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 49,617    |         |         |  |          |         |        |   | 49,617    |        
|                                               
|                                               
|                                               
|                                               
|Current maturities of long-term debt            |                      |                               | 2,550     |         |         |                   | 193     |       |        |           |         |            |   |          |         |        |   |  | 2,743     |         |         |  |          |         |        |   | 2,743     |        
|                                               
|                                               
|                                               
|                                               
|Current maturities of capital lease obligations |                      |                               | 10,240    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 10,240    |         |         |  |          |         |        |   | 10,240    |        
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|                                                |                      | Total current liabilities     |           |         | 287,055 |                   |         |       | 193    |           |         |            |   |          |         |        |   |  |           |         | 287,248 |  |          |         |        |   |           |         | 287,248 | 
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|Long-term debt                                  |                      |                               | 492,463   |         |         |                   | 6,263   |       |        |           |         |            |   |          |         |        |   |  | 498,726   |         |         |  |          |         |        |   | 498,726   |        
|                                               
|                                               
|                                               
|                                               
|Obligations under capital leases                |                      |                               | 15,017    |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 15,017    |         |         |  |          |         |        |   | 15,017    |        
|                                               
|                                               
|                                               
|                                               
|Deferred income taxes                           |                      |                               | 13,121    |         |         |                   | (8,727  | )     |        |           |         |            |   |          |         |        |   |  | 4,394     |         |         |  | (1,061   | )       |        |   | 3,333     |        
|                                               
|                                               
|                                               
|                                               
|Other liabilities                               |                      |                               | 14,251    |         |         |                   | 31,006  |       |        |           |         |            |   |          |         |        |   |  | 45,257    |         |         |  |          |         |        |   | 45,257    |        
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|                                                |                      | Total non-current liabilities |           |         | 534,852 |                   |         |       | 28,542 |           |         |            |   |          |         |        |   |  |           |         | 563,394 |  |          |         | (1,061 | ) |           |         | 562,333 | 
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|Common stock                                    |                      |                               | 465       |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 465       |         |         |  |          |         |        |   | 465       |        
|                                               
|                                               
|                                               
|                                               
|Additional paid-in capital                      |                      |                               | 466,576   |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | 466,576   |         |         |  |          |         |        |   | 466,576   |        
|                                               
|                                               
|                                               
|                                               
|Stockholder receivable                          |                      |                               | (73       | )       |         |                   |         |       |        |           |         |            |   |          |         |        |   |  | (73       | )       |         |  |          |         |        |   | (73       | )      
|                                               
|                                               
|                                               
|                                               
|Accumulated deficit                             |                      |                               | (135,410  | )       |         |                   | (13,273 | )     |        |           | (17,585 | )          |   |          | (9,317  | )      |   |  | (175,585  | )       |         |  | (92,972  | )       |        |   | (268,557  | )      
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|Total stockholders equity                      |                      |                               | 331,558   |         |         |                   | (13,273 | )     |        |           | (17,585 | )          |   |          | (9,317  | )      |   |  | 291,383   |         |         |  | (92,972  | )       |        |   | 198,411   |        
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        
|Total liabilities and stockholders equity      |                      | $                             | 1,153,465 |         |         |                   | 15,462  |       |        |           | (17,585 | )          |   |          | (9,317  | )      |   |  | 1,142,025 |         |         |  | (94,033  | )       |        | $ | 1,047,992 |        
|                                                |                      |                               |           |         |         |                   |         |       |        |           |         |            |   |          |         |        |   |  |           |         |         |  |          |         |        |   |           |        

47



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The effect of the above mentioned errors and accounting change
on our previously reported results of operations, cash flows and
accumulated deficit for fiscal years ended February 1, 2004
and February 2, 2003 is provided below ($ and shares in
thousands):

CONSOLIDATED STATEMENT OF OPERATIONS

for the fiscal year ended February 1, 2004


|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |        |         | 
|--------------------------------- | ------------------------------------------ | ---------------------------- | --------- | ------ | ------- | ----------------- | ------ | ----- | ----- | --------- | ------ | ---------- | - | -------- | ------ | ----- | - | - | --------- | ---- | ------- |  | ------- | ----- | - | - | --------- | ------ | ------- | 
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |           
|                                  |                                            |                              |           |        |         | Vendor Allowances |        |       |       |           |        |           
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |           
|                                  |                                            | As                           |           |        |         | Change in         |        |       |       |           |        | Inventory  |   |         
|                                  |                                            | Previously                   |           |        |         | Recognition       |        | Other |       | As        |        | Accounting |   | As      
|                                  |                                            | Reported                     |           | Leases |         | Period            |        | Items |       | Corrected |        | Change     |   | Restated
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |         
|Net sales                         |                                            | $                            | 1,578,056 |        |         |                   |        |       |       |           |        |            |   |          |        |       |   | $ | 1,578,056 |      |         |  |         |       |   | $ | 1,578,056 |       
|                                 
|                                 
|                                 
|                                 
|Cost of sales                     |                                            |                              | 829,900   |        |         |                   | 31     |       |       |           | 1,169  |            |   |          | 5,982  |       |   |   | 837,082   |      |         |  | 23,870  |       |   |   | 860,952   |       
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|Gross profit                      |                                            |                              | 748,156   |        |         |                   | (31    | )     |       |           | (1,169 | )          |   |          | (5,982 | )     |   |   | 740,974   |      |         |  | (23,870 | )     |   |   | 717,104   |       
|                                 
|                                 
|                                 
|                                 
|Other costs and expenses:         |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|                                 
|                                 
|                                 
|                                 
|                                  |                                            | Operating and administrative |           |        | 618,879 |                   |        |       | 1,053 |           |        |            |   |          |        |       |   |   |           |      | 619,932 |  |         |       |   |   |           |        | 619,932 | 
|                                 
|                                 
|                                 
|                                 
|                                  |                                            | Store closing costs          |           |        | 12,669  |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      | 12,669  |  |         |       |   |   |           |        | 12,669  | 
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|Operating profit                  |                                            |                              | 116,608   |        |         |                   | (1,084 | )     |       |           | (1,169 | )          |   |          | (5,982 | )     |   |   | 108,373   |      |         |  | (23,870 | )     |   |   | 84,503    |       
|                                 
|                                 
|                                 
|                                 
|Interest expense                  |                                            |                              | 50,991    |        |         |                   | 1,427  |       |       |           |        |            |   |          |        |       |   |   | 52,418    |      |         |  |         |       |   |   | 52,418    |       
|                                 
|                                 
|                                 
|                                 
|Loss on debt retirement           |                                            |                              | 49,494    |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   | 49,494    |      |         |  |         |       |   |   | 49,494    |       
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|Income (loss) before income taxes |                                            |                              | 16,123    |        |         |                   | (2,511 | )     |       |           | (1,169 | )          |   |          | (5,982 | )     |   |   | 6,461     |      |         |  | (23,870 | )     |   |   | (17,409   | )     
|                                 
|                                 
|                                 
|                                 
|Income tax expense (benefit)      |                                            |                              | 5,326     |        |         |                   | (987   | )     |       |           | (459   | )          |   |          | (2,351 | )     |   |   | 1,529     |      |         |  | (9,383  | )     |   |   | (7,854    | )     
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|Net income (loss)                 |                                            | $                            | 10,797    |        |         |                   | (1,524 | )     |       |           | (710   | )          |   |          | (3,631 | )     |   | $ | 4,932     |      |         |  | (14,487 | )     |   | $ | (9,555    | )     
|                                  |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|Basic earnings per share:         |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|                                 
|                                 
|                                 
|                                 
|                                  | Net income (loss) per share                |                              | $         | 0.24   |         |                   |        | (0.03 | )     |           |        | (0.02      | ) |          |        | (0.08 | ) |   |           | 0.11 |         |  |         | (0.32 | ) |   | $         | (0.21  | )      
|                                 
|                                 
|                                 
|                                 
|                                  | Shares used in computing per share amounts |                              |           | 45,658 |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           | 45,658 |        
|                                 
|                                 
|                                 
|                                 
|Diluted earnings per share:       |                                            |                              |           |        |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           |       
|                                 
|                                 
|                                 
|                                 
|                                  | Net income (loss) per share                |                              | $         | 0.23   |         |                   |        | (0.03 | )     |           |        | (0.02      | ) |          |        | (0.08 | ) |   |           | 0.10 |         |  |         | (0.31 | ) |   | $         | (0.21  | )      
|                                 
|                                 
|                                 
|                                 
|                                  | Shares used in computing per share amounts |                              |           | 45,964 |         |                   |        |       |       |           |        |            |   |          |        |       |   |   |           |      |         |  |         |       |   |   |           | 45,658 |        

48



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONSOLIDATED STATEMENT OF OPERATIONS

for the year ended February 2, 2003

|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |         | 
|--------------------------------- | ------------------------------------------ | ---------- | --------- | ------- |  | ----------------- | ------ | ----- | - | --------- | ---- | ---------- | - | ----------- | ------ | ----- | - | - | --------- | ------- |  |  | ------- | ----- | - | - | --------- | ------- | 
|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |           
|                                  |                                            |            |           |         |  | Vendor Allowances |        |       |   |           |      |           
|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |           
|                                  |                                            | As         |           |         |  | Change in         |        |       |   |           |      | Inventory  |   |            
|                                  |                                            | Previously |           |         |  | Recognition       |        | Other |   | As        |      | Accounting |   |            
|                                  |                                            | Reported   |           | Leases  |  | Period            |        | Items |   | Corrected |      | Change     |   | As Restated
|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |            
|Net sales                         |                                            | $          | 1,506,646 |         |  |                   |        |       |   |           |      |            |   |             |        |       |   | $ | 1,506,646 |         |  |  |         |       |   | $ | 1,506,646 |        
|                                 
|                                 
|                                 
|                                 
|Cost of sales                     |                                            |            | 806,461   |         |  |                   | 43     |       |   |           | 161  |            |   |             | 8,883  |       |   |   | 815,548   |         |  |  | 19,750  |       |   |   | 835,298   |        
|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |        
|Gross profit                      |                                            |            | 700,185   |         |  |                   | (43    | )     |   |           | (161 | )          |   |             | (8,883 | )     |   |   | 691,098   |         |  |  | (19,750 | )     |   |   | 671,348   |        
|                                 
|                                 
|                                 
|                                 
|Other costs and expenses:         |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |        
|                                 
|                                 
|                                 
|                                 
|                                  | Operating and administrative               |            |           | 592,630 |  |                   |        | 2,068 |   |           |      |            |   |             |        |       |   |   |           | 594,698 |  |  |         |       |   |   |           | 594,698 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Store closing costs                        |            |           | 5,026   |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           | 5,026   |  |  |         |       |   |   |           | 5,026   | 
|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |        
|Operating profit                  |                                            |            | 102,529   |         |  |                   | (2,111 | )     |   |           | (161 | )          |   |             | (8,883 | )     |   |   | 91,374    |         |  |  | (19,750 | )     |   |   | 71,624    |        
|                                 
|                                 
|                                 
|                                 
|Interest expense                  |                                            |            | 62,261    |         |  |                   | 1,283  |       |   |           |      |            |   |             |        |       |   |   | 63,544    |         |  |  |         |       |   |   | 63,544    |        
|                                 
|                                 
|                                 
|                                 
|Loss on debt retirement           |                                            |            | 6,008     |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   | 6,008     |         |  |  |         |       |   |   | 6,008     |        
|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |        
|Income (loss) before income taxes |                                            |            | 34,260    |         |  |                   | (3,394 | )     |   |           | (161 | )          |   |             | (8,883 | )     |   |   | 21,822    |         |  |  | (19,750 | )     |   |   | 2,072     |        
|                                 
|                                 
|                                 
|                                 
|Income tax expense (benefit)      |                                            |            | 12,448    |         |  |                   | (1,347 | )     |   |           | (64  | )          |   |             | (3,525 | )     |   |   | 7,512     |         |  |  | (7,836  | )     |   |   | (324      | )      
|                                  |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |        
|Net income (loss)                 |                                            | $          | 21,812    |         |  |                   | (2,047 | )     |   |           | (97  | )          |   |             | (5,358 | )     |   | $ | 14,310    |         |  |  | (11,914 | )     |   | $ | 2,396     |        
|                                 
|                                 
|                                 
|                                 
|Basic earnings per share:         |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |        
|                                 
|                                 
|                                 
|                                 
|                                  | Net income (loss) per share                |            | $         | 0.54    |  |                   |        | (0.05 | ) |           |      | (0.01      | ) |             |        | (0.13 | ) |   | $         | 0.35    |  |  |         | (0.29 | ) |   | $         | 0.06    | 
|                                 
|                                 
|                                 
|                                 
|                                  | Shares used in computing per share amounts |            |           | 40,635  |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           | 40,635  | 
|                                 
|                                 
|                                 
|                                 
|Diluted earnings per share:       |                                            |            |           |         |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           |        
|                                 
|                                 
|                                 
|                                 
|                                  | Net income (loss) per share                |            | $         | 0.54    |  |                   |        | (0.05 | ) |           |      | (0.01      | ) |             |        | (0.13 | ) |   | $         | 0.35    |  |  |         | (0.29 | ) |   | $         | 0.06    | 
|                                 
|                                 
|                                 
|                                 
|                                  | Shares used in computing per share amounts |            |           | 40,752  |  |                   |        |       |   |           |      |            |   |             |        |       |   |   |           |         |  |  |         |       |   |   |           | 40,752  | 

49



---



##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended February 1, 2004


|                                                                                                       |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |        |  
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------- | ---------- | -------- | ------- | - | ----------------- | ------ | ----- |  | --------- | ---- | ---------- |  | -------- | ------ | ----- |  | - | -------- | ------- | - | - | ------- | ------ |  | - | -------- | ------ | -
|                                                                                                       |                                                                     |            |          |         |   |                   |        |       |  |           |      |           
|                                                                                                       |                                                                     |            |          |         |   | Vendor Allowances |        |       |  |           |      |           
|                                                                                                       |                                                                     |            |          |         |   |                   |        |       |  |           |      |           
|                                                                                                       |                                                                     | As         |          |         |   | Change in         |        |       |  |           |      | Inventory  |  |         
|                                                                                                       |                                                                     | Previously |          |         |   | Recognition       |        | Other |  | As        |      | Accounting |  | As      
|                                                                                                       |                                                                     | Reported   |          | Leases  |   | Period            |        | Items |  | Corrected |      | Change     |  | Restated
|                                                                                                       |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |         
|Cash flows from operating activities:                                                                  |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Net income (loss)                                                                                      |                                                                     | $          | 10,797   |         |   | $                 | (1,524 | )     |  | $         | (710 | )          |  | $        | (3,630 | )     |  | $ | 4,933    |         |   | $ | (14,488 | )      |  | $ | (9,555   | )     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities: |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Depreciation and amortization of property
    and equipment                                            |                                                                     |            | 30,290   |         |   |                   | 4,333  |       |  |           |      |            |  |          |        |       |  |   | 34,623   |         |   |   |         |        |  |   | 34,623   |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Amortization and accretion of financing items                                                          |                                                                     |            | 3,634    |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | 3,634    |         |   |   |         |        |  |   | 3,634    |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Amortization of other items                                                                            |                                                                     |            | 3,943    |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | 3,943    |         |   |   |         |        |  |   | 3,943    |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Loss on disposal of property, equipment and other
    assets                                           |                                                                     |            | 722      |         |   |                   | 69     |       |  |           |      |            |  |          |        |       |  |   | 791      |         |   |   |         |        |  |   | 791      |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Premium paid on early retirement of debt                                                               |                                                                     |            | (39,176  | )       |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | (39,176  | )       |   |   |         |        |  |   | (39,176  | )     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Loss on debt retirement                                                                                |                                                                     |            | 49,494   |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | 49,494   |         |   |   |         |        |  |   | 49,494   |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Deferred income taxes                                                                                  |                                                                     |            | 2,864    |         |   |                   | (987   | )     |  |           | (459 | )          |  |          | (2,352 | )     |  |   | (934     | )       |   |   | (9,382  | )      |  |   | (10,316  | )     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Tax benefit relating to stock option exercises                                                         |                                                                     |            | 2,333    |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | 2,333    |         |   |   |         |        |  |   | 2,333    |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from interest rate swap termination                                                           |                                                                     |            | 6,031    |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | 6,031    |         |   |   |         |        |  |   | 6,031    |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Changes in operating assets and liabilities:                                                           |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Receivables                                                         |            |          | (15,557 | ) |                   |        |       |  |           |      | 1,169      |  |          |        | 5,982 |  |   |          | (8,406  | ) |   |         |        |  |   |          | (8,406 | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Inventories                                                         |            |          | (15,480 | ) |                   |        |       |  |           |      |            |  |          |        |       |  |   |          | (15,480 | ) |   |         | 23,870 |  |   |          | 8,390  |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Prepaid expenses and other current assets                           |            |          | (6,252  | ) |                   |        |       |  |           |      |            |  |          |        |       |  |   |          | (6,252  | ) |   |         |        |  |   |          | (6,252 | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Accounts payable                                                    |            |          | 3,393   |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          | 3,393   |   |   |         |        |  |   |          | 3,393  |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Accrued payroll, accrued expenses and other
    current liabilities |            |          | 13,266  |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          | 13,266  |   |   |         |        |  |   |          | 13,266 |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                       | Other operating activities                                          |            |          | 312     |   |                   |        | 73    |  |           |      |            |  |          |        |       |  |   |          | 385     |   |   |         |        |  |   |          | 385    |  
|                                                                                                       |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |       
|Net cash provided by (used in) operating
    activities                                                |                                                                     |            | 50,614   |         |   |                   | 1,964  |       |  |           |     |            |  |          |       |       |  |   | 52,578   |         |   |   |        |        |  |   | 52,578   |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Cash flows from investing activities:                                                                  |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Capital expenditures                                                                                   |                                                                     |            | (16,056  | )       |   |                   | (2,934 | )     |  |           |      |            |  |          |        |       |  |   | (18,990  | )       |   |   |         |        |  |   | (18,990  | )     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from sales of property and equipment and
    assets held for sale                             |                                                                     |            | 26       |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | 26       |         |   |   |         |        |  |   | 26       |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Other investing activities                                                                             |                                                                     |            | (3,187   | )       |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | (3,187   | )       |   |   |         |        |  |   | (3,187   | )     
|                                                                                                       |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |       
|Net cash provided by (used in) investing
    activities:                                               |                                                                     |            | (19,217  | )       |   |                   | (2,934 | )     |  |           |     |            |  |          |       |       |  |   | (22,151  | )       |   |   |        |        |  |   | (22,151  | )     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Cash flows from financing activities:                                                                  |                                                                     |            |          |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   |          |         |   |   |         |        |  |   |          |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Borrowings under senior credit facility                                                                |                                                                     |            | 561,000  |         |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | 561,000  |         |   |   |         |        |  |   | 561,000  |       
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Payments under senior credit facility                                                                  |                                                                     |            | (508,000 | )       |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | (508,000 | )       |   |   |         |        |  |   | (508,000 | )     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Payment of debt issuance costs                                                                         |                                                                     |            | (12,905  | )       |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | (12,905  | )       |   |   |         |        |  |   | (12,905  | )     
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Retirement of 12% senior notes                                                                         |                                                                     |            | (265,090 | )       |   |                   |        |       |  |           |      |            |  |          |        |       |  |   | (265,090 | )       |   |   |         |        |  |   | (265,090 | )     

50



---



##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                         |  |            |         |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  |         |   |  |  |   |  |  |   |         |  
|-------------------------------------------------------- |  | ---------- | ------- | ------ |  | ----------------- | ----- | ----- |  | --------- | - | ---------- |  | -------- | - |  |  |  | ------- | - |  |  | - |  |  | - | ------- | -
|                                                         |  |            |         |        |  |                   |       |       |  |           |   |           
|                                                         |  |            |         |        |  | Vendor Allowances |       |       |  |           |   |           
|                                                         |  |            |         |        |  |                   |       |       |  |           |   |           
|                                                         |  | As         |         |        |  | Change in         |       |       |  |           |   | Inventory  |  |         
|                                                         |  | Previously |         |        |  | Recognition       |       | Other |  | As        |   | Accounting |  | As      
|                                                         |  | Reported   |         | Leases |  | Period            |       | Items |  | Corrected |   | Change     |  | Restated
|                                                         |  |            |         |        |  |                   |       |       |  |           |   |            |  |         
|Borrowings under 7% senior subordinated notes            |  |            | 225,000 |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  | 225,000 |   |  |  |   |  |  |   | 225,000 |  
|                                                        
|                                                        
|                                                        
|                                                        
|Partial retirement of 11% senior
    subordinated notes  |  |            | (9,547  | )      |  |                   |       |       |  |           |   |            |  |          |   |  |  |  | (9,547  | ) |  |  |   |  |  |   | (9,547  | )
|                                                        
|                                                        
|                                                        
|                                                        
|Payments on capital lease obligations                    |  |            | (16,153 | )      |  |                   |       |       |  |           |   |            |  |          |   |  |  |  | (16,153 | ) |  |  |   |  |  |   | (16,153 | )
|                                                        
|                                                        
|                                                        
|                                                        
|Proceeds from seller financing arrangements              |  |            |        |        |  |                   | 1,120 |       |  |           |   |            |  |          |   |  |  |  | 1,120   |   |  |  |   |  |  |   | 1,120   |  
|                                                        
|                                                        
|                                                        
|                                                        
|Payments on seller financing arrangements                |  |            |        |        |  |                   | (150  | )     |  |           |   |            |  |          |   |  |  |  | (150    | ) |  |  |   |  |  |   | (150    | )
|                                                        
|                                                        
|                                                        
|                                                        
|Proceeds from exercise of stock options                  |  |            | 15,955  |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  | 15,955  |   |  |  |   |  |  |   | 15,955  |  
|                                                        
|                                                        
|                                                        
|                                                        
|Proceeds from repayment of stockholder receivable        |  |            | 269     |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  | 269     |   |  |  |   |  |  |   | 269     |  
|                                                        
|                                                        
|                                                        
|                                                        
|Other financing activities                               |  |            | (224    | )      |  |                   |       |       |  |           |   |            |  |          |   |  |  |  | (224    | ) |  |  |   |  |  |   | (224    | )
|                                                         |  |            |         |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  |         |   |  |  |   |  |  |   |         |  
|Net cash used in financing activities:                   |  | $          | (9,695  | )      |  |                   | 970   |       |  |           |  |            |  |          |  |  |  |  | (8,725  | ) |  |  |  |  |  | $ | (8,725  | )
|                                                        
|                                                        
|                                                        
|                                                        
|Net increase (decrease) in cash and cash
    equivalents |  |            | 21,702  |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  |         |   |  |  |   |  |  |   | 21,702  |  
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and cash equivalents beginning of period            |  |            | 15,519  |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  |         |   |  |  |   |  |  |   | 15,519  |  
|                                                         |  |            |         |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  |         |   |  |  |   |  |  |   |         |  
|Cash and cash equivalents, end of period                 |  | $          | 37,221  |        |  |                   |       |       |  |           |   |            |  |          |   |  |  |  |         |   |  |  |   |  |  | $ | 37,221  |  

51



---



##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended February 2, 2003


|                                                                                                       |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |          |   |  |  |         |   |  |   |          |  
|------------------------------------------------------------------------------------------------------ |  | ---------- | -------- | ------ |  | ----------------- | ------ | ----- |  | --------- | --- | ---------- |  | -------- | ------ | - |  |  | -------- | - |  |  | ------- | - |  | - | -------- | -
|                                                                                                       |  |            |          |        |  |                   |        |       |  |           |     |           
|                                                                                                       |  |            |          |        |  | Vendor Allowances |        |       |  |           |     |           
|                                                                                                       |  |            |          |        |  |                   |        |       |  |           |     |           
|                                                                                                       |  | As         |          |        |  | Change in         |        |       |  |           |     | Inventory  |  |         
|                                                                                                       |  | Previously |          |        |  | Recognition       |        | Other |  | As        |     | Accounting |  | As      
|                                                                                                       |  | Reported   |          | Leases |  | Period            |        | Items |  | Corrected |     | Change     |  | Restated
|                                                                                                       |  |            |          |        |  |                   |        |       |  |           |     |            |  |         
|Cash flows from operating activities:                                                                  |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |          |   |  |  |         |   |  |   |          |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Net income (loss)                                                                                      |  | $          | 21,812   |        |  |                   | (1,940 | )     |  |           | (98 | )          |  |          | (5,391 | ) |  |  | 14,383   |   |  |  | (11,987 | ) |  | $ | 2,396    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities: |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |          |   |  |  |         |   |  |   |          |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Depreciation and amortization of property and
    equipment                                            |  |            | 31,746   |        |  |                   | 4,587  |       |  |           |     |            |  |          |        |   |  |  | 36,333   |   |  |  |         |   |  |   | 36,333   |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Amortization and accretion of financing items                                                          |  |            | 6,194    |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 6,194    |   |  |  |         |   |  |   | 6,194    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Amortization of other items                                                                            |  |            | 3,820    |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 3,820    |   |  |  |         |   |  |   | 3,820    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Losses on disposal of property, equipment and
    other assets                                         |  |            | 901      |        |  |                   | 42     |       |  |           |     |            |  |          |        |   |  |  | 943      |   |  |  |         |   |  |   | 943      |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Premium paid on early retirement of debt                                                               |  |            | (4,368   | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (4,368   | ) |  |  |         |   |  |   | (4,368   | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Loss on debt retirement                                                                                |  |            | 6,008    |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 6,008    |   |  |  |         |   |  |   | 6,008    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Loss on sale of stores                                                                                 |  |            | 847      |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 847      |   |  |  |         |   |  |   | 847      |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Deferred income taxes                                                                                  |  |            | 12,927   |        |  |                   | (1,454 | )     |  |           | (63 | )          |  |          | (3,492 | ) |  |  | 7,918    |   |  |  | (7,763  | ) |  |   | 155      |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Change in operating assets and liabilities:                                                            |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |         |   |  |  |         |   |  |   |          |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Receivables                                                                                            |  |            | (36,175  | )      |  |                   |        |       |  |           | 161 |            |  |          | 8,883  |   |  |  | (27,131  | ) |  |  |         |   |  |   | (27,131  | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Inventories                                                                                            |  |            | (34,827  | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (34,827  | ) |  |  | 19,750  |   |  |   | (15,077  | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Prepaid expenses and other current assets                                                              |  |            | 4,976    |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 4,976    |   |  |  |         |   |  |   | 4,976    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Accounts payable                                                                                       |  |            | 16,473   |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 16,473   |   |  |  |         |   |  |   | 16,473   |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Accrued payroll, accrued expenses, and other
    current liabilities                                   |  |            | 6,715    |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 6,715    |   |  |  |         |   |  |   | 6,715    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Other operating activities                                                                             |  |            | (1,130   | )      |  |                   | (600   | )     |  |           |     |            |  |          |        |   |  |  | (1,730   | ) |  |  |         |   |  |   | (1,730   | )
|                                                                                                       |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |          |   |  |  |         |   |  |   |          |  
|Net cash provided by operating activities                                                              |  |            | 35,919   |        |  |                   | 635    |       |  |           |    |            |  |          |       |   |  |  | 36,554   |   |  |  |        |   |  |   | 36,554   |  
|Cash flows from investing activities                                                                   |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |          |   |  |  |         |   |  |   |          |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Capital expenditures                                                                                   |  |            | (9,573   | )      |  |                   | (550   | )     |  |           |     |            |  |          |        |   |  |  | (10,123  | ) |  |  |         |   |  |   | (10,123  | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from sales of property and equipment and
    assets held for sale                             |  |            | 2,188    |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 2,188    |   |  |  |         |   |  |   | 2,188    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from sales of stores                                                                          |  |            | 4,217    |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 4,217    |   |  |  |         |   |  |   | 4,217    |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Other investing activities                                                                             |  |            | (3,384   | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (3,384   | ) |  |  |         |   |  |   | (3,384   | )
|                                                                                                       |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |          |   |  |  |         |   |  |   |          |  
|Net cash used in investing activities:                                                                 |  |            | (6,552   | )      |  |                   | (550   | )     |  |           |    |            |  |          |       |   |  |  | (7,102   | ) |  |  |        |   |  |   | (7,102   | )
|Cash flows from financing activities                                                                   |  |            |          |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  |          |   |  |  |         |   |  |   |          |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Borrowings under senior credit facility                                                                |  |            | 297,000  |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 297,000  |   |  |  |         |   |  |   | 297,000  |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Payments under senior credit facility                                                                  |  |            | (322,000 | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (322,000 | ) |  |  |         |   |  |   | (322,000 | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Payment of debt issuance costs                                                                         |  |            | (1,483   | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (1,483   | ) |  |  |         |   |  |   | (1,483   | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Partial retirement of 11% senior subordinated
    notes                                                |  |            | (71,703  | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (71,703  | ) |  |  |         |   |  |   | (71,703  | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Payments on capital lease obligations                                                                  |  |            | (10,167  | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (10,167  | ) |  |  |         |   |  |   | (10,167  | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Issuance of common stock in public offering                                                            |  |            | 82,540   |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 82,540   |   |  |  |         |   |  |   | 82,540   |  
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Underwriters discount and other offering costs                                                         |  |            | (4,398   | )      |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | (4,398   | ) |  |  |         |   |  |   | (4,398   | )
|                                                                                                      
|                                                                                                      
|                                                                                                      
|                                                                                                      
|Proceeds from exercise of stock options                                                                |  |            | 168      |        |  |                   |        |       |  |           |     |            |  |          |        |   |  |  | 168      |   |  |  |         |   |  |   | 168      |  

52



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                         |  |            |         |        |  |                   |     |       |  |           |  |            |  |          |  |  |  |  |         |   |  |  |  |  |  |                    |         |  
|-------------------------------------------------------- |  | ---------- | ------- | ------ |  | ----------------- | --- | ----- |  | --------- |  | ---------- |  | -------- |  |  |  |  | ------- | - |  |  |  |  |  | ------------------ | ------- | -
|                                                         |  |            |         |        |  |                   |     |       |  |           |  |           
|                                                         |  |            |         |        |  | Vendor Allowances |     |       |  |           |  |           
|                                                         |  |            |         |        |  |                   |     |       |  |           |  |           
|                                                         |  | As         |         |        |  | Change in         |     |       |  |           |  | Inventory  |  |         
|                                                         |  | Previously |         |        |  | Recognition       |     | Other |  | As        |  | Accounting |  | As      
|                                                         |  | Reported   |         | Leases |  | Period            |     | Items |  | Corrected |  | Change     |  | Restated
|                                                         |  |            |         |        |  |                   |     |       |  |           |  |            |  |         
|Loans to stockholder                                     |  |            | (125    | )      |  |                   |     |       |  |           |  |            |  |          |  |  |  |  | (125    | ) |  |  |  |  |  |                    | (125    | )
|                                                        
|                                                        
|                                                        
|                                                        
|Proceeds from seller financing arrangements              |  |            |        |        |  |                   |    |       |  |           |  |            |  |          |  |  |  |  |        |   |  |  |  |  |  |                    |        |  
|                                                        
|                                                        
|                                                        
|                                                        
|Payments on seller financing arrangements                |  |            |        |        |  |                   | (85 | )     |  |           |  |            |  |          |  |  |  |  | (85     | ) |  |  |  |  |  |                    | (85     | )
|                                                        
|                                                        
|                                                        
|                                                        
|Proceeds from repayment of stockholder receivable        |  |            | 334     |        |  |                   |     |       |  |           |  |            |  |          |  |  |  |  | 334     |   |  |  |  |  |  |                    | 334     |  
|                                                        
|                                                        
|                                                        
|                                                        
|Other financing activities                               |  |            | (98     | )      |  |                   |     |       |  |           |  |            |  |          |  |  |  |  | (98     | ) |  |  |  |  |  |                    | (98     | )
|                                                         |  |            |         |        |  |                   |     |       |  |           |  |            |  |          |  |  |  |  |         |   |  |  |  |  |  |                    |         |  
|Net cash provided by (used in) financing
    activities: |  | $          | (29,932 | )      |  |                   | (85 | )     |  |           |  |            |  |          |  |  |  |  | (30,017 | ) |  |  |  |  |  | $                  | (30,017 | )
|                                                         |  |            |         |        |  |                   |     |       |  |           |  |            |  |          |  |  |  |  |         |   |  |  |  |  |  |                    |         |  
|Net increase (decrease) in cash and cash
    equivalents |  |            | (565    | )      |  |                   |     |       |  |           |  |            |  |          |  |  |  |  |         |   |  |  |  |  |  |                    | (565    | )
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and cash equivalents beginning of period            |  | 16,084 $   | 15,519  |        |  |                   |     |       |  |           |  |            |  |          |  |  |  |  |         |   |  |  |  |  |  | 16,084 --------- $ | 15,519  |  
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and cash equivalents, end of period                 |  |            |         |        |  |                   |     |       |  |           |  |            |  |          |  |  |  |  |         |   |  |  |  |  |  |                    |         |  
|                                                         |  |            |         |        |  |                   |     |       |  |           |  |            |  |          |  |  |  |  |         |   |  |  |  |  |  |                    |         |  



|         |                                           
|-------- | ------------------------------------------
|Note 2  | Summary of Significant Accounting Policies



| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the accounts of
CSK Auto Corporation and Auto for all years presented. In
addition, the consolidated financial statements include the
accounts of the following wholly-owned subsidiaries of Auto for
the periods indicated:



| |   |                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Automotive Information Systems, Inc. (AIS), a
    provider of diagnostic vehicle repair information. The accounts
    were included through the sale of all of our issued and
    outstanding capital stock of AIS on January 21, 2005 to
    Mobile Productivity, Inc. for consideration with a fair value
    which approximated our investment.
|
| |  | CSKAUTO.COM, Inc. (Auto.com), which previously
    operated our web site that sells automotive aftermarket parts
    and accessories that is now operated by PartsAmerica.com.                                                                                                                                                                    

All significant intercompany balances and transactions have been
eliminated in consolidation.



| |                      
| | ---------------------
| | Basis of Presentation

As more fully explained in Note 9, bank borrowings by Auto
are guaranteed by the Company, which guarantee is full and
unconditional. Auto.com (the Subsidiary Guarantor) has also
jointly and severally guaranteed such debt on a full and
unconditional basis. CSK Auto Corporation is a holding company
and has no other direct subsidiaries or independent assets or
operations. The Subsidiary Guarantor is a minor subsidiary and
has no significant independent operations. Summarized financial
statements and other disclosures concerning each of Auto and the
Subsidiary Guarantor are not presented because management

53



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

believes that they are not material to investors. The
consolidated amounts in the accompanying financial statements
are representative of the combined guarantor and issuer.

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



| |            
| | -----------
| | Fiscal Year

Our fiscal year end is on the Sunday nearest to January 31 of
the following calendar year. The fiscal year ended
January 30, 2005 (fiscal 2004), fiscal year
ended February 1, 2004 (fiscal 2003) and the
fiscal year ended February 2, 2003 (fiscal
2002) each consisted of 52 weeks.



| |                    
| | -------------------
| | Revenue Recognition

We recognize sales upon the delivery of products to our
customers, which generally occurs at our retail store locations.
For certain commercial customers, we also deliver products to
customer locations. All retail and commercial sales are final
upon delivery of products. However, as a convenience to the
customer and as typical of most retailers, we will accept
merchandise returns. We generally limit the period of time
within which products may be returned to 30 days and
require returns to be accompanied by original packaging and a
sales receipt. Net sales presented in the accompanying financial
statements are reduced for sales returns.

Our vendors are primarily responsible for warranty claims. Our
net costs relative to merchandise and service warranties are not
material.



| |                 
| | ----------------
| | Cash Equivalents

Cash equivalents consist of highly liquid investments with
maturities of three months or less when purchased.



| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments

Due to their short-term nature, the carrying value of our cash
and cash equivalents, receivables and short-term borrowings
approximate fair value. The fair values of long-term debt and
derivative financial instruments are disclosed in Note 17.



| |                                 
| | --------------------------------
| | Derivative Financial Instruments

Our fixed to floating interest rate swap agreement is accounted
for in accordance with SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended,
and is recorded on the balance sheet at its fair value. Changes
in the fair value of the swap and the hedged item are recognized
currently in earnings. Our swap meets the criteria to assume no
hedge ineffectiveness. The fair value of our derivative was
determined from current market prices. See Note 10.



| |            
| | -----------
| | Receivables

Receivables are primarily comprised of amounts due from vendors
for rebates or allowances and amounts due from commercial sales
customers. We record an estimated provision for bad debts based
on a percentage of sales and review the allowance quarterly for
adequacy. Specific accounts are written off against the
allowance when management determines the account is
uncollectible.

54



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially subject us to
concentration of credit risk consist principally of cash and
cash equivalents and trade receivables. As of January 30,
2005, we had cash and cash equivalents on deposit with a major
financial institution that were in excess of FDIC insured
limits. Historically, we have not experienced any loss of our
cash and cash equivalents due to such concentration of credit
risk.

We do not hold collateral to secure payment of our trade
accounts receivable. However, management performs ongoing credit
evaluations of our customers financial condition and
provides an allowance for estimated potential losses. Exposure
to credit loss is limited to the carrying amount.



| |                                    
| | -----------------------------------
| | Vendor allowances and Cost of Sales

Cost of sales includes product cost, net of earned vendor
rebates, discounts and allowances. We recognize vendor rebates,
discounts and allowances as a reduction of our cost of inventory
as it is purchased and then in cost of sales as inventory is
sold. Certain of our agreements have several year terms, thus
requiring recognition over an extended period.

In March 2003, the EITF reached consensus on certain matters
discussed in EITF 02-16, Accounting by a Customer
(including a Reseller) for Certain Consideration Received from a
Vendor. EITF 02-16 states that allowances
provided by our vendors are presumed to be a reduction in the
costs of purchasing inventories (to be recognized in inventory
and cost of sales), except for that portion that is a
reimbursement for costs incurred by us to sell the vendors
products. In order to qualify as a reimbursement, the costs must
be specific, identifiable and incremental, to be recognized as a
reduction to operating and administrative expenses. Under
previous accounting guidance, we accounted for all
non-performance based vendor allowances as a reduction of
inventory cost and allocated performance based vendor allowances
as a reduction of advertising expense or cost of goods sold, as
appropriate, in the period the expense was incurred. During the
first quarter of fiscal 2003, we adopted the provisions of
EITF 02-16 and implemented a policy of considering all
cooperative advertising arrangements and other vendor allowances
to be a reduction of product costs, unless we are specifically
required to substantiate costs incurred to the vendor and do so
in the normal course of business. For fiscal 2002, vendor
allowances totaling $19.2 million were classified as a
reduction to advertising expense (in operating and
administrative expense) rather than as a reduction to cost of
sales as currently required by EITF 02-16. The change in
accounting principle had no impact on cash flow.



| |            
| | -----------
| | Inventories

Inventories are valued at the lower of cost or market, cost
being determined utilizing the First-in, First-out
(FIFO) method. We changed our inventory valuation
method from Last-in, First-out (LIFO) to FIFO
effective in the fourth quarter of fiscal 2004. See Note 1
for an explanation of the change. In most instances, we retain
the ability to return damaged, obsolete and excess merchandise
inventory to our vendors. In situations were we do not have a
right to return (generally for certain import products), we may
from time to time record an allowance representing an estimated
loss for the difference between the cost of any damaged,
obsolete or excess product and the estimated retail selling
price. Inventory levels and margins earned on all products are
monitored monthly. Quarterly, we make an assessment if we expect
to sell any significant amount of inventory below cost and, if
so, estimate the amount of allowance to record. In the fourth
quarter of fiscal 2004, we recorded a charge of approximately
$1.5 million for inventory obsolescence.

55



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

At each balance sheet reporting date, we adjust our inventory
carrying balances by the capitalization of certain operating and
overhead administrative costs associated with purchasing and
handling of inventory, an estimation of vendor allowances that
remain in ending inventory at period end, and allowances for
inventory shrinkage and obsolescence as follows:

|                                  |  |                 |       |             |  |   |       |  
|--------------------------------- |  | --------------- | ----- | ----------- |  | - | ----- | -
|                                  |  | January 30,     |       | February 1,
|                                  |  | 2005            |       | 2004       
|                                  |  |                 |       |            
|                                  |  |                
|                                  |  | ($ in millions)
|                                 
|                                 
|                                 
|                                 
|FIFO cost                         |  | $               | 569.6 |             |  | $ | 558.9 |  
|                                 
|                                 
|                                 
|                                 
|Administrative and overhead costs |  |                 | 43.5  |             |  |   | 42.3  |  
|                                 
|                                 
|                                 
|                                 
|Vendor allowances                 |  |                 | (60.1 | )           |  |   | (65.0 | )
|                                 
|                                 
|                                 
|                                 
|Shrinkage                         |  |                 | (13.1 | )           |  |   | (13.4 | )
|                                 
|                                 
|                                 
|                                 
|Obsolescence                      |  |                 | (1.5  | )           |  |   |      |  
|                                  |  |                 |       |             |  |   |       |  
|Net inventory                     |  | $               | 538.4 |             |  | $ | 522.8 |  
|                                  |  |                 |       |             |  |   |       |  



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment, including purchased software, are
recorded at cost. Depreciation and amortization are computed for
financial reporting purposes utilizing the straight-line method
over the estimated useful lives of the related assets, which
range from 3 to 25 years, or for leasehold improvements and
property under capital leases, the shorter of the lease term or
the economic life. Maintenance and repairs are charged to
earnings when incurred. When property and equipment is retired
or sold, the net book value of the asset, reduced by any
proceeds, is charged to gain or loss. For stores in which we are
a seller-lessee and do not recover substantially all
construction costs, we record the costs in property and
equipment and amounts funded by the lessor are recorded as a
debt obligation in the accompanying balance sheet.



| |                  
| | -----------------
| | Lease Obligations

We lease all but one of our store locations in addition to our
distribution centers, office space and certain equipment and
vehicles. At the inception of the lease, we evaluate each
agreement to determine whether the lease will be accounted for
as an operating or capital lease. The term of the lease used for
this evaluation includes renewal option periods only in
instances in which the exercise of the renewal option can be
reasonably assured and failure to exercise such option would
result in an economic penalty. Certain leases contain rent
escalation clauses and rent holidays, which are recorded on a
straight-line basis over the lease term with the difference
between the rent paid and the straight-line rent recorded as a
deferred rent liability. Lease incentive payments received from
landlords are recorded as deferred rent liabilities and are
amortized on a straight-line basis over the lease term as a
reduction in rent. Certain leases contain provisions that
require additional rental payments based upon a specified sales
volume, which are accrued as the liabilities are incurred.



| |                                    
| | -----------------------------------
| | Internal Software Development Costs

Certain internal software development costs are capitalized and
amortized over the life of the related software. Amounts
capitalized during fiscal 2004, 2003 and 2002 were
$2.9 million, $3.3 million and $2.8 million,
respectively. Accumulated amortization as of January 30,
2005 and February 1, 2004 was $3.9 million and
$6.4 million, respectively.



| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, Goodwill and
Other Intangible Assets, goodwill is no longer amortized,
but instead is assessed for impairment at least annually. Other
intangible assets consist of leasehold interests representing
the discounted net present value of the excess of the fair
rental value over the respective

56



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

contractual rent of facilities under operating leases acquired
in business combinations. Amortization expense is computed on a
straight-line basis over the respective lease terms. See
Note 8 for the impact of this amortization on the statement
of operations.



| |                                      
| | -------------------------------------
| | Impairment of Other Long-Lived Assets

Long-lived assets and identifiable intangible assets to be held
and used or disposed of are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. In the event assets
are impaired, losses are recognized based on the excess carrying
amount over the estimated fair value of the asset. Assets to be
disposed of are reported at the lower of the carrying amount or
the fair market value less selling costs.



| |                    
| | -------------------
| | Store Closing Costs

We provide an allowance for estimated costs to be incurred in
connection with store closures and losses on the disposal of
store-related assets, which is net of anticipated, sublease
income. Prior to January 1, 2003, such costs were
recognized when a store was specifically identified, costs could
be estimated and closure was planned to be completed within the
next twelve months. On January 1, 2003, we adopted the
provisions of SFAS No. 146, Accounting for Costs
Associated with Exit of Disposal Activities. See
Note 14.



| |            
| | -----------
| | Advertising

Advertising costs are expensed as incurred. In connection with
our adoption of EITF 02-16 in the first quarter of fiscal
2003, we implemented a policy whereby all cooperative
advertising arrangements would be considered a reduction of
product costs, unless we are specifically required to
substantiate costs incurred to the vendor and do so in the
normal course of business. Advertising expense for fiscal 2004
and 2003 totaled $49.9 million and $48.0 million,
respectively. Advertising expense for fiscal 2002 totaled
$25.6 million, net of vendor funded cooperative advertising.



| |                 
| | ----------------
| | Preopening Costs

Preopening expenses, which consist primarily of payroll and
occupancy costs, are expensed as incurred.



| |                        
| | -----------------------
| | Self-Insurance Reserves

We purchase third-party insurance for workers
compensation, automobile, product and general liability claims
that exceed a certain dollar threshold. However, we are
responsible for the payment of claims under these insured
limits. In estimating the obligation associated with incurred
losses, we utilize loss development factors prepared by an
independent third-party actuary. These development factors
utilize historical data to project the future development of
incurred losses. Loss estimates are adjusted based upon actual
claims settlements and reported claims. Our self-insurance
reserves approximated $19.4 million and $17.6 million
at January 30, 2005 and February 1, 2004,
respectively, and are included with current liabilities in the
accompanying Consolidated Balance Sheets.



| |             
| | ------------
| | Income Taxes

Deferred income taxes are recognized for the tax consequences in
future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts (temporary
differences) at each year-end based on enacted tax laws and
statutory rates applicable to the period in which the temporary
differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized. Income tax
expense includes both taxes payable for the period and the
change during the period in deferred tax assets and liabilities.
Income tax expense reflects

57



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

our best estimates and assumptions regarding, among other
things, the level of future taxable income, interpretation of
the tax laws, and tax planning. Future changes in tax laws,
changes in projected levels of taxable income, and tax planning
could affect the effective tax rate and tax balances recorded.



| |                         
| | ------------------------
| | Stock-Based Compensation

We have stock-based employee compensation plans, which are
described more fully in Note 12. We continue to apply the
recognition and measurement provisions of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees and related interpretations in
accounting for those plans. No material stock-based employee
compensation expense is reflected in net income (loss) for
fiscal 2004, 2003 and 2002 as the intrinsic value of all options
granted under those plans was zero. During fiscal 2004, we
issued restricted stock with a fair value of $1.2 million
to our executive officers and other associates pursuant to our
CSK Auto Corporation 2004 Stock and Incentive Plan. Compensation
expense for this restricted stock will be charged to expense
ratably over the three-year vesting period. During fiscal 2004,
$0.1 million was recorded as compensation expense related
to these grants. The following table illustrates the effect on
net income (loss) and earnings (loss) per share if we had
applied the fair value recognition provisions of
SFAS No. 123 Accounting for Stock-Based
Compensation ($ in thousands except per share amounts):

|                                                                                                                                                   |             |             |        |            |  |            |         |       |   |   |        |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ------ | ---------- |  | ---------- | ------- | ----- | - | - | ------ | ----- | -
|                                                                                                                                                   |             |            
|                                                                                                                                                   |             | Fiscal Year
|                                                                                                                                                   |             |            
|                                                                                                                                                   |             | 2004        |        | 2003       |  | 2002      
|                                                                                                                                                   |             |             |        |            |  |           
|                                                                                                                                                   |             |             |        | (Restated) |  | (Restated)
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|Net income (loss)  as reported                                                                                                                    |             | $           | 36,881 |            |  | $          | (9,555  | )     |   | $ | 2,396  |      
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|Add: Stock-based employee compensation expense
    included in reported net income, net of related income taxes                                    |             |             | 89     |            |  |            |        |       |   |   |       |      
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|Less: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related income taxes |             |             | (1,079 | )          |  |            | (725    | )     |   |   | (3,372 | )    
|                                                                                                                                                   |             |             |        |            |  |            |         |       |   |   |        |      
|Net income (loss)  pro forma                                                                                                                      |             | $           | 35,891 |            |  | $          | (10,280 | )     |   | $ | (976   | )    
|                                                                                                                                                   |             |             |        |            |  |            |         |       |   |   |        |      
|Earnings (loss) per share  basic:                                                                                                                 |             |             |        |            |  |            |         |       |   |   |        |      
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | As reported |             | $      | 0.81       |  |            | $       | (0.21 | ) |   | $      | 0.06  |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Pro forma   |             |        | 0.79       |  |            |         | (0.23 | ) |   |        | (0.02 | )
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|Earnings (loss) per share  diluted:                                                                                                               |             |             |        |            |  |            |         |       |   |   |        |      
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | As reported |             | $      | 0.80       |  |            | $       | (0.21 | ) |   | $      | 0.06  |  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                   | Pro forma   |             |        | 0.78       |  |            |         | (0.23 | ) |   |        | (0.02 | )

The fair value of each option grant is estimated on the date of
grant using the Black Scholes option pricing model and is based
upon the following assumptions:

|                         |  |             |              |      |  |      |              |  |  |  |              | 
|------------------------ |  | ----------- | ------------ | ---- |  | ---- | ------------ |  |  |  | ------------ | 
|                         |  |            
|                         |  | Fiscal Year
|                         |  |            
|                         |  | 2004        |              | 2003 |  | 2002
|                         |  |             |              |      |  |     
|Dividend yield           |  |             | 0%           |      |  |      | 0%           |  |  |  | 0%           | 
|                        
|                        
|                        
|                        
|Risk free interest rate  |  |             | 3.07 - 3.82% |      |  |      | 2.54 - 3.25% |  |  |  | 3.04 - 4.56% | 
|                        
|                        
|                        
|                        
|Expected life of options |  |             | 6 years      |      |  |      | 6 years      |  |  |  | 6 years      | 
|                        
|                        
|                        
|                        
|Expected volatility      |  |             | 27% - 36%    |      |  |      | 22% - 32%    |  |  |  | 46%          | 

58



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                          
| | -------------------------
| | Earnings (Loss) per Share

SFAS No. 128 Earnings Per Share,
(EPS) requires earnings per share to be computed and
reported as both basic EPS and diluted EPS. Basic EPS is
computed by dividing net income by the weighted average number
of common shares outstanding for the period. Diluted EPS is
computed by dividing net income by the weighted average number
of common shares and dilutive common stock equivalents
(convertible notes and interest on the notes, stock awards and
stock options) outstanding during the period. Dilutive EPS
reflects the potential dilution that could occur if options to
issue common stock were exercised into common stock. The
following is a reconciliation of the number of shares
(denominator) used in the basic and diluted EPS
computations:

|                                              |  |                   |        |             |  |             |        |  |  |  |        | 
|--------------------------------------------- |  | ----------------- | ------ | ----------- |  | ----------- | ------ |  |  |  | ------ | 
|                                              |  |                  
|                                              |  | Fiscal Year Ended
|                                              |  |                  
|                                              |  | January 30,       |        | February 1, |  | February 2,
|                                              |  | 2005              |        | 2004        |  | 2003       
|                                              |  |                   |        |             |  |            
|                                              |  |                  
|                                              |  | (In thousands)   
|                                             
|                                             
|                                             
|                                             
|Weighted average shares outstanding (basic)   |  |                   | 45,713 |             |  |             | 45,658 |  |  |  | 40,635 | 
|                                             
|                                             
|                                             
|                                             
|Effects of dilutive securities                |  |                   | 289    |             |  |             |       |  |  |  | 117    | 
|                                              |  |                   |        |             |  |             |        |  |  |  |        | 
|Weighted average shares outstanding (diluted) |  |                   | 46,002 |             |  |             | 45,658 |  |  |  | 40,752 | 
|                                              |  |                   |        |             |  |             |        |  |  |  |        | 

Options to purchase approximately 0.4 million,
0.5 million and 3.8 million shares of common stock
were not included in our computation of diluted earnings per
share for fiscal years 2004, 2003 and 2002, respectively,
because they would have been anti-dilutive.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.



|         |                                 
|-------- | --------------------------------
|Note 3  | Recent Accounting Pronouncements

In December 2004, the FASB issued revised
SFAS No. 123R, Share-Based Payment.
SFAS No. 123R sets accounting requirements for
share-based compensation to employees and requires
companies to recognize in the income statement the grant-date
fair value of stock options and other equity-based compensation.
SFAS No. 123R is effective for fiscal years beginning
after June 15, 2005. We will be required to adopt
SFAS No. 123R in our first quarter of fiscal 2006. We
currently disclose the proforma impact on net income (loss) and
earnings (loss) per share under SFAS No. 123, in
Note 2 of the Consolidated Financial Statements. We are
currently evaluating the impact of the adoption of
SFAS No. 123R on our financial position and results of
operations, including the valuation methods and support for the
assumptions that underlie the valuation of the awards.

In November 2004, the FASB issued SFAS No. 151,
Inventory Costs  an amendment of ARB
No. 43, Chapter 4, which clarifies the
accounting for abnormal amounts of idle facility expense,
freight, handling costs and wasted material (spoilage). The
standard requires that such costs be excluded from the cost of
inventory and expensed when incurred. SFAS No. 151 is
effective for fiscal periods beginning after June 15, 2005.
We do not expect that the adoption of SFAS No. 151
will have a material effect on our consolidated financial
statements.

In December 2004, the FASB issued SFAS No. 153,
Exchanges of Nonmonetary Assets  an amendment
of APB No. 29, Accounting for Nonmonetary
Transactions, which addresses the measurement

59



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of exchanges of nonmonetary assets and eliminates the exception
from fair value measurement for nonmonetary exchanges of similar
productive assets. SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. We do not expect that the
adoption of SFAS No. 153 will have a material effect
on our consolidated financial statements.



|         |                     
|-------- | --------------------
|Note 4  | Business Disposition

During fiscal 2002, we sold 13 stores in Texas. The stores were
sold because they were geographically remote from our other
operations. This transaction resulted in net cash proceeds of
$4.2 million and a loss upon sale of $0.8 million.



|         |                                                    
|-------- | ---------------------------------------------------
|Note 5  | Transactions and Relationships with Related Parties



| |                            
| | ---------------------------
| | Sale of Stock by Affiliates

On June 22, 2004, pursuant to our share repurchase program
approved by our Board of Directors on June 8, 2004, we
purchased approximately 476,000 shares of our common stock
in a privately negotiated transaction from entities associated
with or organized by Investcorp, S.A., formerly one of our
principal stockholders. The purchase price of the shares we
bought was at an approximate 1% discount from the average market
price of our common stock on the date of purchase. Charles
Marquis, a member of our Board of Directors, is employed by
Investcorp.

During January 2004 and September 2003, entities associated with
or organized by Investcorp, S.A., sold approximately
2.6 million and 3.0 million shares, respectively, of
CSK Auto Corporation common stock. We did not receive any
proceeds from the sales of such stock nor did this transaction
result in share dilution. We incurred expenses related to these
transactions of approximately $0.2 million.

On July 2, 2002, an entity affiliated with the Carmel Group
(Carmel), a former stockholder group of ours, sold
2.6 million shares of CSK Auto Corporation stock in a
secondary offering. On November 20, 2002, the Carmel
stockholders sold their remaining approximately 3.0 million
shares of CSK Auto Corporation common stock in an underwritten
offering. We did not receive any proceeds from the sales of
common stock by Carmel and incurred approximately
$0.5 million of accounting, legal and miscellaneous
expenses. Upon the sale by Carmel of all of their shares, a
stockholders agreement originally executed in 1996 and
subsequently amended, was terminated, except with respect to
certain registration rights.



| |                   
| | ------------------
| | Lease Transactions

We have in the past entered into several lease agreements with
parties who at lease inception were, but no longer are, related
parties. The leases are for approximately 125,000 square
feet of office space and real property and run through October
2012. These lease agreements are subject to certain
inflation-based adjustments that could affect the rent expense
in future periods. The agreements formerly were with entities
affiliated with Carmel, previously one of our principal
stockholders (see above). During each of the fiscal years
presented, we paid annual rent in the amount of approximately
$2.5 million to the former related party for these leases.
The amounts for fiscal years 2004 and 2003 are annual amounts
even though the related party relationship ended on
November 20, 2002. We believe that the terms of the leasing
transactions with these former related parties described above
were no less favorable to us than terms that may have been
available from independent third parties at the time of the
applicable transaction.



| |                   
| | ------------------
| | Other Transactions

In December 2001, in connection with the refinancing of our then
existing credit facility, we sold $50.0 million aggregate
principal amount of 7% convertible subordinated debentures
due December 2006 (the convertible debentures) and related
contingently exercisable warrants (the make-whole warrants),
consisting

60



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of $30.0 million in principal amount and one make-whole
warrant to Investcorp CSK Holdings L.P., an affiliate of
Investcorp S.A., and $20 million in principal amount and
one make-whole warrant to an unrelated third party investor in a
private placement. Interest on the debentures was payable
quarterly, either in cash or, at our election, additional shares
of our common stock. The convertible debentures and make-whole
warrants issued to Investcorp CSK Holdings L.P. were on the same
terms as those issued to the unrelated third party. On
May 20, 2002, we converted these debentures for both
Investcorp CSK Holdings L.P. and the third party into
approximately 5.75 million shares of our common stock
(approximately 3.45 million shares to Investcorp CSK
Holdings L.P. and 2.3 million shares to the third party),
based on a conversion price of $8.69 per share. In
addition, we elected to pay interest on the debentures in
additional shares of CSK Auto Corporation 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.



|         |            
|-------- | -----------
|Note 6  | Receivables

Accounts receivable consist of the following ($ in thousands):

|                                                                                         |                         |             |        |             |  |   |        |        | 
|---------------------------------------------------------------------------------------- | ----------------------- | ----------- | ------ | ----------- |  | - | ------ | ------ | 
|                                                                                         |                         | January 30, |        | February 1,
|                                                                                         |                         | 2005        |        | 2004       
|                                                                                         |                         |             |        |            
|                                                                                         |                         |             |        | (Restated) 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Amounts due under vendor allowance programs and
    cooperative advertising arrangements |                         | $           | 57,540 |             |  | $ | 74,014 |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Trade receivables from commercial and other
    customers                                |                         |             | 13,857 |             |  |   | 15,773 |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Landlord and subtenant receivables                                                       |                         |             | 2,130  |             |  |   | 2,564  |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Other                                                                                    |                         |             | 249    |             |  |   | 1,158  |       
|                                                                                         |                         |             |        |             |  |   |        |       
|                                                                                         | Gross receivables       |             |        | 73,776      |  |   |        | 93,509 | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Allowance for doubtful accounts                                                          |                         |             | (670   | )           |  |   | (1,577 | )     
|                                                                                         |                         |             |        |             |  |   |        |       
|                                                                                         | Net accounts receivable |             | $      | 73,106      |  |   | $      | 91,932 | 
|                                                                                         |                         |             |        |             |  |   |        |       

We reflect amounts to be paid or credited to us by vendors as
receivables. Pursuant to contract terms, we have the right to
offset vendor receivables against corresponding accounts
payable, thus minimizing the risk of non-collection of these
receivables.



|         |                       
|-------- | ----------------------
|Note 7  | Property and Equipment

Property and equipment are comprised of the following ($ in
thousands):

|                                                |  |             |          |             |  |                       |          |   |  |  |                                      | 
|----------------------------------------------- |  | ----------- | -------- | ----------- |  | --------------------- | -------- | - |  |  | ------------------------------------ | 
|                                                |  | January 30, |          | February 1, |  |                      
|                                                |  | 2005        |          | 2004        |  | Estimated Useful Life
|                                                |  |             |          |             |  |                      
|                                                |  |             |          | (Restated)  |  |                      
|                                               
|                                               
|                                               
|                                               
|Land                                            |  | $           | 348      |             |  | $                     | 348      |   |  |  |                                      | 
|                                               
|                                               
|                                               
|                                               
|Buildings                                       |  |             | 8,553    |             |  |                       | 7,378    |   |  |  | 15 - 25 years                        | 
|                                               
|                                               
|                                               
|                                               
|Leasehold improvements                          |  |             | 133,812  |             |  |                       | 127,857  |   |  |  | Shorter of lease term or useful life | 
|                                               
|                                               
|                                               
|                                               
|Furniture, fixtures and equipment               |  |             | 138,956  |             |  |                       | 125,900  |   |  |  | 3 - 10 years                         | 
|                                               
|                                               
|                                               
|                                               
|Property under capital leases                   |  |             | 73,022   |             |  |                       | 87,434   |   |  |  | 5 - 15 years or life of lease        | 
|                                               
|                                               
|                                               
|                                               
|Purchased software                              |  |             | 9,015    |             |  |                       | 12,070   |   |  |  | 5 years                              | 
|                                                |  |             |          |             |  |                       |          |   |  |  |                                      | 
|                                                |  |             | 363,706  |             |  |                       | 360,987  |   |  |  |                                      | 
|                                               
|                                               
|                                               
|                                               
|Less: accumulated depreciation and amortization |  |             | (224,349 | )           |  |                       | (220,712 | ) |  |  |                                      | 
|                                                |  |             |          |             |  |                       |          |   |  |  |                                      | 
|Property and equipment, net                     |  | $           | 139,357  |             |  | $                     | 140,275  |   |  |  |                                      | 
|                                                |  |             |          |             |  |                       |          |   |  |  |                                      | 

61



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Accumulated amortization of property under capital leases
totaled $56.4 million and $66.1 million at
January 30, 2005 and February 1, 2004, respectively.

We evaluate the carrying value of long-lived assets on a
quarterly basis to determine whether events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable and an impairment loss should be recognized.
Such evaluation is based on the expected utilization of the
related asset and the corresponding useful life.



|         |                                     
|-------- | ------------------------------------
|Note 8  | Goodwill and Other Intangible Assets

We completed our annual goodwill impairment test on
January 30, 2005, the last day of our fiscal year and we
determined that no impairment of goodwill existed.

Our intangible assets, excluding goodwill, consist of favorable
leasehold interests resulting from business acquisitions.
Leasehold interests associated with store closures are written
off at the time of closure. Amortization expense related to the
leasehold interests is computed on a straight-line basis over
the respective lease terms. Estimated amortization expense
relating to leasehold interests for future periods is listed
below ($ in thousands):

|            |       |   |       |       | 
|----------- | ----- | - | ----- | ----- | 
|           
|           
|           
|           
|Fiscal 2005 |       | $ | 1,220 |      
|           
|           
|           
|           
|Fiscal 2006 |       |   | 1,147 |      
|           
|           
|           
|           
|Fiscal 2007 |       |   | 1,136 |      
|           
|           
|           
|           
|Fiscal 2008 |       |   | 967   |      
|           
|           
|           
|           
|Fiscal 2009 |       |   | 890   |      
|            |       |   |       |      
|            | Total |   | $     | 5,360 | 
|            |       |   |       |      

The changes in intangible assets, including goodwill, for fiscal
2004 are as follows ($ in thousands):

|                               |                          |             |         |              |   |             |        |             |   |  |        |        |      |   |         |         |  
|------------------------------ | ------------------------ | ----------- | ------- | ------------ | - | ----------- | ------ | ----------- | - |  | ------ | ------ | ---- | - | ------- | ------- | -
|                               |                          | Carrying    |         |              |   |             |        | Carrying   
|                               |                          | Value as of |         |              |   |             |        | Value as of
|                               |                          | February 1, |         |              |   |             |        | January 30,
|                               |                          | 2004        |         | Amortization |   | Adjustments |        | 2005       
|                               |                          |             |         |              |   |             |        |            
|Amortized intangible assets:   |                          |             |         |              |   |             |        |             |   |  |        |        |      |   |         |        
|                              
|                              
|                              
|                              
|                               | Leasehold interests      |             | $       | 23,038       |   |             |        |            |   |  |        | (1,405 | )    |   | $       | 21,633  |  
|                              
|                              
|                              
|                              
|                               | Accumulated amortization |             |         | (10,760      | ) |             |        | (1,488      | ) |  |        | 1,008  |      |   |         | (11,240 | )
|                               |                          |             |         |              |   |             |        |             |   |  |        |        |      |   |         |        
|                               | Leasehold interests, net |             |         | 12,278       |   |             |        | (1,488      | ) |  |        | (397   | )(a) |   |         | 10,393  |  
|                               |                          |             |         |              |   |             |        |             |   |  |        |        |      |   |         |        
|Unamortized intangible assets: |                          |             |         |              |   |             |        |             |   |  |        |        |      |   |         |        
|                              
|                              
|                              
|                              
|                               | Goodwill                 |             |         | 127,069      |   |             |        |            |   |  |        | (8,103 | )(b) |   |         | 118,966 |  
|                               |                          |             |         |              |   |             |        |             |   |  |        |        |      |   |         |        
|Total intangible assets, net   |                          | $           | 139,347 |              |   |             | (1,488 | )           |   |  | (8,500 | )      |      | $ | 129,359 |        
|                               |                          |             |         |              |   |             |        |             |   |  |        |        |      |   |         |        



---



|    |                                                                             
|--- | ----------------------------------------------------------------------------
|(a) | Represents write-offs for closed stores net of accumulated
    amortization.



|    |  |                                                     
|--- |  | ----------------------------------------------------
|(b) |  | Goodwill related to the sale of our subsidiary, AIS.

62



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 9  Long Term Debt



| |         
| | --------
| | Overview

Outstanding debt, excluding capital leases, is as follows ($ in
thousands):

|                                                                                                                                                                                   |                               |                          |         |             |         |   |         |       |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------------------------ | ------- | ----------- | ------- | - | ------- | ----- | ------- | 
|                                                                                                                                                                                   |                               | January 30,              |         | February 1,
|                                                                                                                                                                                   |                               | 2005                     |         | 2004       
|                                                                                                                                                                                   |                               |                          |         |            
|                                                                                                                                                                                   |                               |                          |         | (Restated) 
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|Senior credit facility  term loan                                                                                                                                                 |                               | $                        | 252,450 |             |         | $ | 255,000 |      
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|12% senior notes, unamortized original issue
    discount of $0.1 million, carrying balance increased by
    $0.3 million relating to SFAS No. 133 hedge
    accounting adjustment |                               |                          |        |             |         |   | 15,013  |      
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|7% senior subordinated notes, carrying
    balance decreased by $4.5 million at January 30, 2005
    relating to SFAS No. 133 hedge accounting adjustment                          |                               |                          | 220,519 |             |         |   | 225,000 |      
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|Seller financing arrangements                                                                                                                                                      |                               |                          | 7,417   |             |         |   | 6,456   |      
|                                                                                                                                                                                   |                               |                          |         |             |         |   |         |      
|                                                                                                                                                                                   |                               | Total debt               |         |             | 480,386 |   |         |       | 501,469 | 
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|Less current maturities of:                                                                                                                                                        |                               |                          |         |             |         |   |         |      
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                   | Senior credit facility        |                          |         | 2,550       |         |   |         | 2,550 |        
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                  
|                                                                                                                                                                                   | Seller financing arrangements |                          |         | 268         |         |   |         | 193   |        
|                                                                                                                                                                                   |                               |                          |         |             |         |   |         |      
|                                                                                                                                                                                   |                               | Total debt (non-current) |         | $           | 477,568 |   |         | $     | 498,726 | 
|                                                                                                                                                                                   |                               |                          |         |             |         |   |         |      

As of January 30, 2005, the estimated maturities of long
term debt, excluding capital leases, were as follows:

|            |       |   |         |         | 
|----------- | ----- | - | ------- | ------- | 
|           
|           
|           
|           
|Fiscal 2005 |       | $ | 2,818   |        
|           
|           
|           
|           
|Fiscal 2006 |       |   | 2,908   |        
|           
|           
|           
|           
|Fiscal 2007 |       |   | 3,022   |        
|           
|           
|           
|           
|Fiscal 2008 |       |   | 2,936   |        
|           
|           
|           
|           
|Fiscal 2009 |       |   | 122,217 |        
|           
|           
|           
|           
|Thereafter  |       |   | 346,485 |        
|            |       |   |         |        
|            | Total |   | $       | 480,386 | 
|            |       |   |         |        

Our various debt and credit agreements contain covenants
restricting our ability to, among other things, incur additional
debt, create or allow liens, pay dividends, merge or consolidate
with or invest in other companies, sell, lease or transfer all
or substantially all of our properties or assets, or make
certain payments with respect to our outstanding capital stock,
issue preferred stock and engage in certain transactions with
affiliates. In addition, we must comply with certain financial
covenants, ratios and tests, including a maximum leverage ratio
and a minimum interest coverage ratio. We were in compliance
with all such covenants at January 30, 2005. The
Companys senior credit facility does not currently permit
Auto to distribute funds to CSK Auto Corporation for the
purposes of paying dividends on the Companys common stock.



| |                                                
| | -----------------------------------------------
| | Recent Transactions and Loss on Debt Retirement

We completed the following transactions during recent years:



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In December 2004, we elected to redeem the approximately
    $14.9 million remaining balance of our 12% senior
    notes due 2006 at a redemption price equal to 106% of the
    principal amount plus accrued and unpaid interest.

63



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In January 2004, we completed a refinancing of our debt that
    included the redemption of approximately 94% of our then
    outstanding 12% senior notes and the issuance of
    $225.0 million 7% senior subordinated notes.                                                                                                                                                                                                                                                     
|
| |  | In January 2004, we also amended our senior credit facility,
    increasing the amount of our facility by $75.0 million to
    $400.0 million, consisting of a $255.0 million term
    loan and a $145.0 million revolving credit facility.                                                                                                                                                                                                                                         
|
| |  | In June 2003, we replaced our then existing $300.0 million
    senior credit facility with a $325.0 million senior
    collateralized, asset based credit facility consisting of a
    $200.0 million term loan and a $125.0 million
    revolving credit commitment. We used proceeds from the credit
    facility increase to redeem the remaining $9.5 million in
    aggregate principal amount of our 11% senior subordinated
    notes, including accrued and unpaid interest.
|
| |  | In July 2002, we sold shares of our common stock in an
    underwritten public offering and used proceeds from the sale of
    those shares to retire approximately $71.7 million of our
    11% senior subordinated notes.                                                                                                                                                                                                                                                         

In conjunction with the amendments and retirements noted above,
we recorded losses on debt retirement during fiscal 2004, 2003,
and 2002 of $1.0 million, $49.5 million and
$6.0 million, respectively. The losses on debt retirement
include (if applicable) early redemption premiums, the write-off
of certain financing fees, a prorata adjustment representing the
unamortized fair market value swap adjustment and other direct
costs.



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

On May 20, 2002, at our option, 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 136,580 shares of CSK Auto Corporation common stock in
lieu of cash. At the time of the conversion, the
$50.0 million principal amount, $0.8 million of
unamortized debt discount and $3.0 million of unamortized
debt issuance costs were converted to common stock and
additional paid-in capital.



| |                       
| | ----------------------
| | Senior Credit Facility

Our senior credit facility is comprised of a $255.0 million
term loan and a $145.0 million revolving credit facility.
The term loan is to be repaid in twelve installments consisting
of ten $1.275 million dollar payments made semiannually
beginning in December 2004 and two final payments of
$120.5 million each in December 2009 and at maturity,
August 2010. The revolving credit facility matures in June 2008.
At January 30, 2005, there were no borrowings under the
revolving credit facility. The availability under the revolving
credit facility at January 30, 2005 was
$114.0 million. Although there were no outstanding
borrowings on the revolving facility, $31.0 million was
committed under letters of credit. Loans under the senior credit
facility are collateralized by a first priority security
interest in substantially all of our assets and in all of the
capital stock of CSK Auto, Inc. The senior credit facility
provides that we may from time to time make optional prepayments
of loans in whole or in part without penalty, subject to minimum
prepayments and reimbursement of the lenders breakage
costs in the case of prepayment of Eurodollar Rate loans.

On August 10, 2004, we amended our senior credit facility
to provide for an immediate reduction of the interest rate on
the term loan of 25 basis points and an opportunity for an
additional 25 basis points reduction of the interest rate
on such term loan upon the achievement of certain conditions, as
more particularly set forth in the amendment. The current
interest rates on our revolving credit facility and term loan
are LIBOR + 275 basis points and LIBOR +
200 basis points, respectively. The amendment also provides
for a one-year extension of the term loan maturity to August
2010.

64



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Interest accrues under the senior credit facility based on a
variable rate, which is a function of the spread over the Base
rate (as defined in the agreement) or the Eurodollar rate (as
defined in the agreement) at our option. The average interest
rate on the term loan portion of the facility was 3.7%, 4.2% and
5.4% for fiscal 2004, 2003 and 2002, respectively. The average
interest rate on the revolver portion of the facility was 4.8%,
5.1% and 5.8% for fiscal years 2004, 2003 and 2002,
respectively. Interest is payable upon borrowing maturity or
quarterly, depending on the type of loan.



| |                             
| | ----------------------------
| | 7% Senior Subordinated Notes

In January 2004, we issued $225.0 million of 7% senior
subordinated notes due January 15, 2014. Interest is
payable semi-annually on January 15 and July 15. On or after
January 15, 2009, we may redeem some or all of the notes at
the redemption prices listed below plus accrued and unpaid
interest to the date of redemption. We may redeem all of the
notes prior to that date pursuant to the make-whole provisions
as defined in the indenture governing the notes. In addition, we
may redeem up to 35% of the aggregate principal amount of the
notes before January 15, 2007 with the net proceeds of
certain equity offerings. At any time on or after
January 15, 2009, we may redeem the notes for cash at our
option, in whole or in part, at the following redemption prices
(expressed as percentages of the principal amount):
January 15, 2009 through January 15, 2010, 103.5%;
January 15, 2010 through January 15, 2011, 102.3%;
January 15, 2011 through January 15, 2012, 101.2%; and
January 15, 2012 through maturity, 100%. If we experience a
Change of Control (as defined in the indenture governing these
notes), holders of the notes will have the right to require us
to repurchase their notes at a purchase price of 101% of the
principal amount of the notes, plus accrued and unpaid interest
and liquidated damages, if any, to the date of the purchase.

The notes are unsecured general obligations of CSK Auto, Inc.
They rank junior in right of payment to all of our existing and
future senior debt, equal in right of payment to all of our
future senior subordinated indebtedness, senior in right of
payment to all of our future subordinated indebtedness and are
unconditionally guaranteed by CSK Auto Corporation and the
Subsidiary Guarantors on a senior subordinated basis.



| |                              
| | -----------------------------
| | Seller Financing Arrangements

Seller financing arrangements relate to debt established for
stores in which we were the seller-lessee and did not recover
substantially all construction costs from the lessor. In those
situations, we recorded our total cost in property and equipment
and amounts funded by the lessor as a debt obligation in the
accompanying balance sheet in accordance with EITF
No. 97-10, The Effect of Lessee Involvement in Asset
Construction. Rental payments made to the lessor are
charged to interest expense and reduce the corresponding debt
based on amortization schedules.



|          |                                 
|--------- | --------------------------------
|Note 10  | Derivative Financial Instruments

During April 2004, we entered into an interest rate swap
agreement to convert $100.0 million of our 7% senior
subordinated notes due 2014 to a floating rate, set quarterly in
arrears, equal to the 6 month LIBOR + 283 basis
points. The agreement is for the term of the notes. The interest
rate swap was intended to hedge the fair value of these notes
against potential movements in market interest rates. The hedge
is considered to qualify as a fair value hedge;
accordingly, the fair value of the derivative and changes in the
fair value of the underlying debt will be reported on our
balance sheet. Based upon our assessment of effectiveness of the
hedge, changes in the fair value of this derivative and the
underlying debt are not expected to result in a material impact
on net income.

During February 2002, we entered into an interest rate swap
agreement to convert the interest rate 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. The interest rate swap was 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

65



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

in market interest rates. On June 5, 2003, we terminated
the swap agreement and received in consideration thereof the sum
of $6.0 million, which represented the fair market value of
the swap agreement on that date. In December 2004, we redeemed
the remaining 12% senior notes to which the rate swap
agreement was associated and at that time recognized the
remaining portion of the unamortized fair market value
adjustment as a component of the loss on debt retirement. See
Note 9.

The differential to be paid or received under these agreements
was accrued consistent with the terms of the agreement and was
recognized in interest expense over the term of the related
debt. The related amounts payable to or receivable from the
counter party are included in other liabilities or assets. Cash
flows related to the interest rate swap agreements are
classified as operating activities in the Consolidated Statement
of Cash Flows. We reduced interest expense by $1.3 million,
$2.2 million and $2.4 million in fiscal 2004, 2003 and
2002, respectively, as a result of the interest rate swaps. Due
to the effect of the rate swap on the related notes, the average
interest rate in 2004 on our $225.0 million 7% senior
subordinated notes due January 15, 2014, approximated 6.4%.



|          |       
|--------- | ------
|Note 11  | Leases

We lease our office and warehouse facilities, all but one of our
retail stores, and certain of our equipment. Generally, store
leases provide for minimum rentals and the payment of utilities,
maintenance, insurance and taxes. Certain store leases also
provide for contingent rentals based upon a percentage of sales
in excess of a stipulated minimum. The majority of lease
agreements are for base lease periods ranging from 10 to
20 years, with three to five renewal options of five years
each.

Operating lease rental expense is as follows ($ in thousands):

|                                                                                              |  |             |         |            |  |            |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ----------- | ------- | ---------- |  | ---------- | ------- | - |  | - | ------- | -
|                                                                                              |  |            
|                                                                                              |  | Fiscal Year
|                                                                                              |  |            
|                                                                                              |  | 2004        |         | 2003       |  | 2002      
|                                                                                              |  |             |         |            |  |           
|                                                                                              |  |             |         | (Restated) |  | (Restated)
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Minimum rentals                                                                               |  | $           | 118,087 |            |  | $          | 117,908 |   |  | $ | 119,755 |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Contingent rentals                                                                            |  |             | 1,125   |            |  |            | 1,301   |   |  |   | 1,150   |  
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Sublease rentals                                                                              |  |             | (8,907  | )          |  |            | (9,838  | ) |  |   | (10,121 | )
|                                                                                              |  |             |         |            |  |            |         |   |  |   |         |  
|                                                                                              |  | $           | 110,305 |            |  | $          | 109,371 |   |  | $ | 110,784 |  
|                                                                                              |  |             |         |            |  |            |         |   |  |   |         |  
|The above amounts include rental expense under
    leases with former affiliates (see Note 5) |  | $           | 2,528   |            |  | $          | 2,528   |   |  | $ | 2,528   |  
|                                                                                              |  |             |         |            |  |            |         |   |  |   |         |  

66



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Future minimum lease obligations (income) under non-cancelable
leases at January 30, 2005 are as follows ($ in thousands):

|                                    |  |         |        |           |  |          |         |  |  |   |         |  
|----------------------------------- |  | ------- | ------ | --------- |  | -------- | ------- |  |  | - | ------- | -
|                                    |  | Capital |        | Operating |  | Sublease
|For Fiscal Years                    |  | Leases  |        | Leases    |  | Rentals 
|                                    |  |         |        |           |  |         
|2005                                |  | $       | 7,763  |           |  | $        | 121,355 |  |  | $ | (7,996  | )
|                                   
|                                   
|                                   
|                                   
|2006                                |  |         | 5,315  |           |  |          | 112,820 |  |  |   | (6,763  | )
|                                   
|                                   
|                                   
|                                   
|2007                                |  |         | 3,402  |           |  |          | 100,508 |  |  |   | (4,786  | )
|                                   
|                                   
|                                   
|                                   
|2008                                |  |         | 1,344  |           |  |          | 80,454  |  |  |   | (2,514  | )
|                                   
|                                   
|                                   
|                                   
|2009                                |  |         | 536    |           |  |          | 60,765  |  |  |   | (1,014  | )
|                                   
|                                   
|                                   
|                                   
|Thereafter                          |  |         | 1,331  |           |  |          | 239,650 |  |  |   | (1,884  | )
|                                    |  |         |        |           |  |          |         |  |  |   |         |  
|                                    |  |         | 19,691 |           |  | $        | 715,552 |  |  | $ | (24,957 | )
|                                    |  |         |        |           |  |          |         |  |  |   |         |  
|Less: amounts representing interest |  |         | (2,764 | )         |  |          |         |  |  |   |         |  
|                                    |  |         |        |           |  |          |         |  |  |   |         |  
|Present value of obligations        |  |         | 16,927 |           |  |          |         |  |  |   |         |  
|                                   
|                                   
|                                   
|                                   
|Less: current portion               |  |         | (6,490 | )         |  |          |         |  |  |   |         |  
|                                    |  |         |        |           |  |          |         |  |  |   |         |  
|Long term obligation                |  | $       | 10,437 |           |  |          |         |  |  |   |         |  
|                                    |  |         |        |           |  |          |         |  |  |   |         |  



|          |                       
|--------- | ----------------------
|Note 12  | Employee Benefit Plans

We provide various health, welfare and disability benefits to
our full-time employees that are funded primarily by Company
contributions. Other than for certain of our senior executives,
we do not provide post-employment or post-retirement health care
or life insurance benefits to our employees.



| |                                       
| | --------------------------------------
| | Supplemental Retirement Plan Agreement

We have a supplemental retirement plan agreement with our
Chairman which provides supplemental retirement benefits for a
period of ten years beginning the earlier of
(i) February 1, 2006, and (ii) the first
anniversary of the effective date of termination of his
employment for any reason other than for Cause (as defined in
such retirement plan agreement). The benefit amount payable to
our Chairman under this agreement is based on the percentage of
the benefit vested as of the date of termination of his
employment, not to exceed $600,000 per annum. In December
2004, this agreement was amended to make such changes as were
necessary to bring the agreement into compliance with the
American Jobs Creation Act of 2004.



| |                   
| | ------------------
| | Retirement Program

We sponsor a 401(k) plan that is available to all our employees
who have completed one year of continuous service. Effective
October 1, 1997, we match from 40% to 60% of employee
contributions in 10% increments, based on years of service, up
to 4% of the participants base salary. Participant
contributions are subject to certain restrictions as set forth
in the Internal Revenue Code. Our matching contributions totaled
$1.5 million, $1.2 million, and $1.3 million for
fiscal 2004, 2003, and 2002, respectively.



| |                              
| | -----------------------------
| | 2004 Stock and Incentive Plan

In June 2004, our shareholders approved the CSK Auto Corporation
2004 Stock and Incentive Plan (the Plan) which
replaces all of the following previously existing plans:
(1) the 1996 Associate Stock Option Plan; (2) the 1996
Executive Stock Option Plan; (3) the 1999 Executive Stock
Option Plan; and (4) the CSK Auto Corporation Directors
Stock Plan. Approximately 1.9 million options to purchase
shares of our common stock granted under these prior plans were
still outstanding at the inception of the new Plan. These
options can still be exercised by the grantees according to the
provisions of the prior plans. Pursuant to the

67



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

provisions of the Plan, any of these options which are cancelled
under the prior plans will be added to shares available for
issuance under the Plan.

The Plan is administered by the Compensation Committee of our
Board of Directors, which has broad authority in administering
and interpreting the Plan. We believe the Plan will promote and
closely align the interests of our employees and directors with
our stockholders by permitting the award of stock-based
compensation and other performance-based compensation. We
believe the Plan will strengthen our ability to reward
performance that enhances long-term stockholder value and
strengthen our ability to attract and retain outstanding
employees and executives. Plan participation is limited to
employees of the Company, any subsidiary or parent of the
Company and to directors of the Company.

The Plan provides for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights,
restricted stock, stock units, incentive bonuses and other stock
unit awards. Under the Plan, the number and kind of shares as to
which options, stock appreciation rights, restricted stock,
stock units, incentive bonuses or other stock unit awards may be
granted is 4.0 million shares of our common stock plus any
shares subject to awards made under the prior plans that were
outstanding on the effective date of the Plan. The number of
shares that can be granted for certain of the items listed above
may be restricted per the Plan document. In no event will any
option be exercisable more than 10 years after the date the
option is granted. In general, the stock incentives vest in
three years. As of January 30, 2005, there were
approximately 3.0 million shares available for grant.

During fiscal 2004, the Company issued 82,885 shares of
restricted stock, at an average market price of $13.23, to our
executive officers and other associates pursuant to the Plan.
The restricted stock was valued at the market price of the stock
on the New York Stock Exchange on the grant date and
approximately $1.1 million was recorded as deferred
compensation with an offset to additional paid-in capital in
stockholders equity on the Consolidated Balance Sheet. The
deferred compensation in stockholders equity will be
amortized to expense over the three year vesting period of each
grant. Compensation expense of $0.1 million was recorded
during fiscal 2004. Also 3,818 shares of restricted stock
were issued to our directors under the Plan. In fiscal years
2003 and 2002, 3,054 and 3,212 shares of restricted stock
respectively were issued to our Directors under the prior CSK
Auto Corporation Directors Stock Plan. Grants to directors
generally vest over a one year period.



| |                     
| | --------------------
| | Option Cancellations

During the third quarter of fiscal 2001, we cancelled
outstanding stock options to purchase an aggregate of
496,296 shares of our common stock that had been granted to
certain Company executives under all of our option plans. The
options covered by such cancellations had exercise prices
ranging from $17.50 to $32.25 per share, with a weighted
average exercise price of $26.34 per share. During fiscal
2002, new stock options to purchase an aggregate of
496,296 shares of our common stock were granted to these
executives. The exercise price of the vast majority of the new
stock options was $11.00 per share, which was the greater
of: (a) $11.00 per share; or (b) the fair market
value of CSK Auto Corporation common stock on the date of grant.
These options were granted six months and one day after the
cancellation and, consistent with the guidance in
FIN No. 44, Accounting for Certain Transactions
Involving Stock Compensation: An Interpretation of APB Opinion
No. 25, no stock compensation expense was recorded.

68



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                 
| | ----------------
| | Options Activity

Activity in all of our stock option plans is summarized as
follows:

|                            |                            |           |           |                |   |            |       |             |  |             |   |      |  |  |           |  |  |  |       |  | 
|--------------------------- | -------------------------- | --------- | --------- | -------------- | - | ---------- | ----- | ----------- |  | ----------- | - | ---- |  |  | --------- |  |  |  | ----- |  | 
|                            |                            |           |           |                |   |            |       |             |  | Weighted   
|                            |                            |           |           | Weighted       |   | Weighted   |       |             |  | Average    
|                            |                            | Number of |           | Average        |   | Average    |       | Options     |  | Exercisable
|                            |                            | Shares    |           | Exercise Price |   | Fair Value |       | Exercisable |  | Price      
|                            |                            |           |           |                |   |            |       |             |  |            
|Balance at February 3, 2002 |                            |           | 2,439,989 |                |   | $          | 14.07 |             |  |             |   |      |  |  |           |  |  |  |       | 
|                           
|                           
|                           
|                           
|                            | Granted at market price    |           |           | 934,721        |   |            |       | 10.75       |  |             | $ | 5.36 |  |  |           |  |  |  |       |  | 
|                           
|                           
|                           
|                           
|                            | Granted above market price |           |           | 16,778         |   |            |       | 11.00       |  |             | $ | 4.14 |  |  |           |  |  |  |       |  | 
|                           
|                           
|                           
|                           
|                            | Exercised                  |           |           | (17,604        | ) |            |       | 9.59        |  |             |   |      |  |  |           |  |  |  |       |  | 
|                           
|                           
|                           
|                           
|                            | Canceled                   |           |           | (158,067       | ) |            |       | 15.30       |  |             |   |      |  |  |           |  |  |  |       |  | 
|                            |                            |           |           |                |   |            |       |             |  |             |   |      |  |  |           |  |  |  |       | 
|Balance at February 2, 2003 |                            |           | 3,215,817 |                |   | $          | 13.04 |             |  |             |   |      |  |  | 2,255,424 |  |  |  | 13.13 | 
|                           
|                           
|                           
|                           
|                            | Granted at market price    |           |           | 190,746        |   |            |       | 13.54       |  |             | $ | 4.39 |  |  |           |  |  |  |       |  | 
|                           
|                           
|                           
|                           
|                            | Exercised                  |           |           | (1,348,279     | ) |            |       | 11.83       |  |             |   |      |  |  |           |  |  |  |       |  | 
|                           
|                           
|                           
|                           
|                            | Canceled                   |           |           | (188,975       | ) |            |       | 13.54       |  |             |   |      |  |  |           |  |  |  |       |  | 
|                            |                            |           |           |                |   |            |       |             |  |             |   |      |  |  |           |  |  |  |       | 
|Balance at February 1, 2004 |                            |           | 1,869,309 |                |   | $          | 13.91 |             |  |             |   |      |  |  | 1,058,713 |  |  |  | 14.27 | 
|                           
|                           
|                           
|                           
|                            | Granted at market price    |           |           | 1,127,896      |   |            |       | 13.78       |  |             | $ | 5.55 |  |  |           |  |  |  |       |  | 
|                           
|                           
|                           
|                           
|                            | Exercised                  |           |           | (188,858       | ) |            |       | 10.97       |  |             |   |      |  |  |           |  |  |  |       |  | 
|                           
|                           
|                           
|                           
|                            | Canceled                   |           |           | (161,515       | ) |            |       | 16.22       |  |             |   |      |  |  |           |  |  |  |       |  | 
|                            |                            |           |           |                |   |            |       |             |  |             |   |      |  |  |           |  |  |  |       | 
|Balance at January 30, 2005 |                            |           | 2,646,832 |                |   | $          | 13.92 |             |  |             |   |      |  |  | 964,898   |  |  |  | 13.87 | 
|                            |                            |           |           |                |   |            |       |             |  |             |   |      |  |  |           |  |  |  |       | 

The following table summarizes information about our stock
options at January 30, 2005:

|                         |  |                     |           |                     |  |                |      |             |  |                   |       |  |  |  |         |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ------------------- |  | -------------- | ---- | ----------- |  | ----------------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|                         |  |                     |           |                    
|                         |  | Options Outstanding |           | Options Exercisable
|                         |  |                     |           |                    
|                         |  |                     |           | Weighted Average    |  | Weighted       |      |             |  | Weighted         
|                         |  | Number              |           | Remaining           |  | Average        |      |             |  | Average          
|Range of Exercise Prices |  | Outstanding         |           | Contractual Life    |  | Exercise Price |      | Exercisable |  | Exercisable Price
|                         |  |                     |           |                     |  |                |      |             |  |                  
|$ 2.75 - $11.00          |  |                     | 864,558   |                     |  |                | 3.83 |             |  | $                 | 10.02 |  |  |  | 614,382 |  |  | $ | 10.52 | 
|                        
|                        
|                        
|                        
|$11.02 - $12.88          |  |                     | 62,732    |                     |  |                | 4.13 |             |  |                   | 12.02 |  |  |  | 22,638  |  |  |   | 12.10 | 
|                        
|                        
|                        
|                        
|$12.97 - $13.32          |  |                     | 1,018,236 |                     |  |                | 6.70 |             |  |                   | 13.32 |  |  |  | 1,185   |  |  |   | 13.12 | 
|                        
|                        
|                        
|                        
|$13.34 - $25.34          |  |                     | 544,227   |                     |  |                | 3.37 |             |  |                   | 16.74 |  |  |  | 235,422 |  |  |   | 16.39 | 
|                        
|                        
|                        
|                        
|$25.38 - $36.53          |  |                     | 157,079   |                     |  |                | 1.02 |             |  |                   | 30.36 |  |  |  | 91,271  |  |  |   | 30.39 | 
|                         |  |                     |           |                     |  |                |      |             |  |                   |       |  |  |  |         |  |  |   |       | 
|$ 2.75 - $36.53          |  |                     | 2,646,832 |                     |  |                | 4.68 |             |  | $                 | 13.92 |  |  |  | 964,898 |  |  | $ | 13.87 | 
|                         |  |                     |           |                     |  |                |      |             |  |                   |       |  |  |  |         |  |  |   |       | 



|          |             
|--------- | ------------
|Note 13  | Income Taxes

The provision (benefit) for income taxes is comprised of the
following ($ in thousands):

|          |         |             |        |            |        |            |        |        |        |   |      |      |      |  
|--------- | ------- | ----------- | ------ | ---------- | ------ | ---------- | ------ | ------ | ------ | - | ---- | ---- | ---- | -
|          |         |            
|          |         | Fiscal Year
|          |         |            
|          |         | 2004        |        | 2003       |        | 2002      
|          |         |             |        |            |        |           
|          |         |             |        | (Restated) |        | (Restated)
|         
|         
|         
|         
|Current:  |         |             |        |            |        |            |        |        |        |   |      |     
|         
|         
|         
|         
|          | Federal |             | $      | 470        |        |            | $      | 23     |        |   | $    | (529 | )   
|         
|         
|         
|         
|          | State   |             |        | 10         |        |            |        | 106    |        |   |      | 50   |     
|          |         |             |        |            |        |            |        |        |        |   |      |     
|          |         |             | 480    |            |        |            | 129    |        |        |   | (479 | )   
|         
|         
|         
|         
|Deferred: |         |             |        |            |        |            |        |        |        |   |      |     
|         
|         
|         
|         
|          | Federal |             |        | 20,257     |        |            |        | (6,644 | )      |   |      | 606  |     
|         
|         
|         
|         
|          | State   |             |        | 4,024      |        |            |        | (1,339 | )      |   |      | (451 | )   
|          |         |             |        |            |        |            |        |        |        |   |      |     
|          |         |             | 24,281 |            |        |            | (7,983 | )      |        |   | 155  |     
|          |         |             |        |            |        |            |        |        |        |   |      |     
|          |         | Total       |        | $          | 24,761 |            |        | $      | (7,854 | ) |      | $    | (324 | )
|          |         |             |        |            |        |            |        |        |        |   |      |     

69



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes the differences between our
provision for income taxes and the statutory provision ($ in
thousands):

|                                                |  |             |        |            |  |            |         |   |  |   |        |  
|----------------------------------------------- |  | ----------- | ------ | ---------- |  | ---------- | ------- | - |  | - | ------ | -
|                                                |  |            
|                                                |  | Fiscal Year
|                                                |  |            
|                                                |  | 2004        |        | 2003       |  | 2002      
|                                                |  |             |        |            |  |           
|                                                |  |             |        | (Restated) |  | (Restated)
|                                               
|                                               
|                                               
|                                               
|Income (loss) before income taxes               |  | $           | 61,642 |            |  | $          | (17,409 | ) |  | $ | 2,072  |  
|                                               
|                                               
|                                               
|                                               
|Federal income tax rate                         |  |             | 35     | %          |  |            | 35      | % |  |   | 35     | %
|                                                |  |             |        |            |  |            |         |   |  |   |        |  
|Expected provision (benefit) for income taxes   |  |             | 21,575 |            |  |            | (6,093  | ) |  |   | 725    |  
|                                               
|                                               
|                                               
|                                               
|Permanent wage add-back for federal tax credits |  |             | 185    |            |  |            | 151     |   |  |   |       |  
|                                               
|                                               
|                                               
|                                               
|Non-deductible executive compensation           |  |             | 251    |            |  |            |        |   |  |   |       |  
|                                               
|                                               
|                                               
|                                               
|Non-deductible interest expense                 |  |             |       |            |  |            |        |   |  |   | 473    |  
|                                               
|                                               
|                                               
|                                               
|Non-deductible offering costs                   |  |             |       |            |  |            | 94      |   |  |   | 190    |  
|                                               
|                                               
|                                               
|                                               
|Other permanent differences                     |  |             | 135    |            |  |            | 77      |   |  |   | 111    |  
|                                               
|                                               
|                                               
|                                               
|State taxes, net of federal benefit             |  |             | 2,653  |            |  |            | (749    | ) |  |   | 131    |  
|                                               
|                                               
|                                               
|                                               
|Reversal of reserves no longer required         |  |             |       |            |  |            | (800    | ) |  |   | (312   | )
|                                               
|                                               
|                                               
|                                               
|Tax credits and other                           |  |             | (38    | )          |  |            | (534    | ) |  |   | (1,642 | )
|                                                |  |             |        |            |  |            |         |   |  |   |        |  
|Actual provision (benefit) for income taxes     |  | $           | 24,761 |            |  | $          | (7,854  | ) |  | $ | (324   | )
|                                                |  |             |        |            |  |            |         |   |  |   |        |  

The current and non-current deferred tax assets and liabilities
reflected in the balance sheet consist of the following ($ in
thousands):

|                               |                                 |                                                         |   |             |        |  |   |        |        | 
|------------------------------ | ------------------------------- | ------------------------------------------------------- | - | ----------- | ------ |  | - | ------ | ------ | 
|                               |                                 | January 30,                                             |   | February 1,
|                               |                                 | 2005                                                    |   | 2004       
|                               |                                 |                                                         |   |            
|                               |                                 |                                                         |   | (Restated) 
|                              
|                              
|                              
|                              
|Current deferred income taxes: |                                 |                                                         |   |             |        |  |   |       
|                              
|                              
|                              
|                              
|                               | Store closing costs             |                                                         | $ | 1,007       |        |  | $ | 1,591  |       
|                              
|                              
|                              
|                              
|                               | Accrued employee benefits       |                                                         |   | 14,087      |        |  |   | 11,959 |       
|                              
|                              
|                              
|                              
|                               | Credits and other benefits      |                                                         |   | 2,500       |        |  |   | 1,532  |       
|                              
|                              
|                              
|                              
|                               | Property taxes                  |                                                         |   | (2,444      | )      |  |   | (2,476 | )     
|                              
|                              
|                              
|                              
|                               | Provision for bad debts         |                                                         |   | 224         |        |  |   | 197    |       
|                              
|                              
|                              
|                              
|                               | Tax loss carryforwards          |                                                         |   | 14,103      |        |  |   | 25,210 |       
|                              
|                              
|                              
|                              
|                               | Inventory valuation differences |                                                         |   | 5,371       |        |  |   | 13,825 |       
|                              
|                              
|                              
|                              
|                               | Vendor allowances               |                                                         |   | 12,080      |        |  |   | 17,689 |       
|                              
|                              
|                              
|                              
|                               | Other                           |                                                         |   | 351         |        |  |   | (609   | )     
|                              
|                              
|                              
|                              
|                               | Valuation allowance             |                                                         |   | (1,016      | )      |  |   | (1,061 | )     
|                               |                                 |                                                         |   |             |        |  |   |       
|                               |                                 | Total current deferred income tax asset
    (liability) |   |             | 46,263 |  |   |        | 67,857 | 
|                               |                                 |                                                         |   |             |        |  |   |       

70



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                   |                               |                                                             |        |             |        |   |        |         |        |  
|---------------------------------- | ----------------------------- | ----------------------------------------------------------- | ------ | ----------- | ------ | - | ------ | ------- | ------ | -
|                                   |                               | January 30,                                                 |        | February 1,
|                                   |                               | 2005                                                        |        | 2004       
|                                   |                               |                                                             |        |            
|                                   |                               |                                                             |        | (Restated) 
|                                  
|                                  
|                                  
|                                  
|Non-current deferred income taxes: |                               |                                                             |        |             |        |   |        |        
|                                  
|                                  
|                                  
|                                  
|                                   | Store closing costs           |                                                             |        | 2,091       |        |   |        | 3,227   |       
|                                  
|                                  
|                                  
|                                  
|                                   | Capital lease expenditures    |                                                             |        | 110         |        |   |        | 1,562   |       
|                                  
|                                  
|                                  
|                                  
|                                   | Deferred rent and incentives  |                                                             |        | 14,961      |        |   |        | 14,861  |       
|                                  
|                                  
|                                  
|                                  
|                                   | Credits and other benefits    |                                                             |        | 7,301       |        |   |        | 6,441   |       
|                                  
|                                  
|                                  
|                                  
|                                   | Depreciation and amortization |                                                             |        | (26,942     | )      |   |        | (26,132 | )     
|                                  
|                                  
|                                  
|                                  
|                                   | Other                         |                                                             |        | (3,433      | )      |   |        | (2,908  | )     
|                                  
|                                  
|                                  
|                                  
|                                   | Valuation allowance           |                                                             |        | (429        | )      |   |        | (384    | )     
|                                   |                               |                                                             |        |             |        |   |        |        
|                                   |                               | Total non-current deferred income tax asset
    (liability) |        |             | (6,341 | ) |        |         | (3,333 | )
|                                   |                               |                                                             |        |             |        |   |        |        
|Net deferred tax asset             |                               | $                                                           | 39,922 |             |        | $ | 64,524 |        
|                                   |                               |                                                             |        |             |        |   |        |        

We have recorded deferred tax assets of $14.1 million as of
January 30, 2005 reflecting the benefit of federal and
state tax loss carryforwards approximating $38.6 million
and $12.1 million, which begin to expire in 2015 and 2008,
respectively. Realization is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards.
Utilization of certain of the net operating loss carryforwards
may be limited under Section 382 of the Internal Revenue
Code. Although realization is not assured, management believes
it is more likely than not that all the deferred tax assets will
be realized with the exception of a portion of California
Enterprise Zone credits for which management has determined that
a valuation allowance in the amount of $1.4 million is necessary.

We recognize liabilities for anticipated tax audit issues based
on our estimate of whether, and the extent to which, additional
taxes will be due. If we ultimately determine that payment of
these amounts is not required, we reverse the liability and
recognize a tax benefit during the period in which we determine
that the liability is no longer necessary. We record an
additional charge in our provision for taxes in the period in
which we determine that the recorded tax liability is less than
we expect the ultimate assessment to be.



|          |                    
|--------- | -------------------
|Note 14  | Store Closing Costs

We provide an allowance for estimated costs to be incurred in
connection with 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
considered for closure.

The allowance for store closing costs is included in accrued
expenses and other long term liabilities in the accompanying
financial statements and 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. Prior to
January 1, 2003, such costs were recognized when a store
was specifically identified, costs could be estimated and
closure was planned to be completed within the next twelve
months in accordance with EITF 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). No provision was made for employee termination
costs. For stores to be relocated, such costs were recognized
when an agreement for the new location had been reached with a
landlord and site plans met preliminary municipal approvals.
During the period that they remained open for business, the rent
and other operating expenses for the stores to be closed
continued to be reflected in normal operating expenses.

71



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As a result of the refinancing transactions we completed in
January 2004, we increased our cash flow and financial
flexibility, enabling us to pursue an alternate strategy to
reduce our portfolio of closed stores, which includes lease
buyouts and foregoing lease extensions on locations that we
subleased at a marginal profit. This change in strategy requires
us to establish a new closed store reserve based upon the
guidance in SFAS No. 146 Accounting for Costs
Associated with Exit or Disposal Activities
(SFAS No. 146) and reverse the existing
closed store reserve that was previously established under
EITF 94-3. SFAS No. 146 requires that costs under
a lease contract for a closed store be recognized at fair value
and that the amount of remaining lease payments owed be reduced
by estimated sublease income (but not to an amount less than
zero). This change in methodology resulted in a non-cash charge
of $12.2 million during the fourth quarter of fiscal 2003.
The charge reflects the elimination from the reserve of net
sublease income previously recorded for leases with incremental
estimated sublease income in excess of the cost of the original
lease, partially offset by the discounting of net cash outflow.
Sublease income in excess of costs associated with the lease is
recognized as it is earned. We have also applied
SFAS No. 146 to exit or disposal activities initiated
or exit plans substantially modified after December 31,
2002 as required.

As of January 30, 2005, we had a total of 141 store
locations included in the allowance for store closing costs. Of
this total, 12 locations were vacant and 129 locations were
subleased. In addition to these stores, we had 54 service
centers also included in the allowance for store closing costs,
of which 3 were vacant and 51 were subleased. Future rent
expense will be incurred through the expiration of the
non-cancelable leases, the longest of which runs through March
2018.

Activity in the allowance for store closings and the related
payments for the three fiscal years ended January 30, 2005
is as follows ($ in thousands):

|                           |                                                                              |                     |        |        |        |      |        |        |        |   |       |        |        |  
|-------------------------- | ---------------------------------------------------------------------------- | ------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ----- | ------ | ------ | -
|                           |                                                                              |                    
|                           |                                                                              | Fiscal Year        
|                           |                                                                              |                    
|                           |                                                                              | 2004                |        | 2003   |        | 2002
|                           |                                                                              |                     |        |        |        |     
|Balance, beginning of year |                                                                              | $                   | 12,148 |        |        | $    | 4,422  |        |        | $ | 6,771 |       
|                          
|                          
|                          
|                          
|Store closing costs:       |                                                                              |                     |        |        |        |      |        |        |        |   |       |       
|                          
|                          
|                          
|                          
|                           | Adjustment of allowance to reflect change in exit
    strategy under FAS 146 |                     |        |       |        |      |        | 12,203 |        |   |       |       |       
|                          
|                          
|                          
|                          
|                           | Provision for store closing costs                                            |                     |        | 247    |        |      |        | 152    |        |   |       | 1,314  |       
|                          
|                          
|                          
|                          
|                           | Adjustments to prior plans                                                   |                     |        |       |        |      |        |       |        |   |       | (1,196 | )     
|                          
|                          
|                          
|                          
|                           | Other revisions in estimates                                                 |                     |        | 604    |        |      |        | 314    |        |   |       | 4,908  |       
|                          
|                          
|                          
|                          
|                           | Accretion                                                                    |                     |        | 552    |        |      |        |       |        |   |       |       |       
|                          
|                          
|                          
|                          
|                           | Operating expenses and other                                                 |                     |        | 788    |        |      |        |       |        |   |       |       |       
|                           |                                                                              |                     |        |        |        |      |        |        |        |   |       |       
|                           |                                                                              | Store closing costs |        |        | 2,191  |      |        |        | 12,669 |   |       |        | 5,026  |  
|                           |                                                                              |                     |        |        |        |      |        |        |        |   |       |       
|Payments:                  |                                                                              |                     |        |        |        |      |        |        |        |   |       |       
|                          
|                          
|                          
|                          
|                           | Rent expense, net of sublease recoveries                                     |                     |        | (2,895 | )      |      |        | (3,303 | )      |   |       | (5,030 | )     
|                          
|                          
|                          
|                          
|                           | Occupancy and other expenses                                                 |                     |        | (787   | )      |      |        | (859   | )      |   |       | (1,837 | )     
|                          
|                          
|                          
|                          
|                           | Sublease commissions and buyouts                                             |                     |        | (2,774 | )      |      |        | (781   | )      |   |       | (508   | )     
|                           |                                                                              |                     |        |        |        |      |        |        |        |   |       |       
|                           |                                                                              | Total payments      |        |        | (6,456 | )    |        |        | (4,943 | ) |       |        | (7,375 | )
|                           |                                                                              |                     |        |        |        |      |        |        |        |   |       |       
|Balance, end of year       |                                                                              | $                   | 7,883  |        |        | $    | 12,148 |        |        | $ | 4,422 |       
|                           |                                                                              |                     |        |        |        |      |        |        |        |   |       |       

Store closing costs in fiscal 2004 were comprised of
$0.2 million associated with fiscal 2004 closures,
$0.6 million associated with revisions to estimates,
$0.6 million associated with accretion expense relating to
the discounting of closed store liabilities, and
$0.8 million associated with other operating expenses such
as utilities, repairs and maintenance costs that are expensed as
incurred.

72



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During fiscal 2003, we recorded the following:
(1) $12.2 million in charges associated with the
reversal of the reserve established under EITF 94-3 and the
establishment of a new closed store reserve on the basis of our
change in exit strategy in accordance with the guidance in
SFAS No. 146; (2) $0.2 million in charges
under SFAS No. 146 associated with the closure of 13
stores, with the majority closed at the expiration of the master
lease; and (3) revisions in estimates of $0.3 million
(primarily relating to plan year 2001) resulting from changes in
estimated vacancy periods and lower realized sublease rates.

During fiscal 2002, we recorded the following: (1) gross
store closing costs of $1.3 million relating to the
identification of 25 stores for closure; (2) an adjustment
to prior plans of $1.2 million primarily due to
managements decision to utilize a warehouse and storage
facility that was previously included within the 1999 plan year
accrual in conjunction with purchase accounting adjustments as a
result of certain acquisitions; and (3) revisions in
estimates of $4.9 million ($3.0 million for plan year
2001, $0.1 million for plan year 2000 and $1.8 million
for plan years prior to 2000) relating to existing closed stores
that have had longer than anticipated vacancy periods as a
result of the continued economic slowdown.

We expect net cash outflows for closed store locations of
approximately $4.0 million during fiscal 2005 and the
remainder of cash outflows to primarily occur during fiscal
years 2006 through 2008. We plan to fund these outflows from
normal operating cash flows. We anticipate that we will close or
relocate approximately 18 stores during fiscal 2005. We
anticipate that the majority of these closures will occur at the
end of the lease terms, resulting in minimal closed store costs.
We anticipate total cash outflows relating to these stores of
$0.3 million, which includes estimated incremental costs to
be measured at fair value when incurred.



|          |                     
|--------- | --------------------
|Note 15  | Stockholders Equity



| |                         
| | ------------------------
| | Stock Repurchase Program

On June 8, 2004, our Board of Directors approved a share
repurchase program that authorized the purchase of shares of our
common stock with an aggregate purchase price not to exceed
$25.0 million. The program provides that we may buy shares
in the open market or in privately negotiated transactions and
that we will base our decisions on whether to repurchase shares
and the timing of any such repurchases on factors including the
stock price, our cash and debt levels, and general economic and
market conditions. Shares of stock repurchased under the program
will be retired and returned to the status of authorized and
unissued shares. This program will expire in December 2005.
During the fourth quarter of fiscal 2004, we did not repurchase
any shares of our common stock. Since the inception of this
program, we have repurchased approximately 1.6 million
shares of our common stock at a cost of approximately
$23.7 million. The repurchase has been recorded as a
reduction to additional paid-in capital.



| |                         
| | ------------------------
| | Issuance of Common Stock

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
2.6 million shares in the offering. On November 20,
2002, the same stockholder together with affiliated stockholders
sold their remaining approximately 3.0 million shares. We
received no proceeds from the shares sold by the selling
stockholders. Issuance costs related to the stock offerings
approximated $0.9 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 $0.5 million of costs
charged to operating expense for the secondary offerings.
Proceeds from the primary offering were used to retire
approximately $71.7 million of our outstanding
11% Senior Subordinated Notes due 2006. The early
extinguishment of this debt resulted in a loss on debt
retirement of $6.0 million, primarily as a result of the
payment of an early redemption premium and the write off of
deferred debt issuance costs.

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CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                    
| | ---------------------------------------------------
| | Management Stock Purchase Agreements and Loan Plans

In May 2002, we extended a personal loan to Mr. Martin
Fraser, our President and Chief Operating Officer, in the
principal amount of $125,000, pursuant to Mr. Frasers
execution of a Promissory Note and Stock Pledge Agreement. The
Promissory Note provided for quarterly payment of interest on
the outstanding principal amount of the loan equal to the
average interest rate paid by CSK Auto, Inc. under the revolving
portion of its senior credit facility during such period.

During fiscal years 1997 and 2000, pursuant to executive stock
loan plans, we loaned $1.0 million and $0.2 million,
respectively, to certain executives to purchase shares of our
common stock. These loans are collateralized by stock under
pledge agreements, provide full recourse to the executive, bear
interest at the average rate paid under the revolving portion of
our senior credit facility and had maturity dates of 2003 and
2005, respectively. All loans that matured in 2003 have been
repaid. Only one loan maturing in 2005 and totaling
approximately $10,000 is still outstanding. The loan is
reflected as a stockholder receivable in the accompanying
Consolidated Statements of Stockholders Equity.



| |                           
| | --------------------------
| | Retirement of Common Stock

On September 30, 2002, Mr. Fraser surrendered
11,000 shares of CSK Auto Corporation common stock to us in
full payment and satisfaction of the above-referenced loan
(including accrued and unpaid interest thereon) and the then
outstanding balance of a separate loan in the principal amount
of $9,731 (plus the accrued and unpaid interest thereon) which
had been extended to Mr. Fraser in February 2000 pursuant
to our Senior Executive Stock Loan Plan. Upon receipt of the
shares, we cancelled and retired the shares. Mr. Fraser
currently has no outstanding loans with us.

In November 2002, a member of our Board of Directors resigned
and surrendered 952 shares of CSK Auto Corporation
common stock to us, which had been recently issued to him
pursuant to our outside director compensation policy. Upon
receipt of the shares, we cancelled and retired the shares.



|          |              
|--------- | -------------
|Note 16  | Legal Matters

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

We believe that we have a strong basis under California law for
disputing the payment of this assessment, and in October 2003 we
timely filed a Petition for Redetermination with the Board. In
May 2004, we received a response from the Board indicating that
the district office that conducted the audit upheld its
position. We attended an appeals conference on April 4,
2005 and are awaiting the decision from the appeals conference.
Our practices through December 2002 relative to the handling of
taxes on battery cores had been consistent for over a decade,
and it is our position that our consistent treatment of battery
core charges, together with prior tax audits and tax
auditors written commentary concerning our handling of
such charges, permits us to rely upon precedent set in prior
audits. Reliance on prior audits is a position that is
supportable under California law. We also have other defenses
and intend to vigorously defend our position with regard to this

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CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

matter. A liability for the potential sales tax and related
interest payments has not been recorded in our consolidated
financial statements.

We were served on October 26, 2004 with a lawsuit that was
filed in the Superior Court in San Diego, California. The
case was brought by a former sales associate in California who
resigned in January 2003, and purports to be a class action on
behalf of all current and former California hourly store
employees claiming that plaintiff and those similarly situated
were not paid for: (i) all time worked (i.e. off the
clock work), (ii) the minimum reporting time pay when
they reported to work a second time in a day, (iii) all
overtime due, (iv ) all wages due at termination, and
(v) amounts due for late or missed meal periods or rest
breaks. Plaintiff also alleges that we violated certain record
keeping requirements arising out of the foregoing alleged
violations. The lawsuit claims these alleged practices are
unfair business practices, and requests back pay, restitution,
penalties for violations of various Labor Code sections and for
failure to pay all wages due on termination, and interest for
the last four years, plus attorney fees and that the Company be
enjoined from committing further unfair business practices. We
believe we have meritorious defenses to all of these claims and
intend to defend the claims vigorously. If one or more of the
claims is permitted by the court to proceed as a class action
and is decided against us, the aggregate potential financial
exposure could be material to our annual results of operations.
We do not believe an adverse outcome would materially affect our
liquidity or consolidated financial position. However, the
litigation is in its early stages and we cannot predict the
outcome with any certainty. A liability for this matter has not
been recorded in our consolidated financial statements.

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



|          |                                    
|--------- | -----------------------------------
|Note 17  | Fair Value of Financial Instruments

The estimated fair values of our financial instruments, which
are determined by reference to quoted market prices, where
available, or are based upon comparisons to similar instruments
of comparable maturities, are as follows ($ in thousands):

|                                                   |  |                  |         |                  |  |          |         |            |  |  |         |  |  |  |         | 
|-------------------------------------------------- |  | ---------------- | ------- | ---------------- |  | -------- | ------- | ---------- |  |  | ------- |  |  |  | ------- | 
|                                                   |  |                  |         |                  |  |         
|                                                   |  |                  |         | February 1, 2004
|                                                   |  | January 30, 2005 |         | (Restated)      
|                                                   |  |                  |         |                 
|                                                   |  | Carrying         |         | Estimated        |  | Carrying |         | Estimated 
|                                                   |  | Amount           |         | Fair Value       |  | Amount   |         | Fair Value
|                                                   |  |                  |         |                  |  |          |         |           
|Receivables                                        |  |                  | 73,106  |                  |  |          | 73,106  |            |  |  | 91,932  |  |  |  | 91,932  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Amounts due under senior credit facility           |  |                  | 252,450 |                  |  |          | 252,450 |            |  |  | 255,000 |  |  |  | 255,000 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Obligations under 12% senior notes                 |  |                  |        |                  |  |          |        |            |  |  | 15,013  |  |  |  | 16,345  | 
|                                                  
|                                                  
|                                                  
|                                                  
|Obligations under 7% senior subordinated
    notes |  |                  | 220,519 |                  |  |          | 213,769 |            |  |  | 225,000 |  |  |  | 226,125 | 



|          |           
|--------- | ----------
|Note 18  | Guarantees

In connection with the disposition and/or sublease of certain
store locations and service centers, we have indemnified the
purchasers/subtenants against claims arising from environmental
contamination, if any, existing on the date of disposition. In
some of these cases, we are indemnified by or have recourse to
an unrelated third party for claims arising from any such
contamination, and also, or in the alternative, have insurance
coverage that may be available to offset the potential cost of
the indemnity obligation. We also indemnify third party
landlords under most of our store leases against claims
resulting from the occurrence of

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CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

certain triggering events or conditions arising out of our
operations from the leased premises. We enter into various other
agreements with unrelated parties in the ordinary course of our
business, which may include indemnity obligations relating to a
triggering event, or condition, which is, in most cases, based
on our future performance. In some cases, the indemnity
obligations are triggered by our prior acts or third
parties future performance, but are otherwise not limited
in duration or monetary exposure. However, in such instances, we
have determined that the likelihood of occurrence of the
triggering event is remote and/or that the potential cost to us
of performance of the indemnity would not be material.

Our risk management philosophy is to limit risk in any
transaction or relationship to the maximum extent reasonable in
relation to commercial and other considerations. Before
accepting any indemnity obligation, we make an informed risk
management decision considering, among other things, the
remoteness of the possibility that the triggering event will
occur, the potential costs to perform any resulting indemnity
obligation, possible actions to reduce the likelihood of a
triggering event or to reduce the costs of performing an
indemnity obligation, whether we are in fact indemnified by an
unrelated third party, insurance coverage that may be available
to offset the cost of the indemnity obligation, and the benefits
to us from the transaction or relationship.

Because most of our indemnity obligations are not limited in
duration or potential monetary exposure, we cannot calculate the
maximum potential amount of future payments that could be paid
under our indemnity obligations stemming from all our existing
agreements. We also accrue for contingent liabilities, including
those arising out of indemnity obligations, when a loss is
probable and the amounts can be reasonably estimated. We are not
aware of the occurrence of any triggering event or condition
that would have a material adverse impact on our financial
statements as a result of an indemnity obligation relating to
such triggering event or condition.

We have issued standby letters of credit related to insurance
coverage, lease obligations and other matters that expire during
fiscal 2005. As of January 30, 2005, total amounts
committed under these letters of credit were $35.9 million.

Note 19  Quarterly Results (unaudited)

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 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.

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CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth certain quarterly unaudited
operating data for fiscal 2004 and 2003. The unaudited quarterly
information includes all adjustments which management considers
necessary for a fair presentation of the information shown.
Please note the sum of the quarterly earnings (loss) per share
amounts within a fiscal year may differ from the total earnings
(loss) per share for the fiscal year due to the impact of
differing weighted average share outstanding calculations.

|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |   |         |  
|----------------------------------------- | --------------------------------------------- | ---------------------------------------- | ------- | ---------- | ------- | ---------- | ------- | ---------- | ------- | - | ------- | ------ | ------- | - | ------- | - | ------- | -
|                                          |                                               |                                         
|                                          |                                               | Fiscal Year 2004                        
|                                          |                                               |                                         
|                                          |                                               | First                                    |         | Second     |         | Third      |         | Fourth    
|                                          |                                               | Quarter                                  |         | Quarter    |         | Quarter    |         | Quarter(a)
|                                          |                                               |                                          |         |            |         |            |         |           
|                                          |                                               | (Restated)                               |         | (Restated) |         | (Restated) |         |           
|                                          |                                               |                                         
|                                          |                                               | (In thousands, except per share amounts)
|                                         
|                                         
|                                         
|                                         
|Results of operations                     |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                         
|                                         
|                                         
|                                         
|Sales                                     |                                               | $                                        | 397,054 |            |         | $          | 409,057 |            |         | $ | 401,457 |        |         | $ | 369,892 |  
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|Gross profit, as previously reported      |                                               |                                          | 188,596 |            |         |            | 191,317 |            |         |   | 190,892 |        |         |   |         |  
|                                         
|                                         
|                                         
|                                         
|                                          | Change in vendor allowance recognition period |                                          |         | 285        |         |            |         | 36         |         |   |         | 524    |         |   |         |   |        
|                                         
|                                         
|                                         
|                                         
|                                          | Other vendor allowance adjustments            |                                          |         | (1,053     | )       |            |         | 92         |         |   |         | 52     |         |   |         |   |        
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustments                  |                                          |         | (9         | )       |            |         | (8         | )       |   |         | (4     | )       |   |         |   |        
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                          |                                               | As corrected                             |         |            | 187,819 |            |         |            | 191,437 |   |         |        | 191,464 |   |         |   |         |  
|                                         
|                                         
|                                         
|                                         
|                                          | Inventory accounting change                   |                                          |         | 876        |         |            |         | 3,226      |         |   |         | (4,021 | )       |   |         |   |        
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                          |                                               | Gross profit, as restated                |         | $          | 188,695 |            |         | $          | 194,663 |   |         | $      | 187,443 |   |         | $ | 163,059 |  
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|Store closing costs                       |                                               | $                                        | 326     |            |         | $          | 561     |            |         | $ | 721     |        |         | $ | 583     |  
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|Operating profit, as previously reported  |                                               | $                                        | 29,525  |            |         | $          | 30,319  |            |         | $ | 31,453  |        |         |   |         |  
|                                         
|                                         
|                                         
|                                         
|                                          | Change in vendor allowance recognition period |                                          |         | 285        |         |            |         | 36         |         |   |         | 524    |         |   |         |   |        
|                                         
|                                         
|                                         
|                                         
|                                          | Other vendor allowance adjustments            |                                          |         | (1,053     | )       |            |         | (503       | )       |   |         | 515    |         |   |         |   |        
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustments                  |                                          |         | 24         |         |            |         | (69        | )       |   |         | (165   | )       |   |         |   |        
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                          |                                               | As corrected                             |         |            | 28,781  |            |         |            | 29,783  |   |         |        | 32,327  |   |         |   |         |  
|                                         
|                                         
|                                         
|                                         
|Inventory accounting change               |                                               |                                          | 876     |            |         |            | 3,226   |            |         |   | (4,021  | )      |         |   |         |  
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                          |                                               | Operating profit, as restated            |         | $          | 29,657  |            |         | $          | 33,009  |   |         | $      | 28,306  |   |         | $ | 5,156   |  
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|Interest expense, as previously reported  |                                               | $                                        | 8,255   |            |         | $          | 7,592   |            |         | $ | 7,837   |        |         |   |         |  
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustments                  |                                          |         | 359        |         |            |         | 374        |         |   |         | 380    |         |   |         |   |        
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                          |                                               | Interest expense, as corrected           |         | $          | 8,614   |            |         | $          | 7,966   |   |         | $      | 8,217   |   |         | $ | 8,663   |  
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|Loss on debt retirement                   |                                               | $                                        |        |            |         | $          |        |            |         | $ |        |        |         | $ | 1,026   |  
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|Net income (loss), as previously reported |                                               | $                                        | 12,953  |            |         | $          | 13,858  |            |         | $ | 14,368  |        |         |   |         |  
|                                         
|                                         
|                                         
|                                         
|                                          | Error corrections, net of tax                 |                                          |         | (670       | )       |            |         | (552       | )       |   |         | 300    |         |   |         |   |        
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                          | As corrected                                  |                                          |         | 12,283     |         |            |         | 13,306     |         |   |         | 14,668 |         |   |         |   |        
|                                         
|                                         
|                                         
|                                         
|                                          | Inventory accounting change, net of tax       |                                          |         | 532        |         |            |         | 1,958      |         |   |         | (2,441 | )       |   |         |   |        
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  
|                                          |                                               | Net income (loss), as restated           |         | $          | 12,815  |            |         | $          | 15,264  |   |         | $      | 12,227  |   |         | $ | (3,425  | )
|                                          |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |  

77



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##### Table of Contents



CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                           |                                 |                                          |   |            |       |            |   |            |        |  |   |      |           |   |  |   |       |  
|-------------------------- | ------------------------------- | ---------------------------------------- | - | ---------- | ----- | ---------- | - | ---------- | ------ |  | - | ---- | --------- | - |  | - | ----- | -
|                           |                                 |                                         
|                           |                                 | Fiscal Year 2004                        
|                           |                                 |                                         
|                           |                                 | First                                    |   | Second     |       | Third      |   | Fourth    
|                           |                                 | Quarter                                  |   | Quarter    |       | Quarter    |   | Quarter(a)
|                           |                                 |                                          |   |            |       |            |   |           
|                           |                                 | (Restated)                               |   | (Restated) |       | (Restated) |   |           
|                           |                                 |                                         
|                           |                                 | (In thousands, except per share amounts)
|                          
|                          
|                          
|                          
|Earnings (loss) per share: |                                 |                                          |   |            |       |            |   |            |        |  |   |      |           |   |  |  
|                          
|                          
|                          
|                          
|                           | Basic, as previously reported   |                                          | $ | 0.28       |       |            | $ | 0.30       |        |  | $ | 0.32 |           |   |  |   |      
|                          
|                          
|                          
|                          
|                           |                                 | Error corrections, net of tax            |   |            | (0.01 | ) 0.27     |   |            |  0.30 |  |   |      | 0.01 0.31 |   |  |   |       |  
|                          
|                          
|                          
|                          
|                           |                                 | As corrected                             |   |            | 0.01  |            |   |            | 0.04   |  |   |      | (0.06     | ) |  |   |       |  
|                          
|                          
|                          
|                          
|                           |                                 | Inventory accounting change, net of tax  |   | $          | 0.28  |            |   | $          | 0.34   |  |   | $    | 0.27      |   |  | $ | (0.07 | )
|                          
|                          
|                          
|                          
|                           | Basic, as restated              |                                          | $ | 0.28       |       |            | $ | 0.30       |        |  | $ | 0.32 |           |   |  |   |      
|                          
|                          
|                          
|                          
|                           | Diluted, as previously reported |                                          |   | (0.01      | )     |            |   |           |        |  |   |     |           |   |  |   |      
|                          
|                          
|                          
|                          
|                           |                                 | Error corrections, net of tax            |   |            | 0.27  |            |   |            | 0.30   |  |   |      | 0.32      |   |  |   |       |  
|                          
|                          
|                          
|                          
|                           |                                 | As corrected                             |   |            | 0.01  |            |   |            | 0.04   |  |   |      | (0.06     | ) |  |   |       |  
|                          
|                          
|                          
|                          
|                           |                                 | Inventory accounting change, net of tax  |   | $          | 0.28  |            |   | $          | 0.34   |  |   | $    | 0.26      |   |  | $ | (0.07 | )
|                          
|                          
|                          
|                          
|                           | Diluted, as restated            |                                          |   |            |       |            |   |            |        |  |   |      |           |   |  |   |      
|                           |                                 |                                          |   |            |       |            |   |            |        |  |   |      |           |   |  |  



---



|    |                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Amounts and per share amounts for the fourth quarter of fiscal
    2004 have not been previously reported and, accordingly,
    restated amounts as shown represent currently reported amounts.

|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |        |         | 
|---------------------------------------- | --------------------------------------------- | ---------------------------------------- | ------- | ---------- | ------- | ---------- | ------- | ---------- | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ------- | 
|                                         |                                               |                                         
|                                         |                                               | Fiscal Year 2003                        
|                                         |                                               |                                         
|                                         |                                               | First                                    |         | Second     |         | Third      |         | Fourth    
|                                         |                                               | Quarter                                  |         | Quarter    |         | Quarter    |         | Quarter   
|                                         |                                               |                                          |         |            |         |            |         |           
|                                         |                                               | (Restated)                               |         | (Restated) |         | (Restated) |         | (Restated)
|                                         |                                               |                                         
|                                         |                                               | (In thousands, except per share amounts)
|                                        
|                                        
|                                        
|                                        
|Results of operations                    |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|                                        
|                                        
|                                        
|                                        
|Sales                                    |                                               | $                                        | 377,449 |            |         | $          | 418,514 |            |         | $ | 409,750 |        |         | $ | 372,343 |       
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|Gross profit, as previously reported     |                                               | $                                        | 175,024 |            |         | $          | 193,702 |            |         | $ | 192,185 |        |         | $ | 187,245 |       
|                                        
|                                        
|                                        
|                                        
|                                         | Change in vendor allowance recognition period |                                          |         | 1,559      |         |            |         | 1,901      |         |   |         | (3,490 | )       |   |         | (1,139 | )      
|                                        
|                                        
|                                        
|                                        
|                                         | Other vendor allowance adjustments            |                                          |         | 117        |         |            |         | (1,297     | )       |   |         | (296   | )       |   |         | (4,506 | )      
|                                        
|                                        
|                                        
|                                        
|                                         | Lease accounting adjustments                  |                                          |         | (8         | )       |            |         | (8         | )       |   |         | (8     | )       |   |         | (8     | )      
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|                                         |                                               | As corrected                             |         |            | 176,692 |            |         |            | 194,298 |   |         |        | 188,391 |   |         |        | 181,592 | 
|                                        
|                                        
|                                        
|                                        
|                                         | Inventory accounting change                   |                                          |         | (13,839    | )       |            |         | (4,574     | )       |   |         | 3,331  |         |   |         | (8,787 | )      
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|                                         |                                               | Gross profit, as restated                |         | $          | 162,853 |            |         | $          | 189,724 |   |         | $      | 191,722 |   |         | $      | 172,805 | 
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|Store closing costs                      |                                               | $                                        | 93      |            |         | $          | 43      |            |         | $ | 203     |        |         | $ | 12,330  |       
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|Operating profit, as previously reported |                                               | $                                        | 26,208  |            |         | $          | 35,184  |            |         | $ | 36,914  |        |         | $ | 18,305  |       
|                                        
|                                        
|                                        
|                                        
|                                         | Change in vendor allowance recognition period |                                          |         | 1,559      |         |            |         | 1,901      |         |   |         | (3,490 | )       |   |         | (1,139 | )      
|                                        
|                                        
|                                        
|                                        
|                                         | Other vendor allowance adjustments            |                                          |         | 117        |         |            |         | (1,297     | )       |   |         | (296   | )       |   |         | (4,506 | )      
|                                        
|                                        
|                                        
|                                        
|                                         | Lease accounting adjustments                  |                                          |         | (244       | )       |            |         | (281       | )       |   |         | (227   | )       |   |         | (335   | )      
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|                                         |                                               | As corrected                             |         |            | 27,640  |            |         |            | 35,507  |   |         |        | 32,901  |   |         |        | 12,325  | 
|                                        
|                                        
|                                        
|                                        
|                                         | Inventory accounting change                   |                                          |         | (13,839    | )       |            |         | (4,574     | )       |   |         | 3,331  |         |   |         | (8,788 | )      
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       
|                                         |                                               | Operating profit, as restated            |         | $          | 13,801  |            |         | $          | 30,933  |   |         | $      | 36,232  |   |         | $      | 3,537   | 
|                                         |                                               |                                          |         |            |         |            |         |            |         |   |         |        |         |   |         |       

78



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CSK AUTO CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |         |         |  
|----------------------------------------- | --------------------------------------- | ---------------------------------------- | ------ | ---------- | ------ | ---------- | ------ | ---------- | ------ | - | ------ | ------ | ------ | - | ------- | ------- | ------- | -
|                                          |                                         |                                         
|                                          |                                         | Fiscal Year 2003                        
|                                          |                                         |                                         
|                                          |                                         | First                                    |        | Second     |        | Third      |        | Fourth    
|                                          |                                         | Quarter                                  |        | Quarter    |        | Quarter    |        | Quarter   
|                                          |                                         |                                          |        |            |        |            |        |           
|                                          |                                         | (Restated)                               |        | (Restated) |        | (Restated) |        | (Restated)
|                                          |                                         |                                         
|                                          |                                         | (In thousands, except per share amounts)
|                                         
|                                         
|                                         
|                                         
|Interest expense, as previously reported  |                                         | $                                        | 13,936 |            |        | $          | 13,251 |            |        | $ | 12,396 |        |        | $ | 11,409  |        
|                                         
|                                         
|                                         
|                                         
|                                          | Lease accounting adjustment             |                                          |        | 334        |        |            |        | 359        |        |   |        | 367    |        |   |         | 366     |        
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          |                                         | Interest expense, as corrected           |        | $          | 14,270 |            |        | $          | 13,610 |   |        | $      | 12,763 |   |         | $       | 11,775  |  
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|Loss on debt retirement                   |                                         | $                                        |       |            |        | $          | 4,315  |            |        | $ |       |        |        | $ | 45,179  |        
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|Net income (loss), as previously reported |                                         | $                                        | 7,523  |            |        | $          | 10,814 |            |        | $ | 15,042 |        |        | $ | (22,582 | )      
|                                         
|                                         
|                                         
|                                         
|                                          | Error corrections, net of tax           |                                          |        | 666        |        |            |        | (22        | )      |   |        | (2,658 | )      |   |         | (3,852  | )      
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          | As corrected                            |                                          |        | 8,189      |        |            |        | 10,792     |        |   |        | 12,384 |        |   |         | (26,434 | )      
|                                         
|                                         
|                                         
|                                         
|                                          | Inventory accounting change, net of tax |                                          |        | (8,399     | )      |            |        | (2,776     | )      |   |        | 2,022  |        |   |         | (5,333  | )      
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          |                                         | Net income (loss), as restated           |        | $          | (210   | )          |        | $          | 8,016  |   |        | $      | 14,406 |   |         | $       | (31,767 | )
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|Earnings (loss) per share:                |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                         
|                                         
|                                         
|                                         
|                                          | Basic, as previously reported           |                                          | $      | 0.17       |        |            | $      | 0.24       |        |   | $      | 0.33   |        |   | $       | (0.49   | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                         | Error corrections, net of tax            |        |            | 0.01   |            |        |            |       |   |        |        | (0.06  | ) |         |         | (0.08   | )
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          |                                         | As corrected                             |        |            | 0.18   |            |        |            | 0.24   |   |        |        | 0.27   |   |         |         | (0.57   | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                         | Inventory accounting change, net of tax  |        |            | (0.19  | )          |        |            | (0.06  | ) |        |        | 0.04   |   |         |         | (0.11   | )
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          | Basic, as restated                      |                                          | $      | (0.01      | )      |            | $      | 0.18       |        |   | $      | 0.31   |        |   | $       | (0.68   | )      
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          | Diluted, as previously reported         |                                          | $      | 0.17       |        |            | $      | 0.24       |        |   | $      | 0.33   |        |   | $       | (0.49   | )      
|                                         
|                                         
|                                         
|                                         
|                                          |                                         | Error corrections, net of tax            |        |            | 0.01   |            |        |            |       |   |        |        | (0.06  | ) |         |         | (0.08   | )
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          |                                         | As corrected                             |        |            | 0.18   |            |        |            | 0.24   |   |        |        | 0.27   |   |         |         | (0.57   | )
|                                         
|                                         
|                                         
|                                         
|                                          |                                         | Inventory accounting change, net of tax  |        |            | (0.19  | )          |        |            | (0.06  | ) |        |        | 0.04   |   |         |         | (0.11   | )
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        
|                                          | Diluted, as restated                    |                                          | $      | (0.01      | )      |            | $      | 0.18       |        |   | $      | 0.31   |        |   | $       | (0.68   | )      
|                                          |                                         |                                          |        |            |        |            |        |            |        |   |        |        |        |   |         |        

In the fourth quarter of fiscal 2004, the Company recorded
$5.1 million of adjustments that increased cost of sales.
The adjustments consisted of $3.6 million for revision of
estimates for vendor allowances primarily due to lower than
anticipated purchase volumes, and $1.5 million for an
inventory allowance for merchandise we expect to sell in future
periods below cost.

The Company also recorded adjustments to incentive compensation
accruals and self-insurance liabilities, which, collectively,
increased operating and administrative expenses approximately
$3.6 million in the fourth quarter of 2004.

In the fourth quarter of fiscal 2003, the Company recorded an
adjustment of $12.2 million in closed store expenses.

The Company incurred $1.0 million of debt retirement costs
in the fourth quarter of 2004 compared to $45.2 million in
the fourth quarter of 2003.

79



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

None






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the
design and operation, as of January 30, 2005, of our
disclosure controls and procedures, as such term is defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934,
as amended (the Exchange Act). Our disclosure controls and
procedures have been designed to ensure that information we are
required to disclose in our reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported
within the time periods specified by the SECs rules and
forms and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and our
Chief Financial Officer, to allow timely decisions regarding
required disclosure.

Based on this evaluation, our Chief Executive Officer and our
Chief Financial Officer concluded that, for the reasons set
forth in Managements Report on Internal Control Over
Financial Reporting set forth in Item 8 our
disclosure controls and procedures were not effective as of
January 30, 2005. In light of the material weaknesses
described in Managements Report on Internal Control
Over Financial Reporting, the Company performed additional
analysis and other post-closing procedures to ensure that our
consolidated financial statements were prepared in accordance
with generally accepted accounting principles. Accordingly,
management believes that the financial statements included in
this Form 10-K fairly present in all material respects our
financial position, results of operations and cash flows for the
periods presented.

Managements Report on Internal Control Over Financial
Reporting

See Managements Report on Internal Control over
Financial Reporting set forth in Item 8,
Consolidated Financial Statements and Supplementary
Data. PricewaterhouseCoopers LLP, an independent
registered public accounting firm, has issued an audit report on
our assessment of internal control over financial reporting
which is also set forth in Item 8, Consolidated
Financial Statements and Supplementary Data.

Changes in Internal Control over Financial Reporting

Except as noted in Managements Report on Internal
Control Over Financial Reporting set forth in Item 8,
there were no changes in our internal control over financial
reporting that occurred during our most recently completed
fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.






|         |                  
|-------- | -----------------
|Item 9B. | Other Information

None.




PART III






|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

The information required by this item is incorporated by
reference from the information under the captions Election
of Directors, Executive Officers, Audit
Committee, Section 16(a) Beneficial Ownership
Reporting Compliance and Communications with the
Board of Directors contained in the proxy statement.

80



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|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The information required by this item is incorporated by
reference from the information under the caption Executive
Compensation contained in the Proxy Statement.






|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management

The information required by this item is incorporated by
reference from the information under the caption Security
Ownership of Certain Beneficial Owners and Management contained
in the Proxy Statement.






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

The information required by this item is incorporated by
reference from the information under the caption Certain
Relationships and Related Transactions contained in the Proxy
Statement.






|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services

The information required by this item is incorporated by
reference from the information under the caption Report of the
Audit Committee contained in the Proxy Statement.




PART IV






|         |                                          
|-------- | -----------------------------------------
|Item 15. | Exhibit and Financial Statement Schedules

(a)(1) The following consolidated financial statements of CSK
Auto Corporation are included in Item 8. of this Report on
Form 10-K.

Report of Independent Registered Public Accounting Firm



| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Operations  Fiscal Years
    Ended January 30, 2005, February 1, 2004, and
    February 2, 2003          
|
| | Consolidated Balance Sheets  January 30, 2005
    and February 1, 2004                                                              
|
| | Consolidated Statements of Cash Flows  Fiscal Years
    Ended January 30, 2005, February 1, 2004, and
    February 2, 2003          
|
| | Consolidated Statements of Stockholders Equity 
    Fiscal Years Ended January 30, 2005, February 1, 2004,
    and February 2, 2003

Notes to Consolidated Financial Statements

(a)(2) The following financial statement schedules of CSK Auto
Corporation for the three years ended January 30, 2005 are
included in this Report on Form  10-K, as required by
Item 14(d): Schedule I Financial Information of the
Registrant and Schedule II Valuation and Qualifying
Accounts. Other schedules have been omitted because information
is not required or otherwise is included in the Notes to
Consolidated Financial Statements.

(a)(3) and (b) Exhibits:

|        |   |                         |  |                                                                                                                                                                                                                                  
|------- | - | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |                        
|Number  |   | Description of Exhibits
|        |   |                        
|        | 3 | .01                     |  | Restated Certificate of Incorporation of the
    Company, incorporated herein by reference to Exhibit 3.01
    of our Annual Report on Form 10-K, filed on May 4, 1998
    (File No. 001-13927).                                 
|       
|        | 3 | .02                     |  | Certificate of Correction to the Restated
    Certificate of Incorporation of the Company, incorporated herein
    by reference to Exhibit 3.02 of our Annual Report on Form
    10-K, filed on May 4, 1998 (File No. 001-13927).

81



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|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 3  | .03                     |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of CSK Auto Corporation,
    incorporated herein by reference to Exhibit 3.02.1 of our
    Report on Form 10-Q, filed on September 18, 2002 (File No.
    001-13927).                                                                                                                                                                                                                                                                                                                                     
|       
|        | 3  | .04                     |  | Amended and Restated By-laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of our
    Annual Report on Form 10-K, filed on April 28, 1999
    (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 3  | .04.1                   |  | First Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our annual report on Form 10-K, filed on
    May 1, 2001 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 3  | .04.2                   |  | Second Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.2 of our Current Report on Form 10-Q, filed on
    June 14, 2004 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 4  | .01                     |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 4  | .02                     |  | Amended and Restated Credit Agreement, dated
    January 16, 2004, by and among CSK Auto, Inc., the several
    lenders from time to time parties thereto (the Lenders),
    JPMorgan Chase Bank, as administrative agent for the Lenders,
    Credit Suisse First Boston, acting through its Cayman Islands
    Branch, as syndication agent for the Lenders, and Bank of
    America, N.A. and U.S. Bank N.A., as Co-Documentation
    Agents for the Lenders, incorporated herein by reference to
    Exhibit 99.2 of our Current Report on Form 8-K, filed
    January 20, 2004.
|       
|        | 4  | .02.1                   |  | Amendment No. 1 to the Amended and Restated
    Credit Agreement, dated as of April 29, 2004, incorporated
    herein by reference to Exhibit 4.01.1 of our Current Report
    on Form 10-Q, filed May 10, 2004. (File No. 001-13927)                                                                                                                                                                                                                                                                                                                                               
|       
|        | 4  | .02.2                   |  | Amendment No. 2 to the Amended and Restated
    Credit Agreement, dated as of August 10, 2004, incorporated
    herein by reference to Exhibit 99.1 of our Current Report
    on Form 8-K, filed August 12, 2004. (File No. 001-13927)                                                                                                                                                                                                                                                                                                                                              
|       
|        | 4  | .03                     |  | Indenture dated January 16, 2004, by and
    among CSK Auto, Inc., CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc. as guarantors,
    and the Bank of New York, as Trustee, incorporated herein by
    reference to our Current Report on Form 8-K filed on
    January 20, 2004 (File No. 001-13927).                                                                                                                                                                                                                                         
|       
|        | 10 | .01                     |  | Amended and Restated Employment Agreement, dated
    as of June 12, 1998, between CSK Auto, Inc. and Maynard
    Jenkins, incorporated herein by reference to our Quarterly
    Report on Form 10-Q, filed on September 11, 1998 (File
    No. 001-13927).                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .02                     |  | Amendment to Employment Agreement, dated as of
    September 24, 1999, between CSK Auto, Inc. and Maynard
    Jenkins, incorporated herein by reference to our Annual Report
    on Form 10-K, filed on April 28, 2000 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .03                     |  | Stock Option Agreement, dated March 9, 1998,
    between the Company and Maynard Jenkins, incorporated herein by
    reference to our Registration Statement on Form S-1 (File
    No. 333-43211).                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .04                     |  | Restated 1996 Associate Stock Option Plan,
    incorporated herein by reference to our Registration Statement
    on Form S-1 (File No. 333-67231).                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10 | .05                     |  | Amended and Restated Supplemental Executive
    Retirement Plan Agreement, dated December 18, 2004 between
    CSK Auto, Inc. and Maynard Jenkins, incorporated herein by
    reference to our Current Report on Form 8-K, filed
    December 21, 2004 (File No. 001-13927).                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .06                     |  | Restated 1996 Executive Stock Option Plan
    (Amended and Restated June 8, 1999), incorporated herein by
    reference to our definitive Proxy Statement, filed on
    May 11, 1999 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .07                     |  | 1999 Employee Stock Option Plan, incorporated by
    reference to our definitive Proxy Statement, filed on
    May 11, 1999 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .08                     |  | CSK Auto Corporation Directors Stock Plan,
    incorporated herein by reference to our Quarterly Report on Form
    10-Q, filed on September 11, 1998 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                                                         
|       
|        | 10 | .09                     |  | Form of Restricted Stock Agreement pursuant to
    the CSK Auto Corporation Directors Stock Plan, incorporated
    herein by reference to our Annual Report on Form 10-K, filed on
    April 28, 2000 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                         

82



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|        |    |                         |  |                                                                                                                                                                                                                                                                                
|------- | -- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 10 | .10                     |  | CSK Auto Corporation 2000 Senior Executive Stock
    Loan Plan, incorporated herein by reference to
    Exhibit 10.11 of our Annual Report on Form 10-K, filed on
    May 1, 2001 (File No. 001-13927).                                                                        
|       
|        | 10 | .11                     |  | Amended and Restated Lease, dated
    October 23, 1989 (the Missouri Falls Lease), between Auto
    and Missouri Falls Associates Limited Partnership, incorporated
    herein by reference to CSK Auto, Incs Registration
    Statement on Form S-4 (File No. 333-22511).    
|       
|        | 10 | .12                     |  | First Amendment to the Missouri Falls Lease,
    dated November 22, 1991, between Auto and Missouri Falls
    Associates Limited Partnership, incorporated herein by reference
    to CSK Auto, Incs Registration Statement on Form S-4
    (File No. 333-22511).             
|       
|        | 10 | .13                     |  | Amendment to Leases, dated as of October 30,
    1996, by and between Missouri Falls Associates Limited
    Partnership and Auto, incorporated herein by reference to CSK
    Auto, Incs Registration Statement on Form S-4 (File
    No. 333-22511).                         
|       
|        | 10 | .14                     |  | Lease dated July 31, 1997 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated April 1, 2000, incorporated herein by reference to
    Exhibit 10.15 of our Annual Report on Form 10-K filed on
    May 1, 2001 (File No. 001-13927).     
|       
|        | 10 | .15                     |  | Lease dated April 20, 2000 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated February 23, 2001, incorporated herein by reference
    to Exhibit 10.15 of our Annual Report on Form 10-K filed on
    May 1, 2001 (File No. 001-13927).
|       
|        | 10 | .16                     |  | Lease dated April 20, 2000 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated August 20, 2000, incorporated herein by reference to
    Exhibit 10.15 of our Annual Report on Form 10-K filed on
    May 1, 2001 (File No. 001-13927).  
|       
|        | 10 | .17                     |  | Amendment to all CSK Auto, Inc. Leases at
    Missouri Falls, dated December 6, 2001, by and between
    Missouri Falls Partners and MFP Holdings, LLC and CSK Auto,
    Inc., incorporated by reference to our Registration Statement on
    Form S-4 filed February 11, 2002.
|       
|        | 10 | .18                     |  | Employment Agreement, dated October 13,
    1995, between CSK Auto, Inc. and Don Watson, incorporated herein
    by reference to Exhibit 10.21 of our Annual Report on Form
    10-K, filed on May 1, 2001 (File No. 001-13927).                                               
|       
|        | 10 | .19                     |  | Employment Agreement between CSK Auto, Inc. and
    Lon B. Novatt, incorporated herein by reference to
    Exhibit 10.22 of our Annual Report on Form 10-K, filed on
    May 1, 2001 (File No. 001-13927).                                                                     
|       
|        | 10 | .20                     |  | Employment Agreement, dated February 25,
    1997, between CSK Auto, Inc. and Dale E. Ward, incorporated
    herein by reference to Exhibit 10.23 of our Annual Report
    on Form 10-K, filed on May 1, 2001 (File No. 001-13927).                                            
|       
|        | 10 | .21*                    |  | Indemnity Agreement  Form of Indemnity
    Agreement between CSK Auto Corporation and each Director.                                                                                                                                                                          
|       
|        | 10 | .22                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Lon Novatt, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                       
|       
|        | 10 | .23                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Dale Ward, dated
    February 14, 2002 incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                         
|       
|        | 10 | .24                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Don Watson, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                       
|       
|        | 10 | .25                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Martin Fraser, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                    
|       
|        | 10 | .26                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Larry Ellis, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                      

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##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                             
|------- | -- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 10 | .27                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Larry Buresh, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                                                                                  
|       
|        | 10 | .28                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Bill Evans, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                                                                                    
|       
|        | 10 | .29                     |  | Indicative Callable Swap Term Sheet dated
    April 5, 2004, between Lehman Brothers and CSK Auto, Inc.,
    incorporated herein by reference to Exhibit 10.57 of our
    Annual Report on Form 10-K, filed April 15, 2004.
    (File No. 001-13927)                                                                                        
|       
|        | 10 | .30                     |  | Amended and Restated Registration Rights
    Agreement dated May 16, 2002, by and between CSK Auto
    Corporation, LBI 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).                    
|       
|        | 10 | .31                     |  | Employment Agreement, dated March 30, 2000,
    between CSK Auto, Inc. and Jim Bazlen incorporated herein by
    reference to Exhibit 10.47 of our Annual Report on Form
    10-K filed May 5, 2003 (File No. 001-13927).                                                                                                                   
|       
|        | 10 | .31.1                   |  | Amendment to Employment Agreement with James
    Bazlen dated October 15, 2004 incorporated herein by
    reference to Exhibit 99.4 of our Current Report on Form 8-K
    filed October 20, 2004 (File No. 001-13927).                                                                                                                      
|       
|        | 10 | .32                     |  | Non-Qualified Stock Option
    Agreement  Employee Form to be used in
    connection with our 2004 Stock and Incentive Plan, incorporated
    herein by reference to Exhibit 99.1 of our Current Report
    on Form 8-K filed October 20, 2004 (File No. 001-13927).                                                                       
|       
|        | 10 | .33                     |  | Non-Qualified Stock Option
    Agreement  Director Form to be used in
    connection with our 2004 Stock and Incentive Plan, incorporated
    herein by reference to Exhibit 99.2 of our Current Report
    on Form 8-K filed October 20, 2004 (File No. 001-13927).                                                                       
|       
|        | 10 | .34                     |  | Restricted Stock Agreement to be used in
    connection with our 2004 Stock and Incentive Plan, incorporated
    herein by reference to Exhibit 99.1 of our Current Report
    on Form 8-K filed October 20, 2004 (File No. 001-13927).                                                                                                     
|       
|        | 10 | .35                     |  | Stock Purchase Agreement dated January 21,
    2005 by and between CSK Auto, Inc. and Mobile Productivity,
    Inc., incorporated herein by reference to Exhibit 99.2 of
    our Current Report on Form 8-K filed January 26, 2005
    (File No. 001-13927).                                                                                
|       
|        | 10 | .36*                    |  | Summary of Executive Compensation Agreements.                                                                                                                                                                                                                                                                                               
|       
|        | 10 | .37*                    |  | Waiver, effective May 1, 2005, to the
    Amended and Restated Credit Agreement dated as of
    January 16, 2004, by and among CSK AUTO, INC., the several
    banks and other financial institutions or entities from time to
    time party thereto (the Lenders), and JPMorgan Chase
    Bank, as administrative agent for the Lenders.
|       
|        | 18 | .01*                    |  | Preferability letter from PricewaterhouseCoopers
    LLP, our independent registered public accounting firm,
    concerning our change in inventory accounting method from LIFO
    to FIFO.                                                                                                                                                
|       
|        | 21 | .01*                    |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                
|       
|        | 23 | .01*                    |  | Consent of Independent Registered Public
    Accounting Firm dated May 2, 2005.                                                                                                                                                                                                                                                             
|       
|        | 31 | .1*                     |  | Certification by the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                 
|       
|        | 31 | .2*                     |  | Certification by the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                 
|       
|        | 32 | .0*                     |  | Certification of the Chief Executive Officer and
    Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                              



---

* Filed herewith

84



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##### Table of Contents



Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


BALANCE SHEETS

|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |          |         | 
|---------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------- | - | ------- | -------- | ------- | 
|                                         |                                                                                                                                                                                         | January 30,                                |         | February 1,
|                                         |                                                                                                                                                                                         | 2005                                       |         | 2004       
|                                         |                                                                                                                                                                                         |                                            |         |            
|                                         |                                                                                                                                                                                         |                                            |         | (Restated) 
|                                         |                                                                                                                                                                                         |                                           
|                                         |                                                                                                                                                                                         | (In thousands, except share data)         
|                                        
|                                        
|                                        
|                                        
|ASSETS                                  
|                                        
|                                        
|                                        
|                                        
|Investment in subsidiaries               |                                                                                                                                                                                         | $                                          | 214,284 |             |         | $ | 198,411 |         
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total assets                               |         | $           | 214,284 |   |         | $        | 198,411 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                        
|                                        
|                                        
|                                        
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|                                        
|                                        
|                                        
|                                        
|Stockholders equity:                    |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                        
|                                        
|                                        
|                                        
|                                         | Common stock, $0.01 par value,
    58,000,000 shares authorized, 45,116,301 and
    46,497,936 shares issued and outstanding at
    January 30, 2005 and February 1, 2004, respectively |                                            |         | 451         |         |   |         | 465      |        
|                                        
|                                        
|                                        
|                                        
|                                         | Additional paid-in capital                                                                                                                                                              |                                            |         | 446,537     |         |   |         | 466,576  |        
|                                        
|                                        
|                                        
|                                        
|                                         | Stockholder receivable                                                                                                                                                                  |                                            |         | (10         | )       |   |         | (73      | )      
|                                        
|                                        
|                                        
|                                        
|                                         | Deferred compensation                                                                                                                                                                   |                                            |         | (1,018      | )       |   |         |         |        
|                                        
|                                        
|                                        
|                                        
|                                         | Accumulated deficit                                                                                                                                                                     |                                            |         | (231,676    | )       |   |         | (268,557 | )      
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total stockholders equity                 |         |             | 214,284 |   |         |          | 198,411 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total liabilities and stockholders equity |         | $           | 214,284 |   |         | $        | 198,411 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         

The accompanying note is an integral part of these financial
statements.

85



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##### Table of Contents



Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


STATEMENTS OF OPERATIONS

|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |            | 
|-------------------------------------------------- | ------------------------------------------ | ------------------------------------------------- | ------ | ----------- |  | ----------- | ------- | ---------- | - | - | ----- | ---------- | 
|                                                   |                                            |                                                  
|                                                   |                                            | Fiscal Year Ended                                
|                                                   |                                            |                                                  
|                                                   |                                            | January 30,                                       |        | February 1, |  | February 2,
|                                                   |                                            | 2005                                              |        | 2004        |  | 2003       
|                                                   |                                            |                                                   |        |             |  |            
|                                                   |                                            |                                                   |        | (Restated)  |  | (Restated) 
|                                                   |                                            |                                                  
|                                                   |                                            | ($ in thousands, except share and per share data)
|                                                  
|                                                  
|                                                  
|                                                  
|Equity interest in income (loss) from subsidiaries |                                            | $                                                 | 36,881 |             |  | $           | (9,555  | )          |   | $ | 2,396 |           
|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|Income (loss) before income taxes                  |                                            |                                                   | 61,642 |             |  |             | (17,409 | )          |   |   | 2,072 |           
|                                                  
|                                                  
|                                                  
|                                                  
|Income tax expense (benefit)                       |                                            |                                                   | 24,761 |             |  |             | (7,854  | )          |   |   | (324  | )         
|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|Net income (loss)                                  |                                            | $                                                 | 36,881 |             |  | $           | (9,555  | )          |   | $ | 2,396 |           
|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|Basic earnings per share:                          |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income (loss)per share                 |                                                   | $      | 0.81        |  |             | $       | (0.21      | ) |   | $     | 0.06       | 
|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|                                                   | Shares used in computing per share amounts |                                                   |        | 45,713,271  |  |             |         | 45,657,710 |   |   |       | 40,634,522 | 
|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|Diluted earnings per share:                        |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income(loss)per share                  |                                                   | $      | 0.80        |  |             | $       | (0.21      | ) |   | $     | 0.06       | 
|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |           
|                                                   | Shares used in computing per share amounts |                                                   |        | 46,002,376  |  |             |         | 45,657,710 |   |   |       | 40,751,802 | 
|                                                   |                                            |                                                   |        |             |  |             |         |            |   |   |       |           

The accompanying note is an integral part of these financial
statements.

86



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##### Table of Contents



Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


STATEMENTS OF STOCKHOLDERS EQUITY

|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|------------------------------------------------- |  | ----------------------------------- | ---------- | ---------- |  | ----------- | --- | ---------- |  | ------------ | ------- | ------- |  | ------ | ---- | - |  | - | ------ | - |  | - | -------- | - |  | - | ------- | -
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |        
|                                                  |  | Common Stock                        |            | Additional |  |             |     |            |  |              |         |        
|                                                  |  |                                     |            | Paid-In    |  | Stockholder |     | Deferred   |  | Accumulated  |         | Total  
|                                                  |  | Shares                              |            | Amount     |  | Capital     |     | Receivable |  | Compensation |         | Deficit |  | Equity
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |       
|                                                  |  |                                    
|                                                  |  | ($ in thousands, except share data)
|                                                 
|                                                 
|                                                 
|                                                 
|Balances at February 3, 2002
    (Restated)       |  |                                     | 32,370,746 |            |  | $           | 324 |            |  | $            | 322,667 |         |  | $      | (686 | ) |  | $ |       |   |  | $ | (261,398 | ) |  | $ | 60,907  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Conversion of debentures net of costs             |  |                                     | 5,753,740  |            |  |             | 58  |            |  |              | 46,058  |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 46,116  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Common stock issued in lieu of cash interest paid |  |                                     | 136,580    |            |  |             | 1   |            |  |              | 1,408   |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 1,409   |  
|                                                 
|                                                 
|                                                 
|                                                 
|Stock offering, net of costs                      |  |                                     | 6,878,300  |            |  |             | 69  |            |  |              | 78,073  |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 78,142  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Issuances of loan to stockholder                  |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | (125 | ) |  |   |       |   |  |   |         |   |  |   | (125    | )
|                                                 
|                                                 
|                                                 
|                                                 
|Recovery of stockholder receivable                |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | 469  |   |  |   |       |   |  |   |         |   |  |   | 469     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Retirement of common stock                        |  |                                     | (11,952    | )          |  |             |    |            |  |              | (137    | )       |  |        |     |   |  |   |       |   |  |   |         |   |  |   | (137    | )
|                                                 
|                                                 
|                                                 
|                                                 
|Exercise of options                               |  |                                     | 17,604     |            |  |             |    |            |  |              | 167     |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 167     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Restricted (restated) stock                       |  |                                     | 3,212      |            |  |             |    |            |  |              | 43      |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 43      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net income                                        |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |       |   |  |   | 2,396    |   |  |   | 2,396   |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Balances at February 2, 2003
    (Restated)       |  |                                     | 45,148,230 |            |  |             | 452 |            |  |              | 448,279 |         |  |        | (342 | ) |  |   |       |   |  |   | (259,002 | ) |  |   | 189,387 |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Exercise of options                               |  |                                     | 1,348,279  |            |  |             | 13  |            |  |              | 15,942  |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 15,955  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Tax benefit relating to stock option exercise     |  |                                     |           |            |  |             |    |            |  |              | 2,333   |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 2,333   |  
|                                                 
|                                                 
|                                                 
|                                                 
|Recovery of stockholder receivable                |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | 269  |   |  |   |       |   |  |   |         |   |  |   | 269     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Retirement of common stock                        |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|Restricted stock                                  |  |                                     | 1,427      |            |  |             |    |            |  |              | 22      |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 22      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net income (restated)                             |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |       |   |  |   | (9,555   | ) |  |   | (9,555  | )
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Balances at February 1, 2004
    (Restated)       |  |                                     | 46,497,936 |            |  |             | 465 |            |  |              | 466,576 |         |  |        | (73  | ) |  |   |       |   |  |   | (268,557 | ) |  | $ | 198,411 |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Repurchase and retirement of common stock         |  |                                     | (1,574,956 | )          |  |             | (16 | )          |  |              | (23,710 | )       |  |        |     |   |  |   |       |   |  |   |         |   |  |   | (23,726 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Restricted stock                                  |  |                                     | 4,463      |            |  |             |    |            |  |              | 1,209   |         |  |        |     |   |  |   | (1,164 | ) |  |   |         |   |  |   | 45      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Amortization of deferred compensation             |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   | 146    |   |  |   |         |   |  |   | 146     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Recovery of stockholder receivable                |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | 63   |   |  |   |       |   |  |   |         |   |  |   | 63      |  
|                                                 
|                                                 
|                                                 
|                                                 
|Exercise of options                               |  |                                     | 188,858    |            |  |             | 2   |            |  |              | 2,072   |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 2,074   |  
|                                                 
|                                                 
|                                                 
|                                                 
|Tax benefit relating to stock option exercises    |  |                                     |           |            |  |             |    |            |  |              | 390     |         |  |        |     |   |  |   |       |   |  |   |         |   |  |   | 390     |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net loss                                          |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |       |   |  |   | 36,881   |   |  |   | 36,881  |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  
|Balances at January 30, 2005                      |  |                                     | 45,116,301 |            |  | $           | 451 |            |  | $            | 446,537 |         |  | $      | (10  | ) |  | $ | (1,018 | ) |  | $ | (231,676 | ) |  | $ | 214,284 |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |        |   |  |   |          |   |  |   |         |  

The accompanying note is an integral part of these financial
statements.

87



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##### Table of Contents



Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


STATEMENTS OF CASH FLOWS

|                                                           |                   |                                                                                              |                                                 |                                                          |  |                      |   |        |   |       |   |       |  |        |   | 
|---------------------------------------------------------- | ----------------- | -------------------------------------------------------------------------------------------- | ----------------------------------------------- | -------------------------------------------------------- |  | -------------------- | - | ------ | - | ----- | - | ----- |  | ------ | - | 
|                                                           |                   |                                                                                             
|                                                           |                   | Fiscal Year Ended                                                                           
|                                                           |                   |                                                                                             
|                                                           |                   | January 30,                                                                                  |                                                 | February 1,                                              |  | February 2,         
|                                                           |                   | 2005                                                                                         |                                                 | 2004                                                     |  | 2003                
|                                                           |                   |                                                                                              |                                                 |                                                          |  |                     
|                                                           |                   |                                                                                              |                                                 | (Restated)                                               |  | (Restated)          
|                                                           |                   |                                                                                              |                                                 | (See note 1 page 27)                                     |  | (See note 1 page 27)
|                                                           |                   |                                                                                             
|                                                           |                   | ($ in thousands)                                                                            
|                                                          
|                                                          
|                                                          
|                                                          
|Cash flows provided by (used in) operating
    activities: |                   |                                                                                              |                                                 |                                                          |  |                      |   |        |   |       |   |      
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Net income (loss) |                                                                                              | $                                               | 36,881                                                   |  |                      | $ | (9,555 | ) |       | $ | 2,396 | 
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |                   | Adjustments to reconcile net income (loss) to net
    cash provided by operating activities: |                                                 |                                                          |  |                      |   |        |   |       |   |       |  |       
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           |                   |                                                                                              | Equity interest in net income from subsidiaries |                                                          |  | (36,881              | ) |        |   | 9,555 |   |       |  | (2,396 | )
|                                                           |                   |                                                                                              |                                                 |                                                          |  |                      |   |        |   |       |   |      
|                                                           |                   |                                                                                              |                                                 | Net cash provided by operating activities                |  |                      |  |        |   |       |  |       |  |        |  | 
|                                                           |                   |                                                                                              |                                                 |                                                          |  |                      |   |        |   |       |   |      
|                                                           |                   |                                                                                              |                                                 | Net increase (decrease) in cash and cash
    equivalents |  |                      |  |        |   |       |  |       |  |        |  | 
|                                                          
|                                                          
|                                                          
|                                                          
|Cash and cash equivalents, beginning of period             |                   |                                                                                              |                                                |                                                          |  |                      |  |        |   |       |  |      
|                                                           |                   |                                                                                              |                                                 |                                                          |  |                      |   |        |   |       |   |      
|Cash and cash equivalents, end of period                   |                   | $                                                                                            |                                                |                                                          |  | $                    |  |        |   | $     |  |      
|                                                           |                   |                                                                                              |                                                 |                                                          |  |                      |   |        |   |       |   |      

The accompanying note is an integral part of these financial
statements.

88



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##### Table of Contents



Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


NOTE TO FINANCIAL STATEMENT SCHEDULE

The accompanying financial statement schedule presents the
financial position, results of operations and cash flows of CSK
Auto Corporation (Corporate) as a parent company only, and thus
includes Corporates investment in CSK Auto, Inc. (Auto) as
well as Corporates interest in the results of Autos
operations, accounted for under the equity method of accounting.
Corporate has not received any dividends from Auto during the
periods presented.

This financial statement schedule should be read in conjunction
with the consolidated financial statements of CSK Auto
Corporation and Subsidiaries for descriptions of significant
accounting policies and other matters, including guarantees by
Corporate. The consolidated financial statements of CSK Auto
Corporation and Subsidiaries have been restated for fiscal years
2003 and prior due to a voluntary change in inventory accounting
method from Last-in, First-out to First-in, First-out, by CSK
Auto, Inc., a wholly owned subsidiary of CSK Auto Corporation.
In addition, CSK Auto, Inc. identified errors in its accounting
for leases and vendor allowances that required prior year
restatements. A more detailed description of the required
accounting restatements are in Note 1 to the Consolidated
Financial Statements.

89



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CSK AUTO CORPORATION AND SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

For the Fiscal Years 2004, 2003, and 2002


|                                          |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |        | 
|----------------------------------------- | --------------------------- | ------------ | - | ---------- |  | ---------- |  | ---------- |  |  |  | ------- | - |  | - | ------ | 
|                                          |                             | Balance at   |   | Charged to |  |            |  | Balance at
|                                          |                             | Beginning of |   | Costs and  |  |            |  | End of    
|Description                               |                             | Period       |   | Expenses   |  | Deductions |  | Period    
|                                          |                             |              |   |            |  |            |  |           
|Allowance for Bad Debts:                  |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 2, 2003 |              | $ | 5,230      |  |            |  | 4,383      |  |  |  | (6,877  | ) |  | $ | 2,736  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 1, 2004 |              | $ | 2,736      |  |            |  | 5,083      |  |  |  | (6,242  | ) |  | $ | 1,577  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended January 30, 2005 |              | $ | 1,577      |  |            |  | 6,629      |  |  |  | (7,536  | ) |  | $ | 670    | 
|                                         
|                                         
|                                         
|                                         
|Allowance for Closed Stores:              |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 2, 2003 |              | $ | 6,771      |  |            |  | 5,026      |  |  |  | (7,375  | ) |  | $ | 4,422  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 1, 2004 |              | $ | 4,422      |  |            |  | 12,669     |  |  |  | (4,943  | ) |  | $ | 12,148 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended January 30, 2005 |              | $ | 12,148     |  |            |  | 2,191      |  |  |  | (6,456  | ) |  | $ | 7,883  | 
|                                         
|                                         
|                                         
|                                         
|Allowance for Inventory Shrink:           |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 2, 2003 |              | $ | 20,650     |  |            |  | 39,518     |  |  |  | (43,969 | ) |  | $ | 16,199 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 1, 2004 |              | $ | 16,199     |  |            |  | 43,728     |  |  |  | (46,540 | ) |  | $ | 13,387 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended January 30, 2005 |              | $ | 13,387     |  |            |  | 31,077     |  |  |  | (31,385 | ) |  | $ | 13,079 | 
|                                         
|                                         
|                                         
|                                         
|Allowance for Inventory
    Obsolescence: |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 2, 2003 |              | $ | 902        |  |            |  |           |  |  |  | (902    | ) |  | $ |       | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 1, 2004 |              | $ |           |  |            |  |           |  |  |  |        |   |  | $ |       | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended January 30, 2005 |              | $ |           |  |            |  | 1,469      |  |  |  |        |   |  | $ | 1,469  | 
|                                         
|                                         
|                                         
|                                         
|Allowance for Deferred Tax Asset:         |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 2, 2003 |              | $ | 474        |  |            |  | 971        |  |  |  |        |   |  | $ | 1,445  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended February 1, 2004 |              | $ | 1,445      |  |            |  |           |  |  |  |        |   |  | $ | 1,445  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Year Ended January 30, 2005 |              | $ | 1,445      |  |            |  |           |  |  |  |        |   |  | $ | 1,445  | 

90



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 2nd day of
May, 2005.



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



| |     |                           
| | --- | --------------------------
| | By: | /s/ MAYNARD L. JENKINS JR.

| |                                     
| | ------------------------------------
| |                                     
| | Maynard L. Jenkins, Jr.             
| | Chairman and Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, this report has
been signed by the following persons on behalf of the
registrant, and in the capacities indicated, on this
2nd day of May, 2005.

|                                                 |  |                                                                                                                      |  | 
|------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- |  | 
|                                                 |  |                                                                                                                     
|                                                
|/s/ MAYNARD L. JENKINS JR.Maynard L. Jenkins Jr. |  | Chairman of the Board and
    Chief Executive Officer
    (Principal Executive Officer)                             
|                                                
|/s/ JAMES G. BAZLENJames G. Bazlen               |  | Director                                                                                                            
|                                                
|/s/ MORTON GODLASMorton Godlas                   |  | Director                                                                                                            
|                                                
|/s/ TERILYN HENDERSONTerilyn Henderson           |  | Director                                                                                                            
|                                                
|/s/ CHARLES K. MARQUISCharles K. Marquis         |  | Director                                                                                                            
|                                                
|/s/ CHARLES J. PHILIPPINCharles J. Philippin     |  | Director                                                                                                            
|                                                
|/s/ WILLIAM A. SHUTZERWilliam A. Shutzer         |  | Director                                                                                                            
|                                                
|/s/ DON W. WATSONDon W. Watson                   |  | Senior Vice President and Chief Financial Officer
    (Principal Financial Officer and Principal Accounting Officer)

91



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INDEX TO EXHIBITS

|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 3  | .01                     |  | Restated Certificate of Incorporation of the
    Company, incorporated herein by reference to Exhibit 3.01
    of our Annual Report on Form 10-K, filed on May 4, 1998
    (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 3  | .02                     |  | Certificate of Correction to the Restated
    Certificate of Incorporation of the Company, incorporated herein
    by reference to Exhibit 3.02 of our Annual Report on Form
    10-K, filed on May 4, 1998 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 3  | .03                     |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of CSK Auto Corporation,
    incorporated herein by reference to Exhibit 3.02.1 of our
    Report on Form 10-Q, filed on September 18, 2002 (File No.
    001-13927).                                                                                                                                                                                                                                                                                                                                     
|       
|        | 3  | .04                     |  | Amended and Restated By-laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of our
    Annual Report on Form 10-K, filed on April 28, 1999
    (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 3  | .04.1                   |  | First Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our annual report on Form 10-K, filed on
    May 1, 2001 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 3  | .04.2                   |  | Second Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.2 of our Current Report on Form 10-Q, filed on
    June 14, 2004 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 4  | .01                     |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 4  | .02                     |  | Amended and Restated Credit Agreement, dated
    January 16, 2004, by and among CSK Auto, Inc., the several
    lenders from time to time parties thereto (the Lenders),
    JPMorgan Chase Bank, as administrative agent for the Lenders,
    Credit Suisse First Boston, acting through its Cayman Islands
    Branch, as syndication agent for the Lenders, and Bank of
    America, N.A. and U.S. Bank N.A., as Co-Documentation
    Agents for the Lenders, incorporated herein by reference to
    Exhibit 99.2 of our Current Report on Form 8-K, filed
    January 20, 2004.
|       
|        | 4  | .02.1                   |  | Amendment No. 1 to the Amended and Restated
    Credit Agreement, dated as of April 29, 2004, incorporated
    herein by reference to Exhibit 4.01.1 of our Current Report
    on Form 10-Q, filed May 10, 2004. (File No. 001-13927)                                                                                                                                                                                                                                                                                                                                               
|       
|        | 4  | .02.2                   |  | Amendment No. 2 to the Amended and Restated
    Credit Agreement, dated as of August 10, 2004, incorporated
    herein by reference to Exhibit 99.1 of our Current Report
    on Form 8-K, filed August 12, 2004. (File No. 001-13927)                                                                                                                                                                                                                                                                                                                                              
|       
|        | 4  | .03                     |  | Indenture dated January 16, 2004, by and
    among CSK Auto, Inc., CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc. as guarantors,
    and the Bank of New York, as Trustee, incorporated herein by
    reference to our Current Report on Form 8-K filed on
    January 20, 2004 (File No. 001-13927).                                                                                                                                                                                                                                         
|       
|        | 10 | .01                     |  | Amended and Restated Employment Agreement, dated
    as of June 12, 1998, between CSK Auto, Inc. and Maynard
    Jenkins, incorporated herein by reference to our Quarterly
    Report on Form 10-Q, filed on September 11, 1998 (File No.
    001-13927).                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .02                     |  | Amendment to Employment Agreement, dated as of
    September 24, 1999, between CSK Auto, Inc. and Maynard
    Jenkins, incorporated herein by reference to our Annual Report
    on Form 10-K, filed on April 28, 2000 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .03                     |  | Stock Option Agreement, dated March 9, 1998,
    between the Company and Maynard Jenkins, incorporated herein by
    reference to our Registration Statement on Form S-1 (File
    No. 333-43211).                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .04                     |  | Restated 1996 Associate Stock Option Plan,
    incorporated herein by reference to our Registration Statement
    on Form S-1 (File No. 333-67231).                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10 | .05                     |  | Amended and Restated Supplemental Executive
    Retirement Plan Agreement, dated December 18, 2004 between
    CSK Auto, Inc. and Maynard Jenkins, incorporated herein by
    reference to our Current Report on Form 8-K, filed
    December 21, 2004 (File No. 001-13927).                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .06                     |  | Restated 1996 Executive Stock Option Plan
    (Amended and Restated June 8, 1999), incorporated herein by
    reference to our definitive Proxy Statement, filed on
    May 11, 1999 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .07                     |  | 1999 Employee Stock Option Plan, incorporated by
    reference to our definitive Proxy Statement, filed on
    May 11, 1999 (File No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                                                                                   

92



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##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                                                
|------- | -- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 10 | .08                     |  | CSK Auto Corporation Directors Stock Plan,
    incorporated herein by reference to our Quarterly Report on Form
    10-Q, filed on September 11, 1998 (File No. 001-13927).                                                                                                    
|       
|        | 10 | .09                     |  | Form of Restricted Stock Agreement pursuant to
    the CSK Auto Corporation Directors Stock Plan, incorporated
    herein by reference to our Annual Report on Form 10-K, filed on
    April 28, 2000 (File No. 001-13927).                                                    
|       
|        | 10 | .10                     |  | CSK Auto Corporation 2000 Senior Executive Stock
    Loan Plan, incorporated herein by reference to
    Exhibit 10.11 of our Annual Report on Form 10-K, filed on
    May 1, 2001 (File No. 001-13927).                                                                        
|       
|        | 10 | .11                     |  | Amended and Restated Lease, dated
    October 23, 1989 (the Missouri Falls Lease), between Auto
    and Missouri Falls Associates Limited Partnership, incorporated
    herein by reference to CSK Auto, Incs Registration
    Statement on Form S-4 (File No. 333-22511).    
|       
|        | 10 | .12                     |  | First Amendment to the Missouri Falls Lease,
    dated November 22, 1991, between Auto and Missouri Falls
    Associates Limited Partnership, incorporated herein by reference
    to CSK Auto, Incs Registration Statement on Form S-4
    (File No. 333-22511).             
|       
|        | 10 | .13                     |  | Amendment to Leases, dated as of October 30,
    1996, by and between Missouri Falls Associates Limited
    Partnership and Auto, incorporated herein by reference to CSK
    Auto, Incs Registration Statement on Form S-4 (File
    No. 333-22511).                         
|       
|        | 10 | .14                     |  | Lease dated July 31, 1997 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated April 1, 2000, incorporated herein by reference to
    Exhibit 10.15 of our Annual Report on Form 10-K filed on
    May 1, 2001 (File No. 001-13927).     
|       
|        | 10 | .15                     |  | Lease dated April 20, 2000 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated February 23, 2001, incorporated herein by reference
    to Exhibit 10.15 of our Annual Report on Form 10-K filed on
    May 1, 2001 (File No. 001-13927).
|       
|        | 10 | .16                     |  | Lease dated April 20, 2000 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated August 20, 2000, incorporated herein by reference to
    Exhibit 10.15 of our Annual Report on Form 10-K filed on
    May 1, 2001 (File No. 001-13927).  
|       
|        | 10 | .17                     |  | Amendment to all CSK Auto, Inc. Leases at
    Missouri Falls, dated December 6, 2001, by and between
    Missouri Falls Partners and MFP Holdings, LLC and CSK Auto,
    Inc., incorporated by reference to our Registration Statement on
    Form S-4 filed February 11, 2002.
|       
|        | 10 | .18                     |  | Employment Agreement, dated October 13,
    1995, between CSK Auto, Inc. and Don Watson, incorporated herein
    by reference to Exhibit 10.21 of our Annual Report on Form
    10-K, filed on May 1, 2001 (File No. 001-13927).                                               
|       
|        | 10 | .19                     |  | Employment Agreement between CSK Auto, Inc. and
    Lon B. Novatt, incorporated herein by reference to
    Exhibit 10.22 of our Annual Report on Form 10-K, filed on
    May 1, 2001 (File No. 001-13927).                                                                     
|       
|        | 10 | .20                     |  | Employment Agreement, dated February 25,
    1997, between CSK Auto, Inc. and Dale E. Ward, incorporated
    herein by reference to Exhibit 10.23 of our Annual Report
    on Form 10-K, filed on May 1, 2001 (File No. 001-13927).                                            
|       
|        | 10 | .21*                    |  | Indemnity Agreement  Form of Indemnity
    Agreement between CSK Auto Corporation and each Director.                                                                                                                                                                          
|       
|        | 10 | .22                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Lon Novatt, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                       
|       
|        | 10 | .23                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Dale Ward, dated
    February 14, 2002 incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                         
|       
|        | 10 | .24                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Don Watson, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                       
|       
|        | 10 | .25                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Martin Fraser, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                    

93



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##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                             
|------- | -- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 10 | .26                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Larry Ellis, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                                                                                   
|       
|        | 10 | .27                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Larry Buresh, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                                                                                  
|       
|        | 10 | .28                     |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Bill Evans, dated
    February 14, 2002, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on April 23, 2002
    (File No. 001-13927).                                                                                    
|       
|        | 10 | .29                     |  | Indicative Callable Swap Term Sheet dated
    April 5, 2004, between Lehman Brothers and CSK Auto, Inc.,
    incorporated herein by reference to Exhibit 10.57 of our
    Annual Report on Form 10-K, filed April 15, 2004. (File No.
    001-13927)                                                                                        
|       
|        | 10 | .30                     |  | Amended and Restated Registration Rights
    Agreement dated May 16, 2002, by and between CSK Auto
    Corporation, LBI 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).                    
|       
|        | 10 | .31                     |  | Employment Agreement, dated March 30, 2000,
    between CSK Auto, Inc. and Jim Bazlen incorporated herein by
    reference to Exhibit 10.47 of our Annual Report on Form
    10-K filed May 5, 2003 (File No. 001-13927).                                                                                                                   
|       
|        | 10 | .31.1                   |  | Amendment to Employment Agreement with James
    Bazlen dated October 15, 2004 incorporated herein by
    reference to Exhibit 99.4 of our Current Report on Form 8-K
    filed October 20, 2004 (File No. 001-13927).                                                                                                                      
|       
|        | 10 | .32                     |  | Non-Qualified Stock Option Agreement 
    Employee Form to be used in connection with our 2004 Stock and
    Incentive Plan, incorporated herein by reference to
    Exhibit 99.1 of our Current Report on Form 8-K filed
    October 20, 2004 (File No. 001-13927).                                                                       
|       
|        | 10 | .33                     |  | Non-Qualified Stock Option Agreement 
    Director Form to be used in connection with our 2004 Stock and
    Incentive Plan, incorporated herein by reference to
    Exhibit 99.2 of our Current Report on Form 8-K filed
    October 20, 2004 (File No. 001-13927).                                                                       
|       
|        | 10 | .34                     |  | Restricted Stock Agreement to be used in
    connection with our 2004 Stock and Incentive Plan, incorporated
    herein by reference to Exhibit 99.1 of our Current Report
    on Form 8-K filed October 20, 2004 (File No. 001-13927).                                                                                                     
|       
|        | 10 | .35                     |  | Stock Purchase Agreement dated January 21,
    2005 by and between CSK Auto, Inc. and Mobile Productivity,
    Inc., incorporated herein by reference to Exhibit 99.2 of
    our Current Report on Form 8-K filed January 26, 2005
    (File No. 001-13927).                                                                                
|       
|        | 10 | .36*                    |  | Summary of Executive Compensation Agreements.                                                                                                                                                                                                                                                                                               
|       
|        | 10 | .37*                    |  | Waiver, effective May 1, 2005, to the
    Amended and Restated Credit Agreement dated as of
    January 16, 2004, by and among CSK AUTO, INC., the several
    banks and other financial institutions or entities from time to
    time party thereto (the Lenders), and JPMorgan Chase
    Bank, as administrative agent for the Lenders.
|       
|        | 18 | .01*                    |  | Preferability letter from PricewaterhouseCoopers
    LLP, our independent registered public accounting firm
    concerning our change in inventory valuation method from LIFO to
    FIFO.                                                                                                                                                  
|       
|        | 21 | .01*                    |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                
|       
|        | 23 | .01*                    |  | Consent of Independent Registered Public
    Accounting Firm dated May 2, 2005.                                                                                                                                                                                                                                                             
|       
|        | 31 | .1*                     |  | Certification by the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                 
|       
|        | 31 | .2*                     |  | Certification by the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                 
|       
|        | 32 | .0*                     |  | Certification of the Chief Executive Officer and
    Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                              



---

* Filed herewith

94