##### 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 February 2,
2003.



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

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 registrants 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 4, 2002 the aggregate market
value of our voting and non-voting common stock held by
non-affiliates was approximately $365.1 million. For
purposes of the above statement only, all directors and
executive officers of the registrant are assumed to be
affiliates. As of April 25, 2003 there were 45,148,632
shares of our common stock outstanding.

Documents Incorporated by Reference



|  |                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Portions of our definitive Proxy Statement on
    Schedule 14A, with respect to our 2003 Annual Meeting of
    Stockholders, are incorporated by reference into Part III
    of this Form 10-K.



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TABLE OF CONTENTS



|              |                                                                                               |  |  |  |  |  |  | 
|------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1. Business                                                                             
|              | Item 2. Properties                                                                           
|              | Item 3. Legal Proceedings                                                                    
|              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II      
|              | Item 5. Market for Registrants Common Stock and Related Stockholder Matters                 
|              | Item 6. Selected Consolidated Financial Data                                                 
|              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|              | Item 8. Consolidated Financial Statements and Supplementary Data                             
|              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III     
|              | Item 10. Directors and Executive Officers of the Registrant                                  
|              | Item 11. Executive Compensation                                                              
|              | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|              | Item 13. Certain Relationships and Related Transactions                                      
|              | Item 14. Controls and Procedures                                                             
|              | Item 15. Principal Accountant Fees and Services                                              
|PART IV      
|              | Item 16. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES   
|Exhibit 10.47
|Exhibit 23.1 
|Exhibit 99.1 
|Exhibit 99.2 



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##### Table of Contents



TABLE OF CONTENTS

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|PART I  
|Item 1.  |  | Business                                                                                  |  |      | 2  | 
|Item 2.  |  | Properties                                                                                |  |      | 10 | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 11 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                   |  |      | 12 | 
|PART II 
|Item 5.  |  | Market for Registrants Common Stock and
    Related Stockholder Matters                  |  |      | 12 | 
|Item 6.  |  | Selected Consolidated Financial Data                                                      |  |      | 14 | 
|Item 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |      | 17 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |  |      | 34 | 
|Item 8.  |  | Consolidated Financial Statements and
    Supplementary Data                              |  |      | 34 | 
|Item 9.  |  | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure  |  |      | 69 | 
|PART III
|Item 10. |  | Directors and Executive Officers of the Registrant                                        |  |      | 69 | 
|Item 11. |  | Executive Compensation                                                                    |  |      | 69 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |      | 69 | 
|Item 13. |  | Certain Relationships and Related Transactions                                            |  |      | 69 | 
|Item 14. |  | Controls and Procedures                                                                   |  |      | 69 | 
|Item 15. |  | Principal Accountant Fees and Services                                                    |  |      | 69 | 
|PART IV 
|Item 16. |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                       |  |      | 70 | 

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. These
events may include future operating results and potential
competition, among other things. Factors that might cause actual
results to differ materially from those in such forward-looking
statements include, but are not limited to, those discussed in
Item 7 Managements Discussion and Analysis of
Financial Condition and Results of Operations.

1



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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
25 of the 28 geographic markets in which we operate, based on
store count. As of February 2, 2003, we operated 1,109
stores in 19 states under one fully integrated operating format
and three brand names:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Checker Auto Parts,
    founded in 1969, with 406 stores in the Southwestern, Rocky
    Mountain and Northern Plains states and Hawaii;
|
| |  | Schucks Auto Supply,
    founded in 1917, with 230 stores in the Pacific Northwest and
    Alaska; and                                 
|
| |  | Kragen Auto Parts,
    founded in 1947, with 473 stores primarily in California.                                                       

We offer a broad selection of national brand name
and generic automotive products for domestic and imported cars
and light trucks. Our products include new and remanufactured
automotive replacement parts, maintenance items, accessories and
our new garage maintenance and organizational products. Our
stores average approximately 7,290 square feet in size and
typically offer a store specific mix of between 13,000 and
18,000 stock-keeping units, or SKUs. We also operate a highly
efficient network of 32 strategically located depots to provide
approximately 75% of our stores an additional 65,000 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 year 2002. The DIFM market is comprised of auto
repair professionals, fleet owners, governments, and
municipalities and accounted for over 65% of the annual sales in
the U.S. automotive aftermarket industry in 2001, according to
statistics published by Lang Market Resources, Inc. Sales to the
DIFM market represented approximately 17% of our net sales for
fiscal year 2002. 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, high
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 Investor Info.
Information contained on our website is not part of this Report
on Form 10-K.

Industry Overview

We compete in the approximately $114 billion
U.S. automotive aftermarket industry, which includes replacement
parts (excluding tires), accessories, maintenance items,
batteries and automotive fluids for cars and light trucks. The
industry is comprised of the $36 billion DIY market and the
$78 billion DIFM market. From 1992 to 2001, the DIY market
grew at a compound annual rate of 4.5% and the DIFM market grew
at a

2



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compound annual rate of 6.3%. We believe that the
U.S. automotive aftermarket industry is characterized by stable
demand and is growing because of increases in:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the size and age of the automotive fleet. The
    number of light vehicles in use, which includes cars and light
    trucks, has increased from 174.2 million in 1992 to
    209.2 million in 2001. From 1992 to 2001, the average age
    of cars increased from 8.1 years to 9.3 years and the
    average age of light trucks increased from 8.4 years to
    8.5 years. In the Western United States, where we operate,
    the average age of domestic cars was 10.9 years in 2001
    according to Lang Marketing Resources, Inc.
|
| |  | the number of miles driven annually per vehicle.
    Miles driven annually has grown from approximately
    2.1 trillion in 1992 to approximately 2.6 trillion in
    2000.                                                                                                                                                                                                                                                                                                                                                            
|
| |  | the number of licensed drivers. Licensed drivers
    increased from 173.0 million in 1992 to approximately
    191.0 million in 2001.                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | the percentage of the total light vehicle fleet
    represented by light trucks, which includes SUVs. Light trucks
    comprised 50.0% of all light vehicles in use in 2001, up from
    29.7% in 1991. According to Lang Marketing Resources, Inc., in
    2001, each light truck generated an average of $471 of
    aftermarket product purchases versus $323 of such purchases
    generated per car.                                                                                                                              
|
| |  | the number of light vehicles coming off warranty,
    particularly leased vehicles. From 1996 to 2001, approximately
    97.4 million new light vehicles were sold and an additional
    18.6 million light vehicles were leased from 1996 to 2000.
    Management believes that leased vehicles are often
    under-maintained and, therefore, may require higher-
    than-average maintenance and repair expenditures in the
    post-warranty period.                                                                              

Despite significant consolidation of automotive
aftermarket retailers in recent years, 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. According
to Lang Marketing Resources, Inc., specialty automotive parts
retailers have increased their market share of U.S. DIY
sales from 31.6% in 1994 to 42.1% in 2001.

Competitive Strengths

We believe that our competitive strengths 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 25 of
the 28 geographic markets in which we operate, based on store
count. Our research indicates that we have better brand name
recognition than many of our competitors in several of our key
markets. We believe that this is 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.Our research indicates that consumers
in our key markets rate our sales associates as the most
knowledgeable and helpful more frequently than those of certain
other well-known specialty retailers of automotive parts.
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 Automotive Society of Engineers, or ASE,
certified mechanics 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.

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Profitable and Growing Commercial Sales
Program.We believe we are well
positioned to effectively service our DIFM customers, who
typically require convenient locations, a high level of customer
service, and timely availability of brand name products.
Beginning in fiscal 1996, we significantly increased our
marketing efforts to the DIFM market, added sales personnel
dedicated to our DIFM customers, increased the breadth and depth
of our product selection, and improved and expanded our
distribution systems. We currently operate DIFM sales centers in
554 of our stores and our DIFM sales have grown from
$89.6 million, or approximately 11% of net sales in fiscal
1996, to $262.8 million, or approximately 17% of net sales
for the fiscal year ended February 2, 2003. The growth of
our commercial sales program has increased the sales base for
our participating stores, created additional marketing and
distribution efficiencies, and allowed us to enhance the product
selection for our DIY customers.

Timely Availability of a Broad Selection of
Brand Name Products.Our stores
typically offer a store specific mix of between 13,000 and
18,000 SKUs. We also operate a highly efficient network of
32 strategically located depots to provide approximately 75% of
our stores an additional 65,000 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. While our stores also stock
high quality generic products that appeal to our value conscious
customers, we feature a broad selection of national brand name
products that help generate customer traffic and have strong
consumer appeal, particularly in the DIFM market.

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, trend 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, which utilizes
historical sales patterns, seasonality and store presentation
requirements. We also maintain a store specific
precision-pricing program that seeks to optimize margins while
maintaining price competitiveness. Our fully integrated
warehouse and distribution network and our 32 strategically
located depots, which operate using state-of-the-art technology,
have allowed us to significantly improve distribution
efficiency. Additionally, these investments have allowed us to
both improve our in-stock inventory levels and reduce delivery
costs and times for products.

Business Strategy

Our business strategy includes the following key
elements:

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 offering new and innovative product offerings
such as our new garage maintenance and organizational products.
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.

Our pricing philosophy is that we should not lose
a customer because of price. Our pricing strategy is to offer
everyday low 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.

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Grow Our Commercial Sales Business.We intend to continue to grow our DIFM
business and to increase our market share by providing a high
level of customer service to our existing customers and by using
our dedicated DIFM sales force to aggressively market to
potential new customers in different sectors of the commercial
market, including independent repair garages, national repair
shops, fleet owners and municipalities. By leveraging our
existing store network, we believe we can increase store
operating profits as we expand our DIFM sales.

Maximize Customer Satisfaction.We aim to provide the highest level of
customer service in our industry to generate repeat business. We
attempt to achieve this goal by staffing our stores with well
trained associates, including an average of two ASE certified
technicians per store, which allows us to provide high quality
diagnostic support. Another integral part of our focus on
customer satisfaction includes utilizing our sophisticated
product distribution and store-level systems to provide our
customers with a broad selection of parts and accessories on a
timely basis.

Improve Profitability and Cash Flow.We continually review our operations
in order to ensure that we are optimally allocating our
resources and have an appropriate cost structure that will
enable us to grow our net sales, profitability, and free cash
flow.

Store Operations

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

The table below sets forth, as of
February 2, 2003, the geographic distribution of our stores
and the trade names under which they operated.

|             |       |            |    |             |  |            |     |         |  |  |     |     |  |  |     |       | 
|------------ | ----- | ---------- | -- | ----------- |  | ---------- | --- | ------- |  |  | --- | --- |  |  | --- | ----- | 
|             |       | Checker    |    | Schucks     |  | Kragen     |     | Company
|             |       | Auto Parts |    | Auto Supply |  | Auto Parts |     | Total  
|             |       |            |    |             |  |            |     |        
|California   |       |            | 1  |             |  |            | 2   |         |  |  | 459 |     |  |  | 462 |      
|Washington   |       |            |   |             |  |            | 145 |         |  |  |    |     |  |  | 145 |      
|Arizona      |       |            | 98 |             |  |            |    |         |  |  |    |     |  |  | 98  |      
|Colorado     |       |            | 67 |             |  |            |    |         |  |  |    |     |  |  | 67  |      
|Minnesota    |       |            | 59 |             |  |            |    |         |  |  |    |     |  |  | 59  |      
|Oregon       |       |            |   |             |  |            | 48  |         |  |  |    |     |  |  | 48  |      
|Utah         |       |            | 38 |             |  |            |    |         |  |  |    |     |  |  | 38  |      
|Nevada       |       |            | 20 |             |  |            |    |         |  |  | 14  |     |  |  | 34  |      
|Wisconsin    |       |            | 33 |             |  |            |    |         |  |  |    |     |  |  | 33  |      
|Idaho        |       |            | 7  |             |  |            | 24  |         |  |  |    |     |  |  | 31  |      
|New Mexico   |       |            | 28 |             |  |            |    |         |  |  |    |     |  |  | 28  |      
|Texas        |       |            | 14 |             |  |            |    |         |  |  |    |     |  |  | 14  |      
|Alaska       |       |            |   |             |  |            | 11  |         |  |  |    |     |  |  | 11  |      
|Montana      |       |            | 10 |             |  |            |    |         |  |  |    |     |  |  | 10  |      
|Wyoming      |       |            | 10 |             |  |            |    |         |  |  |    |     |  |  | 10  |      
|Hawaii       |       |            | 9  |             |  |            |    |         |  |  |    |     |  |  | 9   |      
|North Dakota |       |            | 7  |             |  |            |    |         |  |  |    |     |  |  | 7   |      
|South Dakota |       |            | 4  |             |  |            |    |         |  |  |    |     |  |  | 4   |      
|Michigan     |       |            | 1  |             |  |            |    |         |  |  |    |     |  |  | 1   |      
|             |       |            |    |             |  |            |     |         |  |  |     |     |  |  |     |      
|             | Total |            |    | 406         |  |            |     | 230     |  |  |     | 473 |  |  |     | 1,109 | 
|             |       |            |    |             |  |            |     |         |  |  |     |     |  |  |     |      

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 employees.

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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 7,290 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 February 2, 2003:

|                          |  |                  |       | 
|------------------------- |  | ---------------- | ----- | 
|Store Size                |  | Number of Stores
|                          |  |                 
|10,000 sq. ft. or greater |  |                  | 107   | 
|8,000  9,999 sq. ft.     |  |                  | 206   | 
|6,000  7,999 sq. ft.     |  |                  | 530   | 
|5,000  5,999 sq. ft.     |  |                  | 188   | 
|Less than 5,000 sq. ft.   |  |                  | 78    | 
|                          |  |                  |       | 
|                          |  |                  | 1,109 | 
|                          |  |                  |       | 

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 market strategy group, which is a part of 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
|                                           |  |            
|                                           |  | 2002        |       | 2001 |  | 2000
|                                           |  |             |       |      |  |     
|Beginning stores                           |  |             | 1,130 |      |  |      | 1,152 |   |  |  | 1,120 |  
|New stores                                 |  |             | 12    |      |  |      | 10    |   |  |  | 37    |  
|Relocated stores                           |  |             | 5     |      |  |      | 13    |   |  |  | 14    |  
|Acquired stores                            |  |             | 0     |      |  |      | 0     |   |  |  | 23    |  
|Closed stores (including relocated stores) |  |             | (38   | )    |  |      | (45   | ) |  |  | (42   | )
|                                           |  |             |       |      |  |      |       |   |  |  |       |  
|Ending stores                              |  |             | 1,109 |      |  |      | 1,130 |   |  |  | 1,152 |  
|                                           |  |             |       |      |  |      |       |   |  |  |       |  
|Expanded stores                            |  |             | 1     |      |  |      | 2     |   |  |  | 9     |  
|Total new, relocated and expanded stores   |  |             | 18    |      |  |      | 25    |   |  |  | 60    |  

We expect to open, relocate or expand
approximately 20 to 30 stores in fiscal 2003.

6



---



##### Table of Contents



Store Merchandising

Our store merchandising program, which classifies
our product mix into 120 separate categories, is designed
to determine the optimal inventory mix at each individual store
based on that stores 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 120 product categories. As
part of our Profitability Enhancement Program (PEP)
in fiscal 2001, we completed a comprehensive review of
slower-selling items that met neither current return criteria
nor our objective for inventory turns. This review resulted in
the elimination of certain merchandise, and the transfer of
certain goods to stores that turn the merchandise satisfactorily.

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 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. Approximately
90% of the dollar value of transactions are sent via electronic
data interchange, with the remainder being sent by a computer
facsimile interface. Our store replenishment system generates
orders based upon store on-hand and store model stock. This
includes an automatic model stock adjustment system utilizing
historical sales, seasonality and store presentation
requirements. We also can allocate seasonal and promotional
merchandise based upon a stores history of prior promotional and
seasonal sales.

Our stores offer products with nationally
recognized, well-advertised brand names, such as Armor All,
Autolite, Castrol, Dayco, Exide, 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 most of our generic products are
produced by nationally recognized manufacturers that produce
similar brand name products that enjoy a high degree of consumer
acceptance, 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
do-it-yourself 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 65% of the annual sales in the
automotive aftermarket and is currently growing at a faster rate
than the do-it-yourself 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 commercial
accounts 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. Recently, however, automotive
specialty retailing chains, such as our company, have entered
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

7



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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 February 2, 2003, we operated
commercial service centers in 554 of our stores. Our sales to
commercial accounts (including sales by stores without
commercial service centers) increased 1.4% to
$262.8 million in fiscal 2002 from $259.1 million in
fiscal 2001. On a comparable store basis, commercial sales
increased 8.0% in fiscal 2002 over fiscal 2001.

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 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 two National Hot Rod Association Funny
Cars and have been designated the Official Auto Parts Store of
the NHRA. Our web sites on the Internet include the following:



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

Diagnostic Maintenance Repair
Services

Through our subsidiary, Automotive Information
Systems, Inc., we provide diagnostic vehicle repair information
to automotive technicians, automotive replacement parts
manufacturers, automotive test equipment manufacturers, and to
DIY consumers. This allows us to provide DIY, DIFM, and Internet
customers with high quality diagnostic information in order to
assist them with correctly identifying problems and efficiently
obtaining the parts they need.

Automotive Information Systems was founded in
1987 and markets its products and services under the brand name
IDENTIFIX. These products and services include:



| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | technical hotlines serving more than 15,000
    automotive shops;
|
| |  | the RepairTrac Service Bulletin;                                 
|
| |  | on-line diagrams containing over 50,000 wiring
    diagrams;     
|
| |  | consulting services to automotive manufacturers;
    and         
|
| |  | consumer services provided through our worldwide
    web sites.  

Automotive Information Systems has evolved into
one of the leading sources of knowledge about where and how
vehicles break, and how to correctly repair those vehicles. This
extensive automotive knowledge comes from: (1) more than
250,000 calls received annually from technicians seeking
diagnostic assistance for vehicle repair; (2) our staff of
over 30 Master Technicians; and (3) a comprehensive
on-site library of factory vehicle service information.

8



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##### Table of Contents



In Automotive Information Systems
15 years of operation, it has developed a customer base of
more than 15,000 repair shops by providing efficient and
accurate information resources for automotive diagnostics and
repair. We are committed to supporting Automotive Information
Systems existing customer base while developing new ways to
deliver information to its customers.

Associates

As of February 2, 2003, we employed
approximately 8,355 full-time associates and approximately 4,855
part-time associates. Approximately 86% of our personnel are
employed in store level operations, 8% in distribution and 6% 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 approximately 450 associates located at approximately 40
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.

CSK Tech, our sales associate development
program, is dedicated to the continuous education of store
associates through structured on-the-job training and formal
classroom instruction. The curriculum focuses on four areas of
the associates development:



| |   |                                 
| | - | --------------------------------
| |  | customer service skills;        
|
| |  | basic automotive systems;       
|
| |  | advanced automotive systems; and
|
| |  | management development.         

Much of the training is delivered through formal
classes in training centers that are fully equipped with the
same systems as are in our stores. We believe that our training
programs enable sales associates to provide a high level of
service to a wide variety of customers ranging from less
knowledgeable do-it-yourself consumers to more sophisticated
purchasers requiring diagnostic advice. We also provide
continuing training programs for store managers and district
managers designed to assist them in increasing store-level
efficiency and improving their potential for promotion. In
addition, we require periodic meetings of district and store
managers to facilitate and enhance communications within our
organization. Many of our current associates have passed the
ASE-P2 test, a nationally recognized certification for auto
parts technicians.

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, 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.

9



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Trade Names, Service Marks and
Trademarks

We have the right to exclusively use the
tradename 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 Schucks
with the United States Patent and Trademark Office for use in
connection with the automotive parts retailing business. We
expect to file a renewal for this mark prior to June 30,
2005, based on its current expiration date. We have common law
rights to use the tradename 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 tradenames, service marks and
trademarks are important to our merchandising strategy, but that
our business is not otherwise dependent on any particular
service mark, tradename or trademark. There are no infringing
uses known by us that materially affect the use of such marks.

Warehouse and Distribution

Our warehouse and distribution system utilizes
bar coding, radio frequency scanners and sophisticated conveyor
and put-to-light systems. We instituted 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, 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.




Item 2.Properties

The following table sets forth certain
information concerning our principal leased facilities as of
February 2, 2003:

|                                          |  |          |                     |             |  |                                                                                     |  |           |         |  |  |  |     | 
|----------------------------------------- |  | -------- | ------------------- | ----------- |  | ----------------------------------------------------------------------------------- |  | --------- | ------- |  |  |  | --- | 
|                                          |  |          |                     |             |  |                                                                                     |  | Number   
|                                          |  |          |                     |             |  | Square                                                                              |  | of Stores
|Facility                                  |  | Location |                     | Area Served |  | Footage                                                                             |  | Served   
|                                          |  |          |                     |             |  |                                                                                     |  |          
|Corporate office(1)                       |  |          | Phoenix, AZ         |             |  | All                                                                                 |  |           | 114,691 |  |  |  |    | 
|Distribution center(2)                    |  |          | Dixon, CA           |             |  | California, Nevada, Washington, Oregon, Idaho,
    Montana, Wyoming, Alaska, Hawaii |  |           | 325,500 |  |  |  | 514 | 
|Distribution center(2)                    |  |          | Phoenix, AZ         |             |  | Arizona, Colorado, Idaho, Nevada, New Mexico,
    California, Texas, Utah           |  |           | 273,520 |  |  |  | 495 | 
|Office, warehouse and distribution center |  |          | Mendota Heights, MN |             |  | Minnesota, North Dakota, South Dakota, Wisconsin,
    Michigan                      |  |           | 125,000 |  |  |  | 100 | 
|Regional distribution center              |  |          | Auburn, WA          |             |  | Washington, Oregon, Idaho, Alaska                                                   |  |           | 160,087 |  |  |  | 202 | 
|Regional distribution center              |  |          | Denver, CO          |             |  | Colorado, Wyoming, South Dakota                                                     |  |           | 36,270  |  |  |  | 68  | 

10



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|                             |  |          |                    |             |  |                                                 |  |           |        |  |  |  |     | 
|---------------------------- |  | -------- | ------------------ | ----------- |  | ----------------------------------------------- |  | --------- | ------ |  |  |  | --- | 
|                             |  |          |                    |             |  |                                                 |  | Number   
|                             |  |          |                    |             |  | Square                                          |  | of Stores
|Facility                     |  | Location |                    | Area Served |  | Footage                                         |  | Served   
|                             |  |          |                    |             |  |                                                 |  |          
|Regional distribution center |  |          | Salt Lake City, UT |             |  | Colorado, Utah, Idaho, Wyoming, Montana, Oregon |  |           | 60,000 |  |  |  | 77  | 
|Regional distribution center |  |          | Commerce, CA       |             |  | California                                      |  |           | 75,000 |  |  |  | 207 | 



---



|    |                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This facility is owned by Missouri Falls
    Partners, an affiliate of The Carmel Trust (Carmel), a trust
    governed under the laws of Canada. Until November 2002, Carmel
    was an affiliate of ours. See note 5 to the Consolidated
    Financial Statements for a further explanation.
|   
|(2) | Subject to time period and other restrictions, we
    have the ability to expand the Phoenix distribution center by
    approximately 80,000 square feet and the Dixon distribution
    center by 160,000 square feet should the need arise.                                                 

At February 2, 2003, 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   
|                  |  |          
|2003  2004       |  |           | 36    | 
|2005  2007       |  |           | 40    | 
|2008  2010       |  |           | 88    | 
|2011  2020       |  |           | 414   | 
|2021  2030       |  |           | 468   | 
|2031  thereafter |  |           | 62    | 
|                  |  |           |       | 
|                  |  |           | 1,108 | 
|                  |  |           |       | 

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




Item 3.Legal
Proceedings

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

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 probable
and reasonably estimable contingent liabilities. Although the
amount of liability that may result from these matters cannot be
ascertained, we do not currently believe that

11



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any of the legal claims, individually or in the
aggregate, will result in liabilities material to our
consolidated financial position, results of operations or cash
flows.


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 pursuant to the existing
accounting literature.

At some of our acquired locations, 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.

We do not believe that compliance with
environmental laws and regulations has 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.




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 2002.




PART II






|        |                                                                         
|------- | ------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Stock
    and Related Stockholder Matters



| |                                   
| | ----------------------------------
| | (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 25, 2003, there were 45,148,632 shares of
our common stock outstanding and there were approximately 93
record holders of our common stock.

12



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##### 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 2002: |                |                |   |       |  |  |   |      
|             | First Quarter  |                | $ | 15.25 |  |  | $ | 8.19  | 
|             | Second Quarter |                |   | 17.26 |  |  |   | 10.05 | 
|             | Third Quarter  |                |   | 13.79 |  |  |   | 10.71 | 
|             | Fourth Quarter |                |   | 12.90 |  |  |   | 9.50  | 
|Fiscal 2001: |                |                |   |       |  |  |   |      
|             | First Quarter  |                | $ | 6.97  |  |  | $ | 5.60  | 
|             | Second Quarter |                |   | 8.25  |  |  |   | 5.74  | 
|             | Third Quarter  |                |   | 8.65  |  |  |   | 5.50  | 
|             | Fourth Quarter |                |   | 10.48 |  |  |   | 7.40  | 

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 11%
Senior Subordinated Notes and 12% 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 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 the
Proxy Statement.



| |                                         
| | ----------------------------------------
| | (b) Sales of Unregistered
    Securities

On May 20, 2002, at our election, the entire
$50.0 million of 7% Convertible Subordinated Debentures
issued in December 2001 were converted into approximately
5.75 million shares of CSK Auto Corporation common stock.
Pursuant to the agreements relating to the debentures, interest
on the debentures was paid in shares of our common stock in lieu
of cash. In the first quarter of 2002, interest was paid on the
debentures in the form of 105,708 shares of CSK Auto
Corporation common stock. We elected to pay interest accrued on
the debentures for the period April 1, 2002 to the date of
conversion in the form of 30,872 additional shares of CSK Auto
Corporation common stock. We received no proceeds from the
conversion of these debentures.

13



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##### 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, which have been audited by PricewaterhouseCoopers
LLP, independent accountants. 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)                                                  
|                                                                                                                      |                                             |                                                                 
|                                                                                                                      |                                             | 2002(2)                                                          |           | 2001(3) |  | 2000(4) |           | 1999(5) |  | 1998(6)
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |        
|                                                                                                                      |                                             |                                                                 
|                                                                                                                      |                                             | (In thousands, except per share amounts and selected store data)
|Statement of Operations Data                                                                                          |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Net sales                                                                                                             |                                             | $                                                                | 1,506,646 |         |  | $       | 1,438,585 |         |  | $       | 1,452,109 |         |  | $ | 1,231,455 |         |  | $ | 1,004,385 |        
|Cost of sales                                                                                                         |                                             |                                                                  | 806,461   |         |  |         | 790,585   |         |  |         | 769,043   |         |  |   | 636,239   |         |  |   | 531,073   |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Gross profit                                                                                                          |                                             |                                                                  | 700,185   |         |  |         | 648,000   |         |  |         | 683,066   |         |  |   | 595,216   |         |  |   | 473,312   |        
|Other costs and expenses:                                                                                             |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|                                                                                                                      | Operating and administrative                |                                                                  |           | 592,630 |  |         |           | 580,134 |  |         |           | 592,691 |  |   |           | 501,527 |  |   |           | 399,016 | 
|                                                                                                                      | Store closing and other restructuring costs |                                                                  |           | 5,026   |  |         |           | 22,392  |  |         |           | 6,060   |  |   |           | 4,900   |  |   |           | 335     | 
|                                                                                                                      | Legal settlement                            |                                                                  |           |        |  |         |           | 2,000   |  |         |           | 8,800   |  |   |           |        |  |   |           |        | 
|                                                                                                                      | Goodwill amortization                       |                                                                  |           |        |  |         |           | 4,807   |  |         |           | 4,799   |  |   |           | 1,941   |  |   |           |        | 
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Operating profit                                                                                                      |                                             |                                                                  | 102,529   |         |  |         | 38,667    |         |  |         | 70,716    |         |  |   | 86,848    |         |  |   | 73,961    |        
|Interest expense                                                                                                      |                                             |                                                                  | 62,261    |         |  |         | 61,608    |         |  |         | 62,355    |         |  |   | 41,300    |         |  |   | 30,730    |        
|Equity in loss on joint venture                                                                                       |                                             |                                                                  |          |         |  |         |          |         |  |         | 3,168     |         |  |   |          |         |  |   |          |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Income (loss) before income taxes,
    extraordinary loss and cumulative effect of change in accounting
    principle |                                             |                                                                  | 40,268    |         |  |         | (22,941   | )       |  |         | 5,193     |         |  |   | 45,548    |         |  |   | 43,231    |        
|Income tax expense (benefit)                                                                                          |                                             |                                                                  | 14,761    |         |  |         | (8,886    | )       |  |         | 193       |         |  |   | 17,436    |         |  |   | 15,746    |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Income (loss) before extraordinary loss and
    cumulative effect of change in accounting principle                   |                                             |                                                                  | 25,507    |         |  |         | (14,055   | )       |  |         | 5,000     |         |  |   | 28,112    |         |  |   | 27,485    |        
|Extraordinary loss, net of income taxes                                                                               |                                             |                                                                  | (3,695    | )       |  |         | (3,137    | )       |  |         |          |         |  |   |          |         |  |   | (6,767    | )      
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Income (loss) before cumulative effect of
    change in accounting principle                                          |                                             |                                                                  | 21,812    |         |  |         | (17,192   | )       |  |         | 5,000     |         |  |   | 28,112    |         |  |   | 20,718    |        
|Cumulative effect of change in accounting
    principle, net of income taxes                                          |                                             |                                                                  |          |         |  |         |          |         |  |         |          |         |  |   | (741      | )       |  |   |          |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Net income (loss)                                                                                                     |                                             | $                                                                | 21,812    |         |  | $       | (17,192   | )       |  | $       | 5,000     |         |  | $ | 27,371    |         |  | $ | 20,718    |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Basic earnings (loss) per share                                                                                       |                                             | $                                                                | 0.54      |         |  | $       | (0.61     | )       |  | $       | 0.18      |         |  | $ | 0.98      |         |  | $ | 0.78      |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Diluted earnings (loss) per share                                                                                     |                                             | $                                                                | 0.54      |         |  | $       | (0.61     | )       |  | $       | 0.18      |         |  | $ | 0.96      |         |  | $ | 0.75      |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Shares used for basic per share computation                                                                           |                                             |                                                                  | 40,635    |         |  |         | 28,391    |         |  |         | 27,839    |         |  |   | 27,815    |         |  |   | 26,722    |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Shares used for diluted per share computation                                                                         |                                             |                                                                  | 40,752    |         |  |         | 28,391    |         |  |         | 27,839    |         |  |   | 28,627    |         |  |   | 27,640    |        
|                                                                                                                      |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Other Data                                                                                                            |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Net cash provided by (used in) operating
    activities                                                               |                                             | $                                                                | 35,919    |         |  | $       | (7,914    | )       |  | $       | 32,469    |         |  | $ | (4,031    | )       |  | $ | 3,403     |        
|Net cash used in investing activities                                                                                 |                                             |                                                                  | (6,552    | )       |  |         | (10,143   | )       |  |         | (34,542   | )       |  |   | (260,221  | )       |  |   | (37,524   | )      
|Net cash provided by (used in) financing
    activities                                                               |                                             |                                                                  | (29,932   | )       |  |         | 23,010    |         |  |         | 1,442     |         |  |   | 268,524   |         |  |   | 36,759    |        
|Capital expenditures                                                                                                  |                                             |                                                                  | 9,573     |         |  |         | 12,200    |         |  |         | 32,080    |         |  |   | 41,358    |         |  |   | 37,846    |        
|Rent expense                                                                                                          |                                             |                                                                  | 115,000   |         |  |         | 116,953   |         |  |         | 117,273   |         |  |   | 93,329    |         |  |   | 71,688    |        
|Depreciation and amortization                                                                                         |                                             |                                                                  | 35,566    |         |  |         | 41,146    |         |  |         | 40,827    |         |  |   | 29,375    |         |  |   | 22,412    |        
|Commercial sales(7)                                                                                                   |                                             |                                                                  | 262,773   |         |  |         | 259,096   |         |  |         | 249,314   |         |  |   | 217,696   |         |  |   | 155,845   |        
|Selected Store Data                                                                                                   |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Number of stores (end of period)                                                                                      |                                             |                                                                  | 1,109     |         |  |         | 1,130     |         |  |         | 1,152     |         |  |   | 1,120     |         |  |   | 807       |        
|Stores with commercial sales centers                                                                                  |                                             |                                                                  | 554       |         |  |         | 545       |         |  |         | 548       |         |  |   | 554       |         |  |   | 509       |        
|Percentage increase in comparable store net
    sales(8)                                                              |                                             |                                                                  | 7         | %       |  |         | 1         | %       |  |         | 2         | %       |  |   | 4         | %       |  |   | 2         | %      
|Balance Sheet Data (end of period)                                                                                    |                                             |                                                                  |           |         |  |         |           |         |  |         |           |         |  |   |           |         |  |   |           |        
|Cash and cash equivalents                                                                                             |                                             | $                                                                | 15,519    |         |  | $       | 16,084    |         |  | $       | 11,131    |         |  | $ | 11,762    |         |  | $ | 7,490     |        
|Working capital                                                                                                       |                                             |                                                                  | 528,749   |         |  |         | 498,914   |         |  |         | 401,523   |         |  |   | 456,594   |         |  |   | 306,879   |        
|Total assets                                                                                                          |                                             |                                                                  | 1,092,022 |         |  |         | 1,068,577 |         |  |         | 1,066,806 |         |  |   | 1,035,652 |         |  |   | 634,022   |        
|Total debt (including current maturities)                                                                             |                                             |                                                                  | 524,967   |         |  |         | 670,843   |         |  |         | 647,881   |         |  |   | 627,133   |         |  |   | 333,293   |        
|Stockholders equity                                                                                                   |                                             |                                                                  | 302,182   |         |  |         | 154,286   |         |  |         | 139,613   |         |  |   | 134,547   |         |  |   | 105,389   |        

See accompanying notes on pages 16 and 17.

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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) The results of operations in fiscal 2002
shown are calculated in accordance with Generally Accepted
Accounting Principles (GAAP) and include $12.1 million
of certain items that affect comparability between periods and
which we are allowed to exclude when we calculate our operating
results for purposes of measuring compliance under our debt
covenants. They consist of:



| |   |                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $4.9 million of workers compensation
    expense 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;
|
| |  | $1.5 million non-cash charge relating to the
    partial vesting of a supplemental executive retirement agreement
    for our chairman;                                                                                                                                                 
|
| |  | $4.4 million of closed store charges due to
    revisions in reserves primarily for the Profitability
    Enhancement Program (PEP) relating to longer than anticipated
    vacancy periods for our closed stores as a result of the
    economic slowdown;                             
|
| |  | $0.8 million loss related to the sale of
    certain stores in west Texas;                                                                                                                                                                                                              
|
| |  | $0.5 million in costs related to stock
    offerings.                                                                                                                                                                                                                                   

Our fiscal 2002 results include an extraordinary
loss of $3.7 million (net of an income tax benefit of
$2.3 million) for costs associated with the early
extinguishment of approximately $71.7 million of our 11% Senior
Subordinated Notes due 2006. In addition, consistent with our
adoption of FAS 142, we did not incur any goodwill
amortization during fiscal 2002.

(3) The results of operations in fiscal 2001
shown are calculated in accordance with GAAP and include
$51.2 million of certain items that affect comparability
between periods and which we are allowed to exclude when we
calculate our operating results for purposes of measuring
compliance under our debt covenants. They consist of:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | $46.3 million of charges incurred in
    connection with our Profitability Enhancement Program;                   
|
| |  | $2.0 million of charges associated with
    certain legal settlements;                                            
|
| |  | $0.2 million of transition and integration
    costs incurred with respect to acquired stores;                    
|
| |  | $1.2 million loss on the disposition of
    certain fixed assets; and                                             
|
| |  | $1.5 million discrete provision for bad debt
    in connection with the bankruptcy of a large commercial customer.

In addition, our fiscal 2001 results include an
extraordinary loss of $3.1 million (net of an income tax
benefit of $2.0 million) to write off unamortized deferred
financing costs associated with our previously existing senior
credit facility.

(4) The results of operations in fiscal 2000
shown are calculated in accordance with GAAP and include
$48.5 million of certain items that affect comparability
between periods and which we are allowed to exclude when we
calculate our operating results for purposes of measuring
compliance under our debt covenants. They consist of:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | $3.2 million write-off of our investment in
    PartsAmerica.com;                                                 
|
| |  | $8.8 million of charges associated with
    certain legal settlements;                                            
|
| |  | $23.8 million of transition and integration
    costs incurred with respect to acquired stores;                   
|
| |  | $0.4 million discrete provision for bad debt
    in connection with the bankruptcy of a large commercial customer;

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##### Table of Contents





| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $3.7 million of store closing costs incurred
    in connection with the closure of existing stores that
    overlapped with better-situated acquired stores;
|
| |  | $5.7 million of non-cash charges associated
    with the liquidation of certain acquired inventories; and                                                   
|
| |  | $2.9 million of operating losses incurred by
    acquired automotive service centers prior to our exit from that
    business.                              

(5) The results of operations in fiscal 1999
shown are calculated in accordance with GAAP and include
$32.7 million of certain items that affect comparability
between periods and which we are allowed to exclude when we
calculate our operating results for purposes of measuring
compliance under our debt covenants. They consist of:



| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $30.2 million of transition and integration
    costs incurred with respect to acquired stores; and                                                         
|
| |  | $2.5 million of store closing costs incurred
    in connection with the closure of existing stores that
    overlapped with better-situated acquired stores.

(6) The results of operations in fiscal 1998
shown are calculated in accordance with GAAP and include
$7.5 million of certain items that affect comparability
between periods and which we are allowed to exclude when we
calculate our operating results for purposes of measuring
compliance under our debt covenants. They consist of:



| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | The write-off of a $3.6 million prepaid
    management fee;                                                                   
|
| |  | $3.1 million of transition and integration
    expenses associated with 82 stores acquired from Trak Auto
    Corporation; and
|
| |  | $0.8 million of costs in connection with the
    CSK Auto Corporations offering of common stock.                             

In addition, our fiscal 1998 results include an
extraordinary loss of $6.8 million (net of an income tax
benefit of $4.2 million) relating to the early
extinguishment of outstanding debt with the proceeds from our
initial public offering.

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

(8) 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.

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

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 2002 means the 52 weeks ended
    February 2, 2003;    
|
| |  | Fiscal 2001 means the 52 weeks ended
    February 3, 2002; and
|
| |  | Fiscal 2000 means the 53 weeks ended
    February 4, 2001.    

General

CSK Auto Corporation is the largest specialty
retailer of automotive parts and accessories in the Western
United States and one of the largest retailers of these products
in the United States based, in each case, on our number of
stores. As of February 2, 2003, we operated 1,109 stores
under one fully integrated operating format and three brand
names:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Checker Auto Parts, founded in 1969, with 406
    stores in the Southwestern, Rocky Mountain and Northern Plains
    states and Hawaii;
|
| |  | Schucks Auto Supply, founded in 1917, with 230
    stores in the Pacific Northwest and Alaska; and                                     
|
| |  | Kragen Auto Parts, founded in 1947, with 473
    stores primarily in California.                                                       

The discussion that follows includes several
references to charges and effects relating to the following
significant transactions that occurred during the period covered:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On July 2, 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 secondary
    offerings.
|
| |  | In August 2001, we initiated a refinancing
    of our capital structure that included the issuance of
    convertible notes, convertible debentures, a refinancing of our
    credit facility and the issuance of additional stock. We refer
    to this as our Refinancing.                                                                                                                                                                                                             
|
| |  | In July 2001, we implemented a Profitability
    Enhancement Program to reduce costs, improve operating
    efficiencies and close under-performing stores. We refer to this
    as our PEP.                                                                                                                                                                                                                                                                                             
|
| |  | In April 2000, we acquired 22 AllCar stores
    (the AllCar stores) and in 1999 we acquired 194 Als and
    Grand Auto Supply stores (the AGA stores) and 86 Big Wheel/
    Rossi stores (the Big Wheel stores). We refer to these
    transactions collectively as the Acquisitions.                                                                                                                                                                                                   
|
| |  | In March 2000, we participated in the
    formation of a new joint venture, PartsAmerica.com (PA), with
    Advance Stores Company, Inc. (Advance) and Sequoia Capital. PA
    engaged in the sale of automotive parts and accessories via
    e-commerce. This joint venture terminated in the second quarter
    of fiscal 2001.                                                                                                                                                       

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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
|                                                             |  |            
|                                                             |  | 2002        |       | 2001 |  | 2000
|                                                             |  |             |       |      |  |     
|Net sales                                                    |  |             | 100.0 | %    |  |      | 100.0 | %  |  |  | 100.0 | %
|Cost of sales                                                |  |             | 53.5  |      |  |      | 55.0  |    |  |  | 53.0  |  
|                                                             |  |             |       |      |  |      |       |    |  |  |       |  
|Gross profit                                                 |  |             | 46.5  |      |  |      | 45.0  |    |  |  | 47.0  |  
|Operating and administrative expenses                        |  |             | 39.4  |      |  |      | 40.3  |    |  |  | 40.9  |  
|Store closing costs and other restructuring costs            |  |             | 0.3   |      |  |      | 1.6   |    |  |  | 0.4   |  
|Legal settlement                                             |  |             |      |      |  |      | 0.1   |    |  |  | 0.6   |  
|Goodwill amortization                                        |  |             |      |      |  |      | 0.3   |    |  |  | 0.3   |  
|                                                             |  |             |       |      |  |      |       |    |  |  |       |  
|Operating profit                                             |  |             | 6.8   |      |  |      | 2.7   |    |  |  | 4.8   |  
|Interest expense                                             |  |             | 4.1   |      |  |      | 4.3   |    |  |  | 4.3   |  
|Equity in loss of joint venture                              |  |             |      |      |  |      |      |    |  |  | 0.2   |  
|                                                             |  |             |       |      |  |      |       |    |  |  |       |  
|Income (loss) before income taxes and
    extraordinary loss |  |             | 2.7   |      |  |      | (1.6  | )  |  |  | 0.3   |  
|Income tax expense (benefit)                                 |  |             | 1.0   |      |  |      | (0.6  | )  |  |  |      |  
|                                                             |  |             |       |      |  |      |       |    |  |  |       |  
|Income (loss) before extraordinary loss                      |  |             | 1.7   |      |  |      | (1.0  | )  |  |  | 0.3   |  
|Extraordinary loss, net of income taxes                      |  |             | (0.2  | )    |  |      | (0.2  | )  |  |  |      |  
|                                                             |  |             |       |      |  |      |       |    |  |  |       |  
|Net income (loss)                                            |  |             | 1.5   | %    |  |      | (1.2  | )% |  |  | 0.3   | %
|                                                             |  |             |       |      |  |      |       |    |  |  |       |  

Net
Sales

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

|                                               |                        |                        |           |           |  |      |           |           |  |   |           |           | 
|---------------------------------------------- | ---------------------- | ---------------------- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- | 
|                                               |                        |                       
|                                               |                        | Net Sales & Sales Data
|                                               |                        |                       
|                                               |                        | 2002                   |           | 2001      |  | 2000
|                                               |                        |                        |           |           |  |     
|Retail sales                                   |                        | $                      | 1,238,474 |           |  | $    | 1,174,490 |           |  | $ | 1,176,326 |          
|Commercial sales                               |                        |                        | 262,773   |           |  |      | 259,096   |           |  |   | 244,942   |          
|Other sales                                    |                        |                        | 5,399     |           |  |      | 4,999     |           |  |   | 4,826     |          
|                                               |                        |                        |           |           |  |      |           |           |  |   |           |          
|                                               | Net sales for 52 weeks |                        |           | 1,506,646 |  |      |           | 1,438,585 |  |   |           | 1,426,094 | 
|Impact of 53rd week in fiscal 2000             |                        |                        |          |           |  |      |          |           |  |   | 26,015    |          
|                                               |                        |                        |           |           |  |      |           |           |  |   |           |          
|Total net sales                                |                        | $                      | 1,506,646 |           |  | $    | 1,438,585 |           |  | $ | 1,452,109 |          
|                                               |                        |                        |           |           |  |      |           |           |  |   |           |          
|Sales growth  all stores
    (52 weeks)       |                        |                        | 4.7       | %         |  |      | 0.1       | %         |  |   | 15.8      | %        
|Sales growth  comparable stores               |                        |                        | 7.0       | %         |  |      | 1.0       | %         |  |   | 2.0       | %        
|Sales growth  commercial sales
    (52 weeks) |                        |                        | 1.4       | %         |  |      | 5.8       | %         |  |   | 12.5      | %        
|Number of stores open (at end of year)         |                        |                        | 1,109     |           |  |      | 1,130     |           |  |   | 1,152     |          

Net sales include the results of all stores from
the date opened or acquired. We also evaluate results for
comparable (or same-store) sales. Comparable store net sales
data is calculated 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. To evaluate sales levels, we have
identified the net sales for the 53rd week in 2000 for
comparison purposes so as to evaluate consistent 52-week fiscal
periods across all fiscal years presented.

Net sales for all stores and comparable stores
increased significantly in fiscal 2002 compared to fiscal 2001
primarily due to: (1) our improved liquidity which allowed
us to replenish our store inventories to more

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##### Table of Contents



normal levels of product availability;
(2) the commencement of a new merchandising program that
features garage maintenance and organizational products; and
(3) an increased emphasis on promotional activities and
promotional pricing to stimulate customer awareness and improve
customer counts in our stores. Total commercial sales increased
1.4% in fiscal 2002 compared to fiscal 2001.


Retail sales growth was flat in fiscal 2001
compared to fiscal 2000 and comparable store sales increased 1%
over the same period. Excluding the 53rd week in 2000,
commercial sales for all stores and for comparable stores
increased 5.8% and 10%, respectively, in fiscal 2001 compared to
fiscal 2000. This increase resulted from the continued expansion
of our commercial sales program.

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 2002 was
$700.2 million, or 46.5% of net sales, compared to
$648.0 million, or 45.0% of net sales for fiscal 2001.
Gross profit increased in fiscal 2002 over fiscal 2001 due to
increased cash discounts and vendor allowances as a result of
our improved sales volume and liquidity. As a result of the LIFO
method of accounting for inventory and the ability to obtain
lower product acquisition costs, we recorded reductions to cost
of goods sold of $13.0 million and $9.7 million for
fiscal 2002 and 2001, respectively. In addition, gross profit in
fiscal 2001 was negatively impacted by $23.1 million of
charges incurred relating to our PEP.

Gross profit in fiscal 2001 was
$648.0 million, or 45.0% of nets sales, compared to
$683.1 million, or 47.0% of net sales for fiscal 2000.
Gross profit decreased in fiscal 2001 compared to fiscal 2000
primarily as a result of our PEP, in which $23.1 million of
charges were incurred relating to reduction in inventory values
and costs associated with inventory review and disposal. As a
result of the LIFO method of accounting for inventory and the
ability to obtain lower product acquisition costs, we recorded
reductions to cost of goods sold of $9.7 million and
$5.4 million for fiscal 2001 and 2000, respectively.
Although we had anticipated higher gross profit levels for 2001,
we did not achieve this result because of lower than expected
vendor volume purchase allowances and cash discounts during the
year due principally to lower than typical in-stock inventory
levels in the 2001 period. We have historically utilized prompt
payment and other cash discount programs offered by vendors.
Because of the need to pay for the class action lawsuit
settlement (see Note 16 to the Consolidated Financial
Statements) and the term loan amortization payments, we made
efforts to retain cash during most of fiscal 2001 and did not
take full advantage of the contractual vendor allowances. In
addition, our change of advertising strategy to emphasize
promotional discounts through newspaper advertising to increase
retail customer count resulted in a reduction to the realized
gross profit margin during the period.

Operating and
Administrative Expenses

Operating expenses consist of operating and
administrative expenses and also include the costs of store
closing and restructuring costs (including the PEP), legal
settlements, and goodwill amortization (in fiscal years prior to
2002). 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 decreased by approximately
$11.7 million to $597.7 million, or 39.7% of net
sales, in fiscal 2002 from $609.3 million, or 42.4 % of net
sales, in fiscal 2001. Operating expenses have decreased as a
percent of sales as a result of cost reductions associated with
our PEP and the elimination of goodwill amortization during
fiscal 2002. Operating expenses have also decreased as a percent
of sales due, in part, to

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the leveraging of our fixed costs over rising net
sales. In addition, the following items impacted the
comparability of fiscal 2002 operating expenses:




| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.
|
| |  | Closed store charges of $4.4 million due to
    revisions in reserves, primarily for the PEP stores, relating to
    longer than anticipated vacancy periods and lower estimated
    sublease rates as a result of the economic slowdown.                                                                  

Operating expenses decreased by $3.1 million
to $609.3 million, or 42.4% of net sales, for fiscal 2001
from $612.4 million, or 42.2% of net sales, for fiscal
2000. The following items impacted the comparability of
operating expenses for the fiscal years indicated:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Implementation of our PEP to reduce costs,
    improve operating efficiencies and close under-performing stores
    which included approximately $21.5 million of store closing
    and restructuring charges and $1.7 million of other
    adjustments to prior estimates affecting the closed store
    reserve that were unrelated to the PEP.                                                                                                                                                                                                                                                                               
|
| |  | The sale of certain of our stores that we had
    planned to close as part of the PEP. We had expected to leave
    the stores vacant and incur rents through the expiration of the
    contracted leases, or to incur rental costs while negotiating
    with potential subtenants. The costs were no longer required as
    we sold the stores and transferred the leases to the new owner.
    Results of operations in fiscal 2001 reflect a reduction in
    expenses of $1.5 million resulting from this transaction.                                                                                                     
|
| |  | Settlement of two separate but similar lawsuits.
    The lawsuits sought overtime pay for personnel that we had
    believed were exempt from overtime because they were part of our
    store management. Our operating results reflect the costs of
    settlement of $2.0 million (2001) and $8.8 million
    (2000). We have changed the manner in which we compensate
    certain members of our store management to avoid similar
    litigation in future periods.                                                                                                                                                       
|
| |  | Over the past several years, we have completed a
    series of acquisitions. Upon completion of each acquisition, we
    incurred direct and incremental expenses for the transition of
    acquired stores to our operating format. These expenses included
    the cost of re-merchandising acquired inventories, training
    employees, grand opening advertising (to generate name brand
    awareness in new markets) and other expenses. These expenses
    were typically incurred for a period of approximately six months
    following the acquisition, and totaled $0.2 million (2001)
    and $23.8 million (2000).
|
| |  | We incurred charges of $1.2 million relating
    to a loss on disposition of certain fixed assets in fiscal 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Two of our commercial customers declared
    bankruptcy, requiring us to provide discrete provisions for bad
    debts of $1.5 million in 2001 and $0.4 million in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | In connection with the Acquisitions, we
    identified certain stores in our existing chain for closure
    because they overlapped with better-situated acquired stores. We
    incurred related charges of $3.7 million in fiscal 2000. We
    routinely incur other store closing costs, but have not
    identified these costs as special items because they are
    incurred in the normal course of updating and relocating stores
    to improve our business.                                                                                                                                                          

Interest
Expense

Interest expense for fiscal 2002 increased to
$62.3 million from $61.6 million for the comparable
period of fiscal 2001. Higher average interest rates, primarily
on our fixed rated debt, and increased amortization of deferred
financing fees as a result of our Refinancing increased interest
expense. These increases were partially offset by reduced
interest expense associated with lower average outstanding debt
balances and less vendor interest on accounts payables because
of our improved liquidity in fiscal 2002. During
February 2002, we

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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. For fiscal 2002, we reduced interest expense by
approximately $2.4 million as a result of the interest rate
swap.


Net interest expense for fiscal 2001 totaled
$61.6 million compared to $62.4 million for the
53 weeks of fiscal 2000. Interest expense decreased as a
result of lower average interest rates and the fact that there
was one less week in fiscal 2001 (52 weeks) relative to
fiscal 2000 (53 weeks). These decreases were partially
offset by higher interest expense in fiscal 2001 due to higher
average outstanding loan balances and increased amortization of
deferred financing fees as a result of our Refinancing. Due to
our liquidity issues during the year, we incurred vendor
interest on accounts payable because we extended merchandise
payment terms.

Income Tax
Expense

Income tax expense for fiscal 2002 was
$14.8 million or 36.7%. The effective tax rate in fiscal
2002 is lower than the effective benefit rate in the prior year
(38.7%) due to the impact of state tax credits applied to our
statutory rate in a year with a loss before income taxes.

Income tax benefit for fiscal 2001 was
$8.9 million, reflecting the loss we incurred, compared to
income tax expense of $0.2 million for the 2000 fiscal
period. Our effective tax rate was 38.7% during fiscal 2001. Our
effective tax rate of 4.0% in fiscal 2000 was not representative
of our typical rate as a result of certain permanent items and
tax credits that were relatively higher in proportion to our
income before income taxes than in other years. The rate also
decreased in 2000 as a result of a reversal of prior reserves no
longer required.

Profitability Enhancement Program
(PEP)

During the second quarter of fiscal 2001, we
implemented our PEP to reduce costs, improve operating
efficiencies and close under-performing stores. As a result of
the PEP, we recorded total restructuring and other charges of
$44.6 million, which are detailed in the following
paragraphs. The table below summarizes the charges relating to
the PEP:

|                                                                 |                                                                                            |       |             |        |        |        | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----- | ----------- | ------ | ------ | ------ | 
|Amounts recorded as store closing and
    restructuring charges: |                                                                                            |       |             |       
|                                                                 | Reserve for store closing costs                                                            |       | $           | 13,698 |       
|                                                                 | Write down for impairment of store site costs and
    store related property and equipment |       |             | 6,649  |       
|                                                                 | Reserve for workforce reduction                                                            |       |             | 400    |       
|                                                                 | Other                                                                                      |       |             | 729    |       
|                                                                 |                                                                                            |       |             |       
|                                                                 |                                                                                            | Total |             |        | 21,476 |       
|                                                                 |                                                                                            |       |             |       
|Amounts recorded as charges to cost of
    sales:                |                                                                                            |       |             |       
|                                                                 | Provision for excess inventories                                                           |       |             | 17,292 |       
|                                                                 | Actual costs incurred for inventory review and
    disposal                                |       |             | 5,800  |       
|                                                                 |                                                                                            |       |             |       
|                                                                 |                                                                                            | Total |             |        | 23,092 |       
|                                                                 |                                                                                            |       |             |       
|                                                                 |                                                                                            |       | Grand total |        | $      | 44,568 | 
|                                                                 |                                                                                            |       |             |       

Store Closing
Costs

Under the PEP, we increased the store closing
reserve by approximately $13.7 million. Approximately
$6.8 million of the charge related to the planned closure
of 36 stores based on several factors including market
saturation, store profitability, and store size and format. Of
these planned closures, 34 were closed as of February 2,
2003 and charges relating to 2 of the stores were subsequently
eliminated from the reserve upon the sale of these stores and
the transfer of the lease commitments to the new owner. In
addition, we recorded an increase to the reserve for prior years
plans of approximately $6.9 million relating to existing
closed stores

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that had longer than anticipated vacancy periods
as a result of the continued economic slowdown. The PEP charge
also includes a $6.6 million write-down for impairment of
leasehold improvements and other store-related property and
equipment, which has been recorded as a direct reduction of net
property and equipment balances. See Store Closures in a
subsequent section of this Management Discussion and Analysis of
Financial Condition for further discussion regarding the events
and decisions made that result in strategic store closing plans
and the related impact on our results of operations, liquidity
and capital resources.


Other
Profitability Enhancement Program Costs

As a result of the consolidation of certain
regional operations and general and administrative functions
under our PEP, we terminated 36 employees and eliminated 84 open
positions. The terminated employees worked primarily in human
resources, information technology and real estate. As a result
of these actions, the restructuring charges included a provision
for severance and benefits of approximately $0.4 million.

We have also accrued other costs and charges
incidental to the restructuring. These costs include early
termination fees for operating lease commitments and other asset
impairments aggregating approximately $0.7 million.

Inventory and
Related Charges

We completed an inventory review to:
(1) increase inventory turnover; (2) provide an
optimal inventory level at each store location;
(3) liquidate inventory not meeting our new asset return
levels; and (4) write down the carrying value of inventory
relating to the 36 stores planned for closure. As a result of
the analysis, we elected to establish a reserve for excess
inventories resulting from the decision to eliminate certain
product lines and to liquidate inventory from closed stores. In
conjunction with this decision, a provision of
$17.3 million was recorded to reduce inventory values. In
addition, we incurred actual costs of approximately
$5.8 million related to labor, warehouse and distribution,
freight and other operating costs associated with the inventory
review and disposal. These costs are reflected as cost of sales
in the accompanying statement of operations for fiscal 2001.

Impact of the
PEP

Based on the initiatives described above, the PEP
reduced fiscal 2002 operating expenses by approximately
$3.5 million, which related to the reduction of certain
personnel, communications and transportation costs. We
anticipate that these cost savings will be applicable to future
years as well. In addition, the stores closed as a result of the
PEP incurred operating losses of $0.1 million and
$3.6 million for fiscal 2002 and 2001, respectively.
Certain of these stores incurred operating losses during fiscal
2002 as a result of the respective stores remaining open for a
portion of the year. All stores were closed prior to the end of
fiscal 2002.

Liquidity and Capital Resources

Overview of
Liquidity

Our primary cash requirements include working
capital (primarily inventory), interest on our debt and capital
expenditures. We are not required to make any debt amortization
payments prior to December 2004 other than for capital
leases. 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. The following table
outlines our working capital and liquidity ($ in thousands):

|                                            |  |                |         |      |  |   |         | 
|------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | 
|                                            |  |               
|                                            |  | As of year-end
|                                            |  |               
|                                            |  | 2002           |         | 2001
|                                            |  |                |         |     
|Net current assets                          |  | $              | 528,749 |      |  | $ | 498,914 | 
|                                            |  |                |         |      |  |   |         | 
|Cash                                        |  | $              | 15,519  |      |  | $ | 16,084  | 
|Availability under revolving line of credit |  |                | 54,698  |      |  |   | 35,885  | 
|                                            |  |                |         |      |  |   |         | 
|Total liquidity                             |  | $              | 70,217  |      |  | $ | 51,969  | 
|                                            |  |                |         |      |  |   |         | 

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As of February 2, 2003, we had net working
capital of approximately $528.7 million, an increase of
$29.8 million, or 6.0%, compared to February 3, 2002.
Working capital increased primarily due to: (1) a
$31.2 million increase in inventories consistent with our
return to a more normal inventory in-stock position and the
acquisition of new product types in support of new merchandise
programs; and (2) a $26.8 million increase in
receivables primarily as a result of new vendor rebate and
cooperative advertising programs. These increases were partially
offset by working capital decreases from: (1) a
$7.1 million increase in accounts payable relating to the
increased inventory purchases and extended payment terms;
(2) an $8.7 million change in net current deferred
income taxes primarily as a result of inventory valuation
differences; and (3) an $8.4 million increase in
accrued payroll related expenses primarily as a result of
increased workers compensation reserves.

As of February 2, 2003, we had total
liquidity (cash plus availability under our existing revolving
credit facility) of approximately $70.2 million.
Availability under our revolving credit agreement is controlled
by borrowing base limitations applicable to that facility. The
borrowing base formula is equal to the lesser of
$300.0 million or the sum of certain percentages of our
eligible inventory and accounts receivable. As a result of the
limitations imposed by the borrowing base formula, at
February 2, 2003, we could only borrow up to
$275.5 million of the total $300.0 million facility.
Accordingly, we have $24.5 million of additional borrowing
capacity that has not been included in our liquidity
calculation, but that may become available in the future,
subject to the borrowing base calculation.

Debt is an important part of our overall
capitalization. While we are still highly leveraged, our debt to
equity ratio continues to improve. Our ratio has decreased as a
result of our conversion of $50.0 million in outstanding
Convertible Subordinated Debentures to common stock, our
July 2002 stock offering and the subsequent retirement of
approximately $71.7 million of outstanding 11% Senior
Subordinated Notes. The table below details our debt to equity
ratio ($ in thousands):

|                                          |  |                |         |      |  |   |         | 
|----------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | 
|                                          |  |               
|                                          |  | As of year-end
|                                          |  |               
|                                          |  | 2002           |         | 2001
|                                          |  |                |         |     
|Debt, including capital lease obligations |  | $              | 524,967 |      |  | $ | 670,843 | 
|Equity                                    |  |                | 302,182 |      |  |   | 154,286 | 
|                                          |  |                |         |      |  |   |         | 
|Debt to equity ratio                      |  |                | 1.7     |      |  |   | 4.3     | 
|                                          |  |                |         |      |  |   |         | 

Analysis of Cash Flows

Operating
Activities

During fiscal 2002, net cash provided by
operating activities was $35.9 million compared to
$7.9 million of cash used in operating activities during
fiscal 2001. The significant components of the change are:
(1) net income for fiscal 2002 of $21.8 million
compared to a loss of $17.2 million in the fiscal 2001
period, which is partially offset by $25.4 million of
non-cash inventory and fixed asset charges during the 2001
period as a result of our PEP; (2) a reduction in cash used
to support working capital (as discussed above) and net changes
in other assets and liabilities, whereby $44.0 million was
used during fiscal 2002 compared to $55.4 million during
fiscal 2001; (3) a $4.4 million premium payment made
during fiscal 2002 as part of our retirement of
$71.7 million of outstanding 11% Senior Subordinated Notes;
and (4) an $8.8 million payment made during fiscal
2001 as a result of our settlement of the class action lawsuits
(see Note 16 to the Consolidated Financial Statements).

In fiscal 2001, net cash used in operating
activities was $7.9 million compared to $32.5 million
provided by operating activities during fiscal 2000. The
significant components of the change are: (1) a net loss of
$17.2 million in fiscal 2001 compared to net income of
$5.0 million in fiscal 2000; (2) an increase in cash
used to support working capital and net changes in other assets
and liabilities, whereby $55.4 million was used

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during fiscal 2001 compared to $18.9 million
during fiscal 2000; and (3) the payment during fiscal 2001
with respect to the class action lawsuits described above.


Investing
Activities

Net cash used in investing activities totaled
$6.6 million for fiscal 2002 compared to $10.1 million
used in investing activities during fiscal 2001. The decrease in
cash used in investing activities during fiscal 2002 was the
result of: (1) $4.2 million in proceeds from the sale of 13
stores in west Texas in fiscal 2002 (no such sale occurred in
fiscal 2001); and (2) $2.6 million less in capital
expenditures in fiscal 2002 than in the comparable 2001 period.
These sources of cash were offset in part by $3.3 million
less in proceeds from assets held for sale in fiscal 2002.

Net cash used in investing activities totaled
$10.1 million for fiscal 2001 compared to
$34.5 million used in investing activities during fiscal
2000. The decrease in cash used in investing activities for
fiscal 2001 as compared to fiscal 2000 was primarily the result
of $19.9 million less in capital expenditures. We invested
a greater amount in fiscal 2000 as part of the transition and
integration of our Acquisitions. In addition, during fiscal 2000
we made a $3.2 million investment in PA.

We did not make any acquisitions during fiscal
2002 or 2001 nor do we anticipate any significant acquisitions
during fiscal 2003. We have budgeted approximately
$15.0 million for capital expenditures for fiscal 2003,
primarily for new stores and general corporate purposes. We
opened 18 new, relocated or expanded stores in fiscal 2002 and
expect to open, relocate or expand approximately 20 to
30 stores in fiscal 2003. 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 $125,000 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
$300,000.

Financing
Activities

During fiscal 2001, we completed a Refinancing of
our capital structure that resulted in the elimination of
scheduled bank debt amortization payments prior to the end of
2004, the extension of debt maturities and enhanced liquidity.
The Refinancing consisted of the following: (1) the
issuance of a $30.0 million, 7% Convertible Subordinated
Note, which was converted during fiscal 2001 into approximately
4.5 million shares of our common stock at a conversion
price of $6.63 per share; (2) a new three-year
$300.0 million senior secured, asset-based credit facility
due in December 2004 comprised of a $170.0 million
non-amortizing term loan and a $130.0 million revolving
credit facility; (3) the issuance of $280.0 million of
12% Senior Notes; and (4) the issuance of
$50.0 million of 7% Convertible Subordinated Debentures,
which were converted at our election on May 20, 2002 into
approximately 5.75 million shares of our common stock at
the conversion price of $8.69 per share.

To continue to reduce debt and improve liquidity,
on July 2, 2002, we sold approximately 6.9 million
shares of common stock in an underwritten public offering at $12
per share. Proceeds from this offering were used to retire
approximately $71.7 million of our outstanding 11% Senior
Subordinated Notes. The early extinguishment of this debt
resulted in an extraordinary loss of approximately
$3.7 million, net of approximately $2.3 million of
income tax benefit, primarily as a result of the payment of an
early redemption

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premium and the write off of deferred debt
issuance costs. The sources and uses of funds of this
transaction are as follows ($ in thousands):


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

Net cash used in financing activities totaled
$29.9 million for fiscal 2002 compared to
$23.0 million provided by financing activities in fiscal
2001. Our secondary offering in July 2002 provided the largest
component of our financing cash flows during fiscal 2002, while
our Refinancing provided the largest component during fiscal
2001 (see table below). In addition, the net payments made on
our revolving credit facility during fiscal 2002 were $23.7
million more than fiscal 2001 (excluding the impact of the
Refinancing), resulting from our improved liquidity. The
following table highlights the components of our Refinancing and
its effect on our financing activities for fiscal 2001 ($ in
thousands):

|                                                                     |                                           |             |          |                 |  |       |          |         |   |   |          |        | 
|-------------------------------------------------------------------- | ----------------------------------------- | ----------- | -------- | --------------- |  | ----- | -------- | ------- | - | - | -------- | ------ | 
|                                                                     |                                           |             |          | Non-Refinancing |  |      
|                                                                     |                                           | Refinancing |          | Activity        |  | Total
|                                                                     |                                           |             |          |                 |  |      
|Borrowings under senior credit facility                              |                                           | $           | 217,000  |                 |  | $     | 321,000  |         |   | $ | 538,000  |       
|Payments under senior credit facility                                |                                           |             | (515,160 | )               |  |       | (322,320 | )       |   |   | (837,480 | )     
|Payment of debt issuance costs                                       |                                           |             | (19,917  | )               |  |       | (2,102   | )       |   |   | (22,019  | )     
|Issuance of convertible subordinated notes in
    August 2001        |                                           |             | 30,000   |                 |  |       |         |         |   |   | 30,000   |       
|Issuance of convertible subordinated debentures
    in December 2001 |                                           |             | 50,000   |                 |  |       |         |         |   |   | 50,000   |       
|Borrowings under 12% Senior Notes                                    |                                           |             | 275,317  |                 |  |       |         |         |   |   | 275,317  |       
|Payments on capital lease obligations                                |                                           |             |         |                 |  |       | (10,149  | )       |   |   | (10,149  | )     
|Recovery of stockholder receivable                                   |                                           |             |         |                 |  |       | 29       |         |   |   | 29       |       
|Exercise of stock options                                            |                                           |             |         |                 |  |       | 4        |         |   |   | 4        |       
|Other financing activities                                           |                                           |             |         |                 |  |       | (692     | )       |   |   | (692     | )     
|                                                                     |                                           |             |          |                 |  |       |          |         |   |   |          |       
|                                                                     | Net cash provided by financing activities |             | $        | 37,240          |  |       | $        | (14,230 | ) |   | $        | 23,010 | 
|                                                                     |                                           |             |          |                 |  |       |          |         |   |   |          |       

Net cash provided by financing activities totaled
$23.0 million for fiscal 2001 compared to $1.4 million
in fiscal 2000. Summarized in the table above, our Refinancing
generated $37.2 million in net financing cash inflows as
compared to a net cash outflow of $14.2 million relating to
other financing activities. The decrease in cash flows relating
to other financing activities as compared to fiscal 2000
primarily relates to net payments on the senior credit facility
during fiscal 2001 of $1.3 million as compared to
$17.7 million of net borrowings on the senior credit
facility during fiscal 2000.

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Operating Lease Arrangements and Contractual
Obligations

We lease our office and warehouse facilities, all
but one of our retail stores, and a majority 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 offer security for our store
locations without the risks associated with real estate
ownership.

We currently have leases for our corporate
headquarters and an adjacent parking lot with a landlord which
until November 2002 was a related party. 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.

Historically, we had an arrangement with a real
estate investment company, under which we would identify a
location for a new store and then that company would acquire the
property. We would then build our new store and lease the store
from the real estate investment company under an operating
lease. This arrangement expired on December 31, 2000.
During fiscal 2001, two stores, which were previously committed
under this facility, were funded. We do not plan to negotiate
another similar facility and do not believe that such a lease
facility is critical to our store development plans for fiscal
2003 based on the limited number of projected store openings and
the availability of other alternative financing arrangements,
including sale-leaseback financing transactions directly with
individual investors. We funded our new and relocated stores
during fiscal 2002 under separate agreements with landlords and
individual investors.

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 |  | 2-3   |         | 4-5   |  | After 5
|                               |  | Total                  |           | 1 Year |  | Years |         | Years |  | Years  
|Contractual obligations        |  |                        |           |        |  |       |         |       |  |        
|Long term debt                 |  | $                      | 492,607   |        |  | $     |        |       |  | $       | 202,000 |  |  | $ | 290,607 |  |  | $ |        | 
|Capital lease obligations      |  |                        | 42,486    |        |  |       | 15,363  |       |  |         | 20,657  |  |  |   | 4,073   |  |  |   | 2,393   | 
|Operating lease obligations(1) |  |                        | 820,419   |        |  |       | 122,569 |       |  |         | 208,480 |  |  |   | 167,313 |  |  |   | 322,057 | 
|                               |  |                        |           |        |  |       |         |       |  |         |         |  |  |   |         |  |  |   |         | 
|Total contractual obligations  |  | $                      | 1,355,512 |        |  | $     | 137,932 |       |  | $       | 431,137 |  |  | $ | 461,993 |  |  | $ | 324,450 | 
|                               |  |                        |           |        |  |       |         |       |  |         |         |  |  |   |         |  |  |   |         | 



---



|    |                                                                             
|--- | ----------------------------------------------------------------------------
|(1) | Operating lease obligations are not offset by
    obligations of subtenants.

Other commercial commitments consist of standby
letters of credit totaling approximately $18.8 million, all
of which expire in 2003.

Store Closures

We provide an allowance for estimated costs and
losses 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 designated for closure. As a result of our
acquisitions over the last several years, we have closed
numerous locations as a result of store overlap with previously
existing store locations.

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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. 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 Financial Accounting Standards
Board (the FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 requires companies to
recognize the present value of costs associated with exit or
disposal activities when they are incurred rather than at the
date of a commitment to an exit or disposal plan. Examples of
costs covered by the standard include lease rental and
termination costs and certain employee severance costs that are
associated with a restructuring, discontinued operation, store
closing, or other exit or disposal activity. SFAS No. 146
is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002, with early
implementation encouraged. We did not incur any new liability
related to a store closure between adoption of this statement
and the end of our fiscal year. The adoption of this
pronouncement will impact the timing of recognition of future
closed store charges, which will be recorded at fair value when
a store is vacated.

As of February 2, 2003, we had a total of
218 store locations included in the allowance for store closing
costs. Of this total, 45 locations were vacant, 166 locations
were subleased and 7 locations were identified for closure but
remained open as of year end. In addition to these stores, we
had 58 service centers of which 1 was vacant and 57 were
subleased. Future rents will be incurred through the expiration
of the non-cancelable leases, the longest of which runs through
March 2018.

Activity in the provision for store closings and
the related store closing costs for the three fiscal years ended
February 2, 2003, including the PEP, is as follows ($ in
thousands):

|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |        |         |  
|-------------------------------- | ---------------------------------------- | ------------------------------------- | ----- | ------ | ------ | ---- | ----- | ------ | ------ | - | ----- | ------ | ------- | -
|                                 |                                          |                                      
|                                 |                                          | Fiscal Year                          
|                                 |                                          |                                      
|                                 |                                          | 2002                                  |       | 2001   |        | 2000
|                                 |                                          |                                       |       |        |        |     
|Balance, beginning of year       |                                          | $                                     | 6,771 |        |        | $    | 1,552 |        |        | $ | 4,802 |       
|Store closing costs:             |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 | Store closing costs, gross               |                                       |       | 1,314  |        |      |       | 7,530  |        |   |       | 6,101  |        
|                                 | Adjustments to prior plans               |                                       |       | (1,196 | )      |      |       | (1,536 | )      |   |       | (41    | )      
|                                 | Revisions in estimates                   |                                       |       | 4,908  |        |      |       | 8,638  |        |   |       |       |        
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 |                                          | Store closing costs, net              |       |        | 5,026  |      |       |        | 14,632 |   |       |        | 6,060   |  
|Purchase accounting adjustments: |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 | Als and Grand Auto Supply                |                                       |       |       |        |      |       |       |        |   |       | 2,744  |        
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 |                                          | Total purchase accounting adjustments |       |        |       |      |       |        |       |   |       |        | 2,744   |  
|Payments:                        |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 | Rent expense, net of sublease recoveries |                                       |       | (5,030 | )      |      |       | (6,051 | )      |   |       | (6,570 | )      
|                                 | Occupancy and other expenses             |                                       |       | (1,837 | )      |      |       | (2,839 | )      |   |       | (4,846 | )      
|                                 | Sublease commissions and buyouts         |                                       |       | (508   | )      |      |       | (523   | )      |   |       | (638   | )      
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 |                                          | Total payments                        |       |        | (7,375 | )    |       |        | (9,413 | ) |       |        | (12,054 | )
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|Balance, end of year             |                                          | $                                     | 4,422 |        |        | $    | 6,771 |        |        | $ | 1,552 |       
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       

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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 our 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.

During fiscal 2001, we recorded the following:
(1) gross store closing costs of $7.5 million
($6.8 million from the PEP) relating to the identification
of 46 stores for closure; (2) an adjustment to prior plans
of $1.5 million due to two stores previously identified for
closure under our PEP that were subsequently removed as they
were sold and the lease commitment was transferred to the new
owner; and (3) revisions in estimates of $8.6 million
($1.3 million for plan year 2000, $0.8 million for
plan year 1999 and $6.5 million for plan years prior to 1999)
relating to existing closed stores that have had longer than
anticipated vacancy periods as a result of the economic slowdown.

During fiscal 2000, we recorded the following:
(1) gross store closing costs of $6.1 million relating
to the identification of 24 stores for closure
($3.7 million of which relates to a 1999 closure plan for
current stores that overlapped with the acquired AGA stores);
and (2) purchase accounting adjustments of
$2.7 million relating to a 1999 closure plan of certain
acquired AGA stores.

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

|                           |  |                               |    |        |  |            |    |        |  |            |    |   |  |  |     |   |  |  |   | 
|-------------------------- |  | ----------------------------- | -- | ------ |  | ---------- | -- | ------ |  | ---------- | -- | - |  |  | --- | - |  |  | - | 
|                           |  |                               |    |       
|                           |  | Number of Stores to be Closed |    |       
|                           |  |                               |    |       
|                           |  | Beginning                     |    | Stores |  | Plan       |    | Stores |  | Balance to
|Store Count by Fiscal Year |  | Balance                       |    | Added  |  | Amendments |    | Closed |  | be Closed 
|                           |  |                               |    |        |  |            |    |        |  |           
|2000                       |  |                               | 28 |        |  |            | 24 |        |  |            | (1 | ) |  |  | (42 | ) |  |  | 9 | 
|2001                       |  |                               | 9  |        |  |            | 46 |        |  |            | (2 | ) |  |  | (46 | ) |  |  | 7 | 
|2002                       |  |                               | 7  |        |  |            | 25 |        |  |            |   |   |  |  | (25 | ) |  |  | 7 | 

At February 2, 2003, there were 7 stores
remaining to be closed under our store closing plans, comprised
of the following:

|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  |   | 
|------------------------------------- |  | ------------ | -- | ---------- |  | ------ | -- | ---------- |  |  | --- | - |  |  | - | 
|                                      |  | Stores in    |    | Plan       |  | Stores |    | Balance to
|Store Count by Fiscal Year of Accrual |  | Closing Plan |    | Amendments |  | Closed |    | be Closed 
|                                      |  |              |    |            |  |        |    |           
|2000                                  |  |              | 24 |            |  |        |   |            |  |  | (24 | ) |  |  |  | 
|2001                                  |  |              | 46 |            |  |        | (2 | )          |  |  | (44 | ) |  |  |  | 
|2002                                  |  |              | 25 |            |  |        |   |            |  |  | (18 | ) |  |  | 7 | 
|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  |   | 
|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  | 7 | 
|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  |   | 

We expect cash outflows for closed store
locations of approximately $3.0 million during fiscal 2003 and
the remainder of cash outflows to occur during fiscal 2004 and
2005. We plan to fund these outflows from normal operating cash
flows and borrowings under our Senior Credit Facility. We
anticipate that we will close or relocate approximately 20
stores during fiscal 2003. We anticipate that the majority of
these closures will occur at the end of the lease term,
resulting in minimal store closing costs.

Outlook

In fiscal 2003, we expect to grow comparable
stores sales by 3.5% to 4.0%. We anticipate gross profit in
fiscal 2003 to approximate the levels of fiscal 2002 and expect
to pay down our long-term debt by an additional $50 million
to $60 million. Although this should result in reduced
interest expense, any significant increase in the LIBOR rate to
which our variable rate debt is indexed, could mitigate this
planned improvement. Any unusual weather conditions, competitive
pressures, or other adverse changes to our business or the
economy in general could materially affect our financial
position and results of operations.

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Factors Affecting Liquidity and Capital
Resources

Sales
Trends

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

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

Inflation

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

Debt
Covenants

Our credit agreement contains negative covenants
and restrictions on actions by us and our subsidiaries
including, without limitation, restrictions and limitations on
indebtedness, liens, guarantees, mergers, asset dispositions not
in the ordinary course of business, investments, loans, advances
and acquisitions, payment of dividends, transactions with
Affiliates (as defined in the credit agreement), change in
business conducted, and certain prepayments (other than in the
ordinary course of business) and amendments of subordinated
indebtedness. Our credit agreement requires that we meet certain
financial covenants, ratios and tests, including a maximum
leverage ratio and a minimum interest coverage ratio. The
Consolidated Leverage Ratio is Consolidated Total Funded
Debt, as defined in the credit agreement, divided by
Consolidated EBITDA as defined in the credit
agreement. The Interest Coverage Ratio is Consolidated
EBITDA, as defined in the credit agreement, divided by
cash interest expense, as defined in the credit
agreement. At February 2, 2003, our Consolidated Leverage
Ratio was 3.52 to 1.00; and our Interest Coverage Ratio was 2.73
to 1.00, both of which were in compliance with the related
covenants. We anticipate meeting all required covenants under
our existing credit agreement in fiscal 2003. The following
table shows the ratios that we need to meet through the life of
our credit agreement.

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

A breach of the covenants, ratios, or
restrictions contained in our 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

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interest, to be immediately due and payable. If
we were unable to repay those amounts, the lenders could proceed
against the collateral granted to them to secure the
indebtedness. If the lenders under the credit agreement
accelerate the payment of the indebtedness, we cannot be assured
that our assets would be sufficient to repay in full that
indebtedness, which is secured by substantially all of our
assets.


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

Credit
Ratings

Currently, our debt instruments are rated by the
major debt rating agencies. The table below outlines our debt
ratings.

|                    |  |                |  |                   |  | 
|------------------- |  | -------------- |  | ----------------- |  | 
|Description of Debt |  | Moodys Rating |  | Standard & Poors |  | 
|                    |  |                |  |                   |  | 
|Term loan           |  | Ba3            |  | BB-               |  | 
|Revolver            |  | Ba3            |  | BB-               |  | 
|12% notes           |  | B2             |  | B                 |  | 
|11% notes           |  | B3             |  | B-                |  | 

Interest
Rates

Financial market risks relating to our operations
result primarily from changes in interest rates. Interest earned
on our cash equivalents as well as interest paid on our variable
rate debt is sensitive to changes in interest rates. Our
variable rate debt relates to borrowings under our senior credit
facility and our $100.0 million rate swap agreement, which
are primarily vulnerable to 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

We define a critical accounting matter 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
judgements.

Inventories
and Cost of Sales

Net Realizable Value.Inventories are valued at the lower of
cost or market, cost being determined utilizing the last-in,
first-out (LIFO) method. Our inventory levels have been
generally consistent in recent years and thus, under LIFO, costs
of sales reflect the costs of the most currently purchased
inventories. Inventory carrying balances on the other hand,
reflect the costs relating to prices paid in prior years under
the LIFO method. Our costs of acquiring inventories through
normal purchasing activities have been decreasing in recent
years as our increased size and cash flows have enabled us to
take advantage of volume discounts and lower product acquisition
costs. Accordingly, it costs us less money to replace inventory
today than the LIFO balances carried for similar inventory in
our financial statements. As a result of the LIFO method of
accounting for inventory and the ability to obtain lower product
acquisition costs, we recorded reductions to cost of goods sold
of $13.0 million, $9.7 million and $5.4 million
for fiscal 2002, 2001 and 2000, respectively.

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As a result of the above, the replacement cost of
inventories approximated $545.0 million and
$527.6 million at February 2, 2003 and
February 3, 2002, respectively, as compared to financial
statement carrying values of $650.8 million and
$619.6 million.

While carrying balances are higher than
replacement costs, such carrying balances are not higher than
the net realizable value amount (NRV) we expect to
earn by selling the inventory through our retail stores in the
normal course of business. Under generally accepted accounting
principles, NRV reflects the expected selling price of the
inventories, less expected disposal costs and a normal profit
margin.

We evaluate the difference between carrying
balances and NRV of our inventories at each balance sheet
reporting date. At February 2, 2003, we estimated that the
NRV of our inventories exceeded carrying balances by
approximately $28.5 million and thus no impairment is
indicated. If our evaluation in a future period were to indicate
that carrying balances exceed the NRV of the inventories, the
carrying balances of the inventory would be reduced to NRV, with
a corresponding charge to operations.

Vendor programs.Cost of sales includes product cost, net of earned vendor
rebates, discounts and allowances. We recognize vendor rebates,
discounts and allowances based on the terms of written
agreements. Such amounts may be amortized over the life of the
applicable agreements, or recognized as inventory is sold.

Certain vendor rebates are reimbursements for
costs we incur to sell the vendors products and are
recognized as a reduction of selling expenses. Other rebates,
including amounts received that are in excess of our costs, are
presumed to be a reduction of the prices of the vendors
products and are accounted for as a reduction of our cost of
sales.

At each balance sheet reporting date, we reduce
inventory carrying balances by an estimate of purchase discounts
and volume rebates that remain in ending inventory at period
end, based upon inventory turnover rates. Such discounts and
rebates reduced inventory balances by approximately
$24.2 million and $23.5 million as of February 2,
2003 and February 3, 2002, respectively.

Inventory handling
costs.Certain operating and
administrative costs associated with purchasing and handling of
inventory are capitalized in inventories. The amounts of such
costs included in inventories as of February 2, 2003 and
February 3, 2002 were approximately $33.0 million and
$31.5 million, respectively.



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

Included in our net deferred tax liability are
deferred tax assets of approximately $23.5 million as of
February 2, 2003, reflecting the benefit of federal and
state tax loss carryforwards approximating $66.1 million
and $9.5 million, which begin to expire in 2014 and 2007,
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. Accordingly, we believe that no valuation
allowance is required for deferred tax assets in excess of
deferred tax liabilities. The amount of the deferred tax assets
considered realizable, however, could be reduced in the near
term if estimates of future taxable income during the
carryforward period are reduced.



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

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 an internal
review, we accrue reserves using our best estimate of the
probable and reasonably estimable contingent liabilities.
Although the amount of liability that may result from these
matters cannot be ascertained, 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.

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| |                        
| | -----------------------
| | 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. During
fiscal 2002 we recorded $4.9 million of workers
compensation expense 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.



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

If a store location does not meet our required
standards, it is designated for closure. We provide an allowance
for estimated costs and losses 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
years 2002 and 2001, we were required to make adjustments of
$4.9 million and $8.6 million respectively to the
allowance because actual market 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) fulfillment by
our subtenants of their lease obligations; (3) estimates
for occupancy expenses based on historical averages and, in the
case of real estate taxes, subject to changes by taxing
authorities. 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.

Recent Accounting Pronouncements

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

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

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In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 requires companies to
recognize the present value of costs associated with exit or
disposal activities when they are incurred rather than at the
date of a commitment to an exit or disposal plan. Examples of
costs covered by the standard include lease rental and
termination costs and certain employee severance costs that are
associated with a restructuring, discontinued operation, store
closing, or other exit or disposal activity. SFAS No. 146
is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002, with early
implementation encouraged. We adopted SFAS No. 146 on
January 1, 2003. We did not incur any new liability related
to a disposal cost or exit activity between adoption of this
statement and the end of our fiscal year. The adoption of this
pronouncement will impact the timing of recognition of future
closed store charges, which will be recorded at fair value when
a store is vacated.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS
No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 requires expanded and more
prominent disclosure in both annual and interim financial
statements about the method of accounting for stock-based
employee compensation and the effect of the method on reported
results. We adopted SFAS No. 148 during the fourth quarter
of fiscal 2002. The adoption of SFAS No. 148 did not have a
significant impact on our financial statements.

In November 2002, the FASB issued FASB
Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, which addresses the disclosures to be made by a
guarantor in its interim and annual financial statements about
its obligations under guarantees. FIN No. 45 also
requires the recognition of a liability by a guarantor at the
inception of certain guarantees. The initial measurement of this
liability is the fair value of the guarantee at inception. The
recognition of the liability is required even if it is not
probable that payments will be required under the guarantee or
if the guarantee was issued with a premium payment or as part of
a transaction with multiple elements. We have adopted the
disclosure requirements of FIN No. 45 and will apply
the recognition and measurement provisions for all guarantees
entered into or modified after December 31, 2002. In the
ordinary course of our business, from time to time, we enter
into agreements with unrelated parties which may contain
indemnity obligations triggered by pre-existing conditions
(e.g., environmental contamination), our prior performance or
third party acts. These indemnification provisions are the
result of negotiated transactions and, in each such case, we
have determined that the indemnity obligation is acceptable
based on one or more factors, including the existence of an
indemnification in our favor by an unrelated third party,
availability of insurance coverage, the remote possibility that
the triggering event would occur, and/or the determination that
the cost of performing the indemnity obligation would not be
significant. 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 any such triggering event or condition.
Accordingly, the adoption of FIN No. 45 is not expected to
have a material impact on our financial condition or results of
operations. See Note 18 to our Consolidated Financial
Statements.

In January 2003, the FASB issued FIN No. 46,
Consolidation of Variable Interest entities, an
interpretation of ARB 51. The primary objectives of
FIN No. 46 are to provide guidance on the identification of
entities for which control is achieved through means other than
through voting rights (Variable Interest Entities) and how to
determine when and which business enterprise should consolidate
the Variable Interest Entity (the primary beneficiary). The
transitional disclosure requirements of FIN No. 46 take
effect immediately and are required in all financial statements
initially issued after January 31, 2003, if certain
conditions are met. We do not have any transactions or
relationships with variable interest entities and, therefore,
FIN No. 46 will not impact our financial statements.

In March 2003, the Emerging Issues Task Force
(EITF) of the FASB reached consensus on certain
matters discussed in EITF 02-16, Accounting by a Customer
(including a Reseller) for Certain Considerations Received from
a Vendor. Under the EITF, rebates or allowances provided by our
vendors are presumed to be a reduction in the costs of
purchasing inventories (to be recognized in costs 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

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##### Table of Contents



reimbursement, the costs must be specific,
identifiable and incremental, and would be recognized as a
reduction in selling, general and administrative expenses. We
have historically recognized almost all of our vendor rebates as
a reduction in cost of sales, and therefore do not expect the
adoption of the EITF to have a significant impact on our
financial position, results of operations, or cash flows. We
have also recognized certain vendor rebates, averaging
approximately $19.0 million annually, as reimbursement of
costs to sell vendors products. These amounts have been
recorded as a reduction in advertising costs, which is a
component of operating and administrative costs in our
consolidated statement of operations. In fiscal 2003, we will
evaluate any new or modified vendor contracts to determine if
such reimbursements continue to qualify for recognition
consistent with prior years. To the extent such costs do not
qualify as reimbursements, they will be reclassified and treated
as a reduction in the costs of acquiring the related
inventories. Since we expect to maintain relatively consistent
levels of inventories, this reclassification of costs is not
expected to have a significant impact on our financial position,
results of operations, or cash flows. However, it could result
in a higher gross margin (offset by higher advertising expenses)
to the extent that such costs are reclassified.


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
is sensitive to changes in interest rates. In February 2002, we
entered into an interest rate swap agreement which converted the
interest payment obligation on $100.0 million of our 12%
Senior Notes to a floating rate, set quarterly, equal to the
3 month LIBOR rate plus 760 basis points. Our variable
rate debt relates to borrowings under our senior credit facility
and our rate swap agreement, which are primarily vulnerable to
movements in the LIBOR rate. Our variable and fixed rate debt at
February 2, 2003 consisted of the following ($ in
thousands):

|                                |                                                                                                                         |         |         |          |   |          |      |    |  |          | 
|------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | ------- | ------- | -------- | - | -------- | ---- | -- |  | -------- | 
|                                |                                                                                                                         |         |         | Average  |   |         
|                                |                                                                                                                         |         |         | Interest |   | Fixed or
|Debt Facility                   |                                                                                                                         | Balance |         | Rate     |   | Variable
|                                |                                                                                                                         |         |         |          |   |         
|Senior credit facility term     |                                                                                                                         | $       | 170,000 |          |   |          | 5.4  | %  |  | Variable
|Senior credit facility revolver |                                                                                                                         |         | 32,000  |          |   |          | 5.8  | %  |  | Variable
|12% Senior Notes                |                                                                                                                         |         | 280,000 |          |   |          | 11.4 | %* |  | Var/Fix 
|                                | Unamortized original issue discount on 12% senior
    notes                                                             |         |         | (3,744   | ) |          |      |    |  |          | 
|                                | Fair market value of rate swap on
    $100.0 million of 12% senior notes (SFAS No. 133
    hedge accounting adjustment) |         |         | 4,804    |   |          |      |    |  |          | 
|11% Senior Subordinated Notes   |                                                                                                                         |         | 9,547   |          |   |          | 11.0 | %  |  | Fixed   
|Capital leases                  |                                                                                                                         |         | 32,360  |          |   |          | 16.0 | %  |  | Fixed   
|                                |                                                                                                                         |         |         |          |   |          |      |    |  |         
|Total debt                      |                                                                                                                         | $       | 524,967 |          |   |          |      |    |  |         
|                                |                                                                                                                         |         |         |          |   |          |      |    |  |         



---



|  |                                                                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The coupon rate of these notes is 12%; however
    the effective interest rate is 11.4% due to amortization of the
    original issue discount net of the positive effect of the rate
    swap agreement on interest expense.

At February 2, 2003, including the
$100.0 million of 12% Senior Notes that are part of the
interest rate swap agreement, 58% of our outstanding debt was at
variable interest rates and 42% of our outstanding debt was at
fixed interest rates. With $302.0 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
$3.0 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

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Report of Independent Accountants

To the Board of Directors and Stockholders

of CSK Auto
Corporation:


In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, stockholders equity and cash flows present
fairly, in all material respects, the financial position of CSK
Auto Corporation and its subsidiaries at February 2, 2003
and February 3, 2002, and the results of their operations
and their cash flows for each of the three fiscal years in the
period ended February 2, 2003 in conformity with accounting
principles generally accepted in the United States of America.
These financial statements are the responsibility of the
Companys management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit 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 changed its method of
accounting for goodwill effective February 4, 2002.

PRICEWATERHOUSECOOPERS LLP

Phoenix, Arizona

April 24, 2003


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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |            | 
|-------------------------------------------------------------------------------- | ------------------------------------------------- | ----------------------------------------------- | --------- | ----------- | - | ----------- | --------- | ---------- | - | - | --------- | ---------- | 
|                                                                                 |                                                   |                                                
|                                                                                 |                                                   | Fiscal Year Ended                              
|                                                                                 |                                                   |                                                
|                                                                                 |                                                   | February 2,                                     |           | February 3, |   | February 4,
|                                                                                 |                                                   | 2003                                            |           | 2002        |   | 2001       
|                                                                                 |                                                   |                                                 |           |             |   |            
|                                                                                 |                                                   |                                                
|                                                                                 |                                                   | (in thousands, except share and per share data)
|Net sales                                                                        |                                                   | $                                               | 1,506,646 |             |   | $           | 1,438,585 |            |   | $ | 1,452,109 |           
|Cost of sales                                                                    |                                                   |                                                 | 806,461   |             |   |             | 790,585   |            |   |   | 769,043   |           
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|Gross profit                                                                     |                                                   |                                                 | 700,185   |             |   |             | 648,000   |            |   |   | 683,066   |           
|Other costs and expenses:                                                        |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|                                                                                 | Operating and administrative                      |                                                 |           | 592,630     |   |             |           | 580,134    |   |   |           | 592,691    | 
|                                                                                 | Store closing costs and other restructuring costs |                                                 |           | 5,026       |   |             |           | 22,392     |   |   |           | 6,060      | 
|                                                                                 | Legal settlement                                  |                                                 |           |            |   |             |           | 2,000      |   |   |           | 8,800      | 
|                                                                                 | Goodwill amortization                             |                                                 |           |            |   |             |           | 4,807      |   |   |           | 4,799      | 
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|Operating profit                                                                 |                                                   |                                                 | 102,529   |             |   |             | 38,667    |            |   |   | 70,716    |           
|Interest expense                                                                 |                                                   |                                                 | 62,261    |             |   |             | 61,608    |            |   |   | 62,355    |           
|Equity in loss of joint venture                                                  |                                                   |                                                 |          |             |   |             |          |            |   |   | 3,168     |           
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|Income (loss) before income taxes and
    extraordinary loss                     |                                                   |                                                 | 40,268    |             |   |             | (22,941   | )          |   |   | 5,193     |           
|Income tax expense (benefit)                                                     |                                                   |                                                 | 14,761    |             |   |             | (8,886    | )          |   |   | 193       |           
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|Income (loss) before extraordinary loss                                          |                                                   |                                                 | 25,507    |             |   |             | (14,055   | )          |   |   | 5,000     |           
|Extraordinary loss, net of income taxes of $2,313
    in 2002 and $1,964 in 2001 |                                                   |                                                 | (3,695    | )           |   |             | (3,137    | )          |   |   |          |           
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|Net income (loss)                                                                |                                                   | $                                               | 21,812    |             |   | $           | (17,192   | )          |   | $ | 5,000     |           
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|Basic earnings (loss) per
    share:                                             |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|                                                                                 | Income (loss) before extraordinary loss           |                                                 | $         | 0.63        |   |             | $         | (0.50      | ) |   | $         | 0.18       | 
|                                                                                 | Extraordinary loss, net of income taxes           |                                                 |           | (0.09       | ) |             |           | (0.11      | ) |   |           |           | 
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|                                                                                 | Net income (loss) per share                       |                                                 | $         | 0.54        |   |             | $         | (0.61      | ) |   | $         | 0.18       | 
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|                                                                                 | Shares used in computing per share amounts        |                                                 |           | 40,634,522  |   |             |           | 28,390,582 |   |   |           | 27,839,348 | 
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|Diluted earnings (loss) per share:                                               |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|                                                                                 | Income (loss) before extraordinary loss           |                                                 | $         | 0.63        |   |             | $         | (0.50      | ) |   | $         | 0.18       | 
|                                                                                 | Extraordinary loss, net of income taxes           |                                                 |           | (0.09       | ) |             |           | (0.11      | ) |   |           |           | 
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|                                                                                 | Net income (loss) per share                       |                                                 | $         | 0.54        |   |             | $         | (0.61      | ) |   | $         | 0.18       | 
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           
|                                                                                 | Shares used in computing per share amounts        |                                                 |           | 40,751,802  |   |             |           | 28,390,582 |   |   |           | 27,839,348 | 
|                                                                                 |                                                   |                                                 |           |             |   |             |           |            |   |   |           |           

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

|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |          |           | 
|--------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | --------- | - | ------- | -------- | --------- | 
|                                                                      |                                                                                                                                                                                         | February 2,                                |         | February 3,
|                                                                      |                                                                                                                                                                                         | 2003                                       |         | 2002       
|                                                                      |                                                                                                                                                                                         |                                            |         |            
|                                                                      |                                                                                                                                                                                         |                                           
|                                                                      |                                                                                                                                                                                         | (in thousands, except share data)         
|ASSETS                                                               
|Cash and cash equivalents                                             |                                                                                                                                                                                         | $                                          | 15,519  |             |           | $ | 16,084  |         
|Receivables, net of allowances of $2,736 and
    $5,230, respectively |                                                                                                                                                                                         |                                            | 111,639 |             |           |   | 84,793  |         
|Inventories                                                           |                                                                                                                                                                                         |                                            | 650,783 |             |           |   | 619,629 |         
|Deferred income taxes                                                 |                                                                                                                                                                                         |                                            |        |             |           |   | 2,718   |         
|Prepaid expenses and other current assets                             |                                                                                                                                                                                         |                                            | 14,871  |             |           |   | 21,557  |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total current assets                       |         |             | 792,812   |   |         |          | 744,781   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Property and equipment, net                                           |                                                                                                                                                                                         |                                            | 130,745 |             |           |   | 150,381 |         
|Leasehold interests, net                                              |                                                                                                                                                                                         |                                            | 14,017  |             |           |   | 16,581  |         
|Goodwill                                                              |                                                                                                                                                                                         |                                            | 127,069 |             |           |   | 126,846 |         
|Deferred income taxes                                                 |                                                                                                                                                                                         |                                            |        |             |           |   | 739     |         
|Other assets, net                                                     |                                                                                                                                                                                         |                                            | 27,379  |             |           |   | 29,249  |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total assets                               |         | $           | 1,092,022 |   |         | $        | 1,068,577 | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY                             
|Accounts payable                                                      |                                                                                                                                                                                         | $                                          | 164,430 |             |           | $ | 157,284 |         
|Accrued payroll and related expenses                                  |                                                                                                                                                                                         |                                            | 41,421  |             |           |   | 33,055  |         
|Accrued expenses and other current liabilities                        |                                                                                                                                                                                         |                                            | 41,602  |             |           |   | 44,529  |         
|Deferred income taxes                                                 |                                                                                                                                                                                         |                                            | 6,006   |             |           |   |        |         
|Current maturities of capital lease obligations                       |                                                                                                                                                                                         |                                            | 10,604  |             |           |   | 10,999  |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total current liabilities                  |         |             | 264,063   |   |         |          | 245,867   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Long term debt                                                        |                                                                                                                                                                                         |                                            | 492,607 |             |           |   | 632,766 |         
|Obligations under capital leases                                      |                                                                                                                                                                                         |                                            | 21,756  |             |           |   | 27,078  |         
|Deferred income taxes                                                 |                                                                                                                                                                                         |                                            | 3,464   |             |           |   |        |         
|Other liabilities                                                     |                                                                                                                                                                                         |                                            | 7,950   |             |           |   | 8,580   |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total non-current liabilities              |         |             | 525,777   |   |         |          | 668,424   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Commitments and contingencies                                         |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Stockholders equity:                                                 |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      | Common stock, $0.01 par value, 58,000,000 shares
    authorized, 45,148,230 and 32,370,746 shares issued and
    outstanding at February 2, 2003 and February 3, 2002,
    respectively |                                            |         | 452         |           |   |         | 324      |          
|                                                                      | Additional paid-in capital                                                                                                                                                              |                                            |         | 448,279     |           |   |         | 322,667  |          
|                                                                      | Stockholder receivable                                                                                                                                                                  |                                            |         | (342        | )         |   |         | (686     | )        
|                                                                      | Accumulated deficit                                                                                                                                                                     |                                            |         | (146,207    | )         |   |         | (168,019 | )        
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total stockholders equity                 |         |             | 302,182   |   |         |          | 154,286   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total liabilities and stockholders equity |         | $           | 1,092,022 |   |         | $        | 1,068,577 | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         

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 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 January 30, 2000                      |  |                                   | 27,834,574 |            |  | $           | 278 |            |  | $            | 291,004 |         |  | $      | (584 | ) |  | $ | (324 | ) |  | $ | (155,827 | ) |  | $ | 134,547 |  
|Amortization of deferred compensation             |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   | 168  |   |  |   |         |   |  |   | 168     |  
|Recovery of stockholder receivable                |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | 28   |   |  |   |     |   |  |   |         |   |  |   | 28      |  
|Advances to stockholders                          |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | (189 | ) |  |   |     |   |  |   |         |   |  |   | (189    | )
|Exercise of options                               |  |                                   | 6,604      |            |  |             |    |            |  |              | 59      |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 59      |  
|Net income                                        |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | 5,000    |   |  |   | 5,000   |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 4, 2001                      |  |                                   | 27,841,178 |            |  | $           | 278 |            |  | $            | 291,063 |         |  | $      | (745 | ) |  | $ | (156 | ) |  | $ | (150,827 | ) |  | $ | 139,613 |  
|Amortization of deferred compensation             |  |                                   |          |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   | 156  |   |  |   |         |   |  |   | 156     |  
|Conversion of notes, net of costs                 |  |                                   | 4,524,886  |            |  |             | 45  |            |  |              | 30,701  |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 30,746  |  
|Issuances of restricted stock                     |  |                                   | 3,764      |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   |        |  
|Beneficial conversion feature of note             |  |                                   |           |            |  |             |    |            |  |              | 900     |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 900     |  
|Recovery of stockholder receivable                |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | 59   |   |  |   |     |   |  |   |         |   |  |   | 59      |  
|Exercise of options                               |  |                                   | 918        |            |  |             | 1   |            |  |              | 3       |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 4       |  
|Net loss                                          |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | (17,192  | ) |  |   | (17,192 | )
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 3, 2002                      |  |                                   | 32,370,746 |            |  | $           | 324 |            |  | $            | 322,667 |         |  | $      | (686 | ) |  | $ |     |   |  | $ | (168,019 | ) |  | $ | 154,286 |  
|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     |  
|Issuances of restricted stock                     |  |                                   | 3,212      |            |  |             |    |            |  |              | 43      |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 43      |  
|Net income                                        |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | 21,812   |   |  |   | 21,812  |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 2, 2003                      |  |                                   | 45,148,230 |            |  | $           | 452 |            |  | $            | 448,279 |         |  | $      | (342 | ) |  | $ |     |   |  | $ | (146,207 | ) |  | $ | 302,182 |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  

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

38



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |          |   |        |         |  
|----------------------------------------------------- | ------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------------------- | - | ----------- | ------- | -------- | - | ------ | ------- | -------- | - | ------ | ------- | -
|                                                      |                                                                           |                                                                                                
|                                                      |                                                                           | Fiscal Year Ended                                                                              
|                                                      |                                                                           |                                                                                                
|                                                      |                                                                           | February 2,                                                                                     |                                                                                 | February 3,                                                         |   | February 4,
|                                                      |                                                                           | 2003                                                                                            |                                                                                 | 2002                                                                |   | 2001       
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |            
|                                                      |                                                                           |                                                                                                
|                                                      |                                                                           | (in thousands)                                                                                 
|Cash flows from operating activities:                 |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Net income (loss)                                                         |                                                                                                 | $                                                                               | 21,812                                                              |   |             | $       | (17,192  | ) |        | $       | 5,000    |  
|                                                      |                                                                           | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                                 |                                                                     |   |             |         |          |   |        |         |          |   |       
|                                                      |                                                                           |                                                                                                 | Depreciation and amortization of property and
    equipment                     |                                                                     |   | 31,746      |         |          |   | 32,799 |         |          |   | 33,120 |        
|                                                      |                                                                           |                                                                                                 | Amortization of deferred financing costs                                        |                                                                     |   | 5,292       |         |          |   | 3,741  |         |          |   | 2,224  |        
|                                                      |                                                                           |                                                                                                 | Amortization of other items                                                     |                                                                     |   | 3,820       |         |          |   | 8,347  |         |          |   | 7,707  |        
|                                                      |                                                                           |                                                                                                 | Accretion of discount                                                           |                                                                     |   | 902         |         |          |   | 98     |         |          |   |       |        
|                                                      |                                                                           |                                                                                                 | Provision for write down of inventory                                           |                                                                     |   |            |         |          |   | 17,292 |         |          |   |       |        
|                                                      |                                                                           |                                                                                                 | Write downs on disposal of fixed and other assets                               |                                                                     |   | 901         |         |          |   | 8,133  |         |          |   |       |        
|                                                      |                                                                           |                                                                                                 | Equity in loss of joint venture                                                 |                                                                     |   |            |         |          |   |       |         |          |   | 3,168  |        
|                                                      |                                                                           |                                                                                                 | Extraordinary loss on early retirement of debt,
    net of income taxes         |                                                                     |   | 3,695       |         |          |   | 3,137  |         |          |   |       |        
|                                                      |                                                                           |                                                                                                 | Premium paid on early retirement of debt                                        |                                                                     |   | (4,368      | )       |          |   |       |         |          |   |       |        
|                                                      |                                                                           |                                                                                                 | Loss on sale of stores                                                          |                                                                     |   | 847         |         |          |   |       |         |          |   |       |        
|                                                      |                                                                           |                                                                                                 | Deferred income taxes                                                           |                                                                     |   | 15,240      |         |          |   | (8,905 | )       |          |   | 193    |        
|                                                      |                                                                           |                                                                                                 | Change in operating assets and liabilities, net
    of effects of acquisitions: |                                                                     |   |             |         |          |   |        |         |          |   |        |        
|                                                      |                                                                           |                                                                                                 |                                                                                 | Receivables                                                         |   |             | (26,848 | )        |   |        | (15,067 | )        |   |        | (11,915 | )
|                                                      |                                                                           |                                                                                                 |                                                                                 | Inventories                                                         |   |             | (34,827 | )        |   |        | (16,316 | )        |   |        | (7,577  | )
|                                                      |                                                                           |                                                                                                 |                                                                                 | Prepaid expenses and other current assets                           |   |             | 4,976   |          |   |        | (771    | )        |   |        | (208    | )
|                                                      |                                                                           |                                                                                                 |                                                                                 | Accounts payable                                                    |   |             | 7,146   |          |   |        | (32,024 | )        |   |        | 25,172  |  
|                                                      |                                                                           |                                                                                                 |                                                                                 | Accrued payroll, accrued expenses and other
    current liabilities |   |             | 6,715   |          |   |        | 9,240   |          |   |        | (23,332 | )
|                                                      |                                                                           |                                                                                                 |                                                                                 | Other operating activities                                          |   |             | (1,130  | )        |   |        | (426    | )        |   |        | (1,083  | )
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                 |                                                                                 | Net cash provided by (used in) operating
    activities             |   |             | 35,919  |          |   |        | (7,914  | )        |   |        | 32,469  |  
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash flows from investing activities:                 |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Business acquisitions, net of cash acquired                               |                                                                                                 |                                                                                 |                                                                    |   |             |         |         |   |        |         | (1,182   | )
|                                                      | Capital expenditures                                                      |                                                                                                 |                                                                                 | (9,573                                                              | ) |             |         | (12,200  | ) |        |         | (32,080  | )
|                                                      | Proceeds from sale of property and equipment and
    assets held for sale |                                                                                                 |                                                                                 | 2,188                                                               |   |             |         | 5,454    |   |        |         | 5,029    |  
|                                                      | Proceeds from sale of stores                                              |                                                                                                 |                                                                                 | 4,217                                                               |   |             |         |         |   |        |         |         |  
|                                                      | Investment in joint venture                                               |                                                                                                 |                                                                                 |                                                                    |   |             |         |         |   |        |         | (3,168   | )
|                                                      | Other investing activities                                                |                                                                                                 |                                                                                 | (3,384                                                              | ) |             |         | (3,397   | ) |        |         | (3,141   | )
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                 |                                                                                 | Net cash used in investing activities                               |   |             | (6,552  | )        |   |        | (10,143 | )        |   |        | (34,542 | )
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash flows from financing activities:                 |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Borrowings under senior credit facility                                   |                                                                                                 |                                                                                 | 297,000                                                             |   |             |         | 538,000  |   |        |         | 309,500  |  
|                                                      | Payments under senior credit facility                                     |                                                                                                 |                                                                                 | (322,000                                                            | ) |             |         | (837,480 | ) |        |         | (291,840 | )
|                                                      | Payment of debt issuance costs                                            |                                                                                                 |                                                                                 | (1,483                                                              | ) |             |         | (22,019  | ) |        |         | (1,815   | )
|                                                      | Issuance of convertible subordinated notes and
    debentures             |                                                                                                 |                                                                                 |                                                                    |   |             |         | 80,000   |   |        |         |         |  
|                                                      | Borrowings under 12% Senior Notes                                         |                                                                                                 |                                                                                 |                                                                    |   |             |         | 275,317  |   |        |         |         |  
|                                                      | Issuance of common stock in public offering                               |                                                                                                 |                                                                                 | 82,540                                                              |   |             |         |         |   |        |         |         |  
|                                                      | Underwriters discount and other offering costs                            |                                                                                                 |                                                                                 | (4,398                                                              | ) |             |         |         |   |        |         |         |  
|                                                      | Partial retirement of 11% senior notes                                    |                                                                                                 |                                                                                 | (71,703                                                             | ) |             |         |         |   |        |         |         |  
|                                                      | Payments on capital lease obligations                                     |                                                                                                 |                                                                                 | (10,167                                                             | ) |             |         | (10,149  | ) |        |         | (10,934  | )
|                                                      | Advances to stockholders                                                  |                                                                                                 |                                                                                 | (125                                                                | ) |             |         |         |   |        |         | (189     | )
|                                                      | Recovery of stockholder receivable                                        |                                                                                                 |                                                                                 | 334                                                                 |   |             |         | 29       |   |        |         | 28       |  
|                                                      | Exercise of stock options                                                 |                                                                                                 |                                                                                 | 168                                                                 |   |             |         | 4        |   |        |         | 59       |  
|                                                      | Other financing activities                                                |                                                                                                 |                                                                                 | (98                                                                 | ) |             |         | (692     | ) |        |         | (3,367   | )
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                 |                                                                                 | Net cash provided by (used in) financing
    activities             |   |             | (29,932 | )        |   |        | 23,010  |          |   |        | 1,442   |  
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                 |                                                                                 | Net increase (decrease) in cash and cash
    equivalents            |   |             | (565    | )        |   |        | 4,953   |          |   |        | (631    | )
|Cash and cash equivalents, beginning of period        |                                                                           |                                                                                                 | 16,084                                                                          |                                                                     |   |             | 11,131  |          |   |        | 11,762  |         
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash and cash equivalents, end of period              |                                                                           | $                                                                                               | 15,519                                                                          |                                                                     |   | $           | 16,084  |          |   | $      | 11,131  |         
|                                                      |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Supplemental Disclosures of Cash Flow
    Information |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash paid during the year for:                        |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Interest                                                                  |                                                                                                 |                                                                                 | 57,315                                                              |   |             |         | 56,776   |   |        |         | 61,463   |  
|                                                      | Income taxes                                                              |                                                                                                 |                                                                                 | 383                                                                 |   |             |         |         |   |        |         | 658      |  
|Non-cash investing and financing activities:          |                                                                           |                                                                                                 |                                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Fixed assets acquired under capital leases                                |                                                                                                 |                                                                                 | 4,450                                                               |   |             |         | 8,075    |   |        |         | 13,462   |  
|                                                      | Conversion of subordinated debt to equity
    (including interest)        |                                                                                                 |                                                                                 | 48,070                                                              |   |             |         | 30,746   |   |        |         |         |  
|                                                      | Beneficial conversion feature of debentures                               |                                                                                                 |                                                                                 |                                                                    |   |             |         | 900      |   |        |         |         |  

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

39



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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
February 2, 2003, 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 February 2, 2003, we
operated 1,109 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  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 leading provider of diagnostic vehicle
    repair information.                                                                           
|
| |  | CSKAUTO.COM, Inc. (Auto.com), which
    previously operated our Internet web site that sells automotive
    aftermarket parts and accessories that is now operated by
    PartsAmerica.com.

As more fully described in Note 3, Auto also
participated in a joint venture in which it had less than a 50%
ownership interest. The investment in joint venture was
accounted for by the equity method. 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 and AIS
(collectively, the Subsidiary Guarantors) have also jointly and
severally guaranteed such debt on a full and unconditional
basis. Corporate is a holding company and has no other direct
subsidiaries or independent assets or operations. The Subsidiary
Guarantors are minor subsidiaries and have no significant
independent operations. Summarized financial statements and
other disclosures concerning each of Auto and the Subsidiary
Guarantors are not presented because management believes that
they are not material to investors. The consolidated amounts in
the accompanying financial statements are representative of the
combined guarantors and issuer.

We are highly leveraged. In December 2001, we
completed several transactions (see Note 9), which resulted in
the elimination of scheduled bank debt amortization payments
prior to the end of 2004, the extension of debt maturities and
enhanced liquidity. Our new revolving credit facility requires
that we meet certain financial covenants, ratios and tests,
including a maximum leverage ratio and a minimum interest
coverage ratio. A breach of the covenants, ratios, or
restrictions contained in the new senior credit facility could
result in an event of default thereunder. We anticipate meeting
all required covenants under the new credit facility in fiscal
2003.

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 operation or cash flow.

40



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Fiscal
Year

Our fiscal year end is on the Sunday nearest to
January 31 of the following calendar year. The fiscal year
ended February 2, 2003 (fiscal 2002) and the fiscal year
ended February 3, 2002 (fiscal 2001) each consisted of 52
weeks. Fiscal year ended February 4, 2001 (fiscal 2000)
consisted of 53 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. The accompanying financial statements include an
allowance for sales returns, which has been estimated by
management based upon historical activity.

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

Cash
Equivalents

Cash equivalents consist primarily of
certificates of deposit 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 value of
long-term debt and derivative financial instruments is disclosed
in Note 17.

Derivative
Financial Instruments

Our fixed to floating interest rate swap
agreement is accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging
Activities, as amended, and is recorded on the balance
sheet at its fair value. 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.

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 February 2,
2003, 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.

41



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Inventories
and Cost of Sales

Net Realizable
Value.Inventories are valued at the
lower of cost or market, cost being determined utilizing the
last-in, first-out (LIFO) method. Our inventory levels have
been generally consistent in recent years and thus, under LIFO,
costs of sales reflect the costs of the most currently purchased
inventories. Inventory carrying balances on the other hand,
reflect the costs relating to prices paid in prior years under
the LIFO method. Our costs of acquiring inventories through
normal purchasing activities have been decreasing in recent
years as our increased size and cash flows have enabled us to
take advantage of volume discounts and lower product acquisition
costs. Accordingly, it costs us less money to replace inventory
today than the LIFO balances carried for similar inventory in
our financial statements. As a result of the LIFO method of
accounting for inventory and the ability to obtain lower product
acquisition costs, we recorded reductions to cost of goods sold
of $13.0 million, $9.7 million and $5.4 million
for fiscal 2002, 2001 and 2000, respectively.

As a result of the above, the replacement cost of
inventories approximated $545.0 million and
$527.6 million at February 2, 2003 and
February 3, 2002, respectively, as compared to financial
statement carrying values of $650.8 million and
$619.6 million.

While carrying balances are higher than
replacement costs, such carrying balances are not higher than
the net realizable value amount (NRV) we expect to
earn by selling the inventory through our retail stores in the
normal course of business. Under generally accepted accounting
principles, NRV reflects the expected selling price of the
inventories, less expected disposal costs and a normal profit
margin.

We evaluate the difference between carrying
balances and NRV of our inventories at each balance sheet
reporting date. At February 2, 2003, we estimated that the
NRV of our inventories exceeded carrying balances by
approximately $28.5 million and thus no impairment is
indicated. If our evaluation in a future period were to indicate
that carrying balances exceed the NRV of the inventories, the
carrying balances of the inventory would be reduced to NRV, with
a corresponding charge to operations.

Vendor programs.Cost of sales includes product cost, net of earned vendor
rebates, discounts and allowances. We recognize vendor rebates,
discounts and allowances based on the terms of written
agreements. Such amounts may be amortized over the life of the
applicable agreements, or recognized as inventory is sold.

Certain vendor rebates are reimbursements for
costs we incur to sell the vendors products and are
recognized as a reduction of selling expenses. Other rebates,
including amounts received that are in excess of our costs, are
presumed to be a reduction of the prices of the vendors
products and are accounted for as a reduction of our cost of
sales.

At each balance sheet reporting date, we reduce
inventory carrying balances by an estimate of purchase discounts
and volume rebates that remain in ending inventory at period
end, based upon inventory turnover rates. Such discounts and
rebates reduced inventory balances by approximately
$24.2 million and $23.5 million as of February 2,
2003 and February 3, 2002, respectively.

Inventory handling
costs.Certain operating and
administrative costs associated with purchasing and handling of
inventory are capitalized in inventories. The amounts of such
costs included in inventories as of February 2, 2003 and
February 3, 2002 were approximately $33.0 million and
$31.5 million, respectively.



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

Property, equipment and 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 5 to 25 years, or for leasehold improvements and
property under capital leases, the base lease term or estimated
useful life, if shorter. Maintenance and repairs are charged to
earnings when incurred. When property, equipment or software is
retired or sold, the net book value of the asset, reduced by any
proceeds, is charged to gain or loss on the retirement of fixed
assets.

42



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

Certain internal software development costs are
capitalized and amortized over the life of the related software.
Amounts capitalized during fiscal 2002, 2001 and 2000 were
$2.8 million, $3.0 million and $2.6 million,
respectively. Accumulated amortization as of February 2,
2003 and February 3, 2002 was $4.3 million and
$2.2 million, respectively.



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

Beginning with fiscal 2002, we adopted SFAS
No. 142, Goodwill and Other Intangible Assets.
In accordance with SFAS No. 142, goodwill is no longer
amortized, but instead is assessed for impairment at least
annually. Prior to fiscal 2002, goodwill was amortized on a
straight-line basis over periods ranging from 20 to
30 years, depending on the business acquired. See Note 8
for the impact of this change on the statement of operations.

Other intangible assets are leasehold interests
representing the discounted net present value of the excess of
the fair rental value over the respective 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 certain 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. As of January 1, 2003, we have adopted
SFAS No. 146, Accounting for Costs Associated with
Exit of Disposal Activities. See Note 14.



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

Advertising costs are expensed as incurred.
Amounts due under vendor cooperative advertising agreements are
recorded as receivables until their collection. Advertising
expense for fiscal 2002, 2001 and 2000 totaled $25.6 million,
$20.4 million and $18.6 million, net of vendor funded
cooperative advertising, respectively.



| |                 
| | ----------------
| | 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 independent third-party actuaries. These development
factors utilize historical data to

43



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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

project the future development of incurred
losses. Loss estimates are adjusted based upon actual claims
settlements and reported claims. During fiscal 2002, we recorded
$4.9 million of workers compensation expense
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.



| |             
| | ------------
| | 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.



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

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

We have a few stock-based employee compensation
plans which are described more fully in Note 12. We continue to
apply the recognition and measurement provisions of Accounting
Principals Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees and related
interpretations in accounting for those plans. No stock-based
employee compensation expense is reflected in net income (loss)
for fiscal 2002, 2001, and 2000 as the intrinsic value of all
options granted under those plans was zero. 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 ($ in thousands
except per share amounts):

|                                                                                                                                                   |             |             |        |      |  |      |         |       |   |   |        |      | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ------ | ---- |  | ---- | ------- | ----- | - | - | ------ | ---- | 
|                                                                                                                                                   |             |            
|                                                                                                                                                   |             | Fiscal Year
|                                                                                                                                                   |             |            
|                                                                                                                                                   |             | 2002        |        | 2001 |  | 2000
|                                                                                                                                                   |             |             |        |      |  |     
|Net income (loss)  as reported                                                                                                                    |             |             | 21,812 |      |  | $    | (17,192 | )     |   | $ | 5,000  |     
|Less: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related income taxes |             |             | (3,438 | )    |  |      | (2,331  | )     |   |   | (3,148 | )   
|                                                                                                                                                   |             |             |        |      |  |      |         |       |   |   |        |     
|Net income (loss)  pro forma                                                                                                                      |             | $           | 18,374 |      |  | $    | (19,523 | )     |   | $ | 1,852  |     
|                                                                                                                                                   |             |             |        |      |  |      |         |       |   |   |        |     
|Earnings (loss) per share  basic:                                                                                                                 |             |             |        |      |  |      |         |       |   |   |        |     
|                                                                                                                                                   | As reported |             | $      | 0.54 |  |      | $       | (0.61 | ) |   | $      | 0.18 | 
|                                                                                                                                                   | Pro forma   |             |        | 0.45 |  |      |         | (0.69 | ) |   |        | 0.07 | 
|Earnings (loss) per share 
    diluted:                                                                                                           |             |             |        |      |  |      |         |       |   |   |        |     
|                                                                                                                                                   | As reported |             |        | 0.54 |  |      | $       | (0.61 | ) |   | $      | 0.18 | 
|                                                                                                                                                   | Pro forma   |             |        | 0.45 |  |      |         | (0.69 | ) |   |        | 0.07 | 

44



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 
|                         |  |             
|                         |  | 2002         |  | 2001         |  | 2000        
|                         |  |              |  |              |  |             
|Dividend yield           |  | 0%           |  | 0%           |  | 0%          
|Risk free interest rate  |  | 3.04 - 4.56% |  | 4.15 - 4.92% |  | 5.35 - 6.65%
|Expected life of options |  | 6 years      |  | 6 years      |  | 6 years     
|Expected volatility      |  | 46%          |  | 55%          |  | 98%         



| |                          
| | -------------------------
| | 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    
|                                              |                          |                      
|                                              |                          | February 2,           |            | February 3, |           | February 4,
|                                              |                          | 2003                  |            | 2002        |           | 2001       
|                                              |                          |                       |            |             |           |            
|Weighted average shares outstanding (basic)   |                          |                       | 40,634,522 |             |           |             | 28,390,582 |           |           |  | 27,839,348 |          
|Effects of dilutive stock options             |                          |                       | 117,280    |             |           |             |           |           |           |  |           |          
|                                              |                          |                       |            |             |           |             |            |           |           |  |            |          
|Weighted average shares outstanding (diluted) |                          |                       | 40,751,802 |             |           |             | 28,390,582 |           |           |  | 27,839,348 |          
|                                              |                          |                       |            |             |           |             |            |           |           |  |            |          
|Shares excluded as a result of anti-dilution: |                          |                       |            |             |           |             |            |           |           |  |            |          
|                                              | Stock options            |                       |            | 2,086,222   |           |             |            | 2,439,989 |           |  |            | 3,290,436 |          
|                                              | Conversion of debentures |                       |            | 1,680,155   |           |             |            | 3,976,415 |           |  |            |          |          
|                                              |                          |                       |            |             |           |             |            |           |           |  |            |          
|                                              |                          | Total shares excluded |            |             | 3,766,377 |             |            |           | 6,416,404 |  |            |           | 3,290,436 | 
|                                              |                          |                       |            |             |           |             |            |           |           |  |            |          



| |                 
| | ----------------
| | 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 2  Recent Accounting
Pronouncements

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

45



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 requires companies to
recognize the present value of costs associated with exit or
disposal activities when they are incurred rather than at the
date of a commitment to an exit or disposal plan. Examples of
costs covered by the standard include lease rental and
termination costs and certain employee severance costs that are
associated with a restructuring, discontinued operation, store
closing, or other exit or disposal activity. SFAS No. 146
is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002, with early
implementation encouraged. We adopted SFAS No. 146 on
January 1, 2003. We did not incur any new liability related
to a disposal cost or exit activity between adoption of this
statement and the end of our fiscal year. The adoption of this
pronouncement will impact the timing of recognition of future
closed store charges, which will be recorded at fair value when
a store is vacated.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS
No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 requires expanded and more prominent
disclosure in both annual and interim financial statements about
the method of accounting for stock-based employee compensation
and the effect of the method on reported results. We adopted
SFAS No. 148 during the fourth quarter of fiscal 2002. The
adoption of SFAS No. 148 did not have a significant impact
on our financial statements.

In November 2002, the FASB issued FASB
Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, which addresses the disclosures to be made by a
guarantor in its interim and annual financial statements about
its obligations under guarantees. FIN No. 45 also requires
the recognition of a liability by a guarantor at the inception
of certain guarantees. The initial measurement of this liability
is the fair value of the guarantee at inception. The recognition
of the liability is required even if it is not probable that
payments will be required under the guarantee or if the
guarantee was issued with a premium payment or as part of a
transaction with multiple elements. We have adopted the
disclosure requirements of FIN No. 45 and will apply the
recognition and measurement provisions for all guarantees
entered into or modified after December 31, 2002. In the
ordinary course of our business, from time to time, we enter
into agreements with unrelated parties which may contain
indemnity obligations triggered by pre-existing conditions or
our prior performance (e.g., environmental contamination) or
third party acts. These indemnification provisions are the
result of negotiated transactions and, in each such case, we
have determined that the indemnity obligation is acceptable
based on one or more factors, including the existence of an
indemnification in our favor by an unrelated third party,
availability of insurance coverage, the remote possibility that
the triggering event would occur, and/or the determination that
the cost of performing the indemnity obligation would not be
significant. 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 any such triggering event or condition.
Accordingly, the adoption of FIN No. 45 is not
expected to have a material impact on our financial condition or
results of operations. See Note 18.

46



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In January 2003, the FASB issued FIN No. 46,
Consolidation of Variable Interest entities, an
interpretation of ARB 51. The primary objectives of FIN
No. 46 are to provide guidance on the identification of
entities for which control is achieved through means other than
through voting rights (Variable Interest Entities) and how to
determine when and which business enterprise should consolidate
the Variable Interest Entity (the primary beneficiary). The
transitional disclosure requirements of FIN No. 46 take
effect immediately and are required in all financial statements
initially issued after January 31, 2003, if certain
conditions are met. We do not have any transactions or
relationships with variable interest entities and, therefore,
FIN No. 46 will not impact our financial statements.

In March 2003, the Emerging Issues Task Force
(EITF) of the FASB reached consensus on certain
matters discussed in EITF 02-16, Accounting by a Customer
(including a Reseller) for Certain Considerations Received from
a Vendor. Under the EITF, rebates or allowances provided by our
vendors are presumed to be a reduction in the costs of
purchasing inventories (to be recognized in costs 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, and would be recognized as a
reduction in selling, general and administrative expenses. We
have historically recognized almost all of our vendor rebates as
a reduction in cost of sales, and therefore do not expect the
adoption of the EITF to have a significant impact on our
financial position, results of operations, or cash flows. We
have also recognized certain vendor rebates, averaging
approximately $19.0 million annually, as reimbursement of
costs to sell vendors products. These amounts have been
recorded as a reduction in advertising costs, which is a
component of operating and administrative costs in our
consolidated statement of operations. In fiscal 2003, we will
evaluate any new or modified vendor contracts to determine if
such reimbursements continue to qualify for recognition
consistent with prior years. To the extent such costs do not
qualify as reimbursements, they will be reclassified and treated
as a reduction in the costs of acquiring the related
inventories. Since we expect to maintain relatively consistent
levels of inventories, this reclassification of costs is not
expected to have a significant impact on our financial position,
results of operations, or cash flows. However, it could result
in a higher gross margin (offset by higher advertising expenses)
to the extent that such costs are reclassified.

Note 3  Investment in Joint
Venture

On March 1, 2000, we participated in the
formation of a new joint venture, PartsAmerica.com, Inc. (PA),
with Advance Stores Company Incorporated and Sequoia Capital. PA
engaged in the sale of automotive parts and accessories via
e-commerce. During fiscal 2000, we invested approximately
$3.2 million in PA. During the second quarter of fiscal
2001, PA ceased operations. We wrote off our investment in PA
during fiscal 2000 and have no material financial obligations
remaining with respect to PA.

Note 4  Business Acquisitions and
Dispositions



| |               
| | --------------
| | Sale of Stores

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 approximately $4.2 million and a loss upon sale
of approximately $0.8 million.



| |          
| | ---------
| | SuperAuto

On June 19, 2000, we acquired one store in
California for $1.0 million. We converted this store to the
Kragen name and store format and integrated the store into our
operations. No significant transition and integration costs were
incurred relating to this acquisition.

47



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |       
| | ------
| | AllCar

On April 27, 2000, we acquired substantially
all of the assets of All-Car Distributors, Inc. (AllCar), an
operator of 22 stores in Wisconsin and Michigan. We paid
approximately $1.1 million in cash, which includes
associated transaction costs and purchase price adjustments, for
the assets of AllCar and assumed vendor accounts payable and
certain indebtedness and accrued expenses.

The AllCar stores are serviced out of our Mendota
Heights Distribution Center and have been converted to the
Checker name and store format and integrated into our
operations. In connection with the integration of the AllCar
stores, we incurred transition and integration expenses of
approximately $0.3 million and $3.0 million during
fiscal 2001 and fiscal 2000, respectively. These expenses
consisted primarily of grand opening advertising, training and
re-merchandising costs.



| |                                             
| | --------------------------------------------
| | Als and Grand Auto Supply and Big
    Wheel

On October 1, 1999, we acquired the common
stock of Als and Grand Auto Supply, Inc.
(AGA), formerly known as PACCAR Automotive, Inc.,
which operated 194 stores under the trade names of
Als Auto Supply and Grand Auto Supply (collectively, the
AGA stores) in Washington, California, Idaho,
Oregon, Nevada and Alaska. On June 30, 1999, we acquired
substantially all of the assets of APSCO Products Company dba
Big Wheel/ Rossi (Big Wheel), the leading retailer
of auto parts in the Northern Plains states. Big Wheel operated
86 stores in Minnesota, North Dakota and Wisconsin along
with a distribution center in Minnesota. In connection with the
integration of the AGA and Big Wheel stores, we incurred
transition and integration expenses during fiscal 2000 of
approximately $20.8 million. These costs consist primarily
of grand opening advertising, training and re-merchandising
costs.

The above described acquisitions were all
accounted for under the purchase method of accounting.
Accordingly, the results of operations of these stores are
included in our consolidated operating results from the first
day of operations subsequent to acquisition. The acquired stores
are substantially all included in our results of operations for
all periods presented.

Note 5  Transactions and
Relationships with Related Parties



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

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 were then, but no longer are,
related parties for approximately 125,000 square feet of office
space and real property and certain store fixtures. These lease
agreements are subject to certain inflation based adjustments
that could affect the rent expense in future periods. The
agreements are with affiliates of Carmel, previously one of our
principal stockholders (see above). The table below describes
our transactions with former related parties and, for fiscal

48



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2002, includes annual amounts even though the
affiliate relationship ended on November 20, 2002 ($ in
thousands):

|                                |  |                |               |             |  |                          |               |      |  |      |       |  |  |   |       |  |  |   |       | 
|------------------------------- |  | -------------- | ------------- | ----------- |  | ------------------------ | ------------- | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                |  |                |               |             |  |                         
|                                |  |                |               |             |  | Fiscal Year Rent Expense
|                                |  |                |               |             |  |                         
|Description                     |  | Beginning Date |               | Ending Date |  | 2002                     |               | 2001 |  | 2000
|                                |  |                |               |             |  |                          |               |      |  |     
|Corporate headquarters          |  |                | October 1989  |             |  |                          | October 2012  |      |  | $    | 1,673 |  |  | $ | 1,536 |  |  | $ | 1,490 | 
|Corporate office space          |  |                | April 1995    |             |  |                          | October 2012  |      |  |      | 792   |  |  |   | 725   |  |  |   | 603   | 
|Headquarters parking lot        |  |                | April 1995    |             |  |                          | October 2012  |      |  |      | 63    |  |  |   | 63    |  |  |   | 63    | 
|Real property sale-leaseback(1) |  |                | February 1997 |             |  |                          | November 2000 |      |  |      |      |  |  |   |      |  |  |   | 83    | 
|Fixture sale-leaseback(2)       |  |                | July 1996     |             |  |                          | July 2001     |      |  |      |      |  |  |   | 192   |  |  |   | 463   | 
|                                |  |                |               |             |  |                          |               |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                |  |                |               |             |  |                          |               |      |  | $    | 2,528 |  |  | $ | 2,516 |  |  | $ | 2,702 | 
|                                |  |                |               |             |  |                          |               |      |  |      |       |  |  |   |       |  |  |   |       | 



---



|    |                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------
|(1) | Represents a sale-leaseback transaction for
    $0.9 million in funding which was paid off in November 2000.
|   
|(2) | Represents a sale-leaseback transaction for
    $1.9 million in funding which was paid off in July 2001.    

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. We are currently not planning on
entering into additional sale-leaseback transactions with
related parties and no such sale-leaseback transactions with a
related party have resulted in any gain or loss.



| |                   
| | ------------------
| | 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 of $30.0 million in
principal amount and one make-whole warrant to Investcorp CSK
Holdings L.P., an affiliate of Investcorp S.A., which through
its relationship with several of our stockholders is deemed to
be one of our principal stockholders, 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.

On March 1, 2000, we participated in the
formation of PA, a new joint venture (see Note 3). During
fiscal 2000, we contributed assets and incurred costs of
approximately $3.2 million, which included associated
transaction costs. During fiscal 2000 we also incurred non-cash
charges of $3.2 million to recognize our proportionate
share of PAs net loss and to write off our remaining
investment in the joint venture. In addition, we recorded sales
to PA of approximately $0.2 million and $0.5 million
during fiscal 2001 and 2000, respectively, and incurred
reimbursable costs of $0.3 million during fiscal 2000.
During the second quarter of fiscal 2001, PA ceased operations.
We wrote off our investment in PA during fiscal 2000 and have no
material financial obligations remaining with respect to PA.

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 6  Receivables

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

|                                                                                      |                         |             |        |             |  |   |        |        | 
|------------------------------------------------------------------------------------- | ----------------------- | ----------- | ------ | ----------- |  | - | ------ | ------ | 
|                                                                                      |                         | February 2, |        | February 3,
|                                                                                      |                         | 2003        |        | 2002       
|                                                                                      |                         |             |        |            
|Trade receivables from commercial and other
    customers                             |                         | $           | 20,123 |             |  | $ | 29,567 |       
|Amounts due under vendor rebate programs and
    cooperative advertising arrangements |                         |             | 91,058 |             |  |   | 57,691 |       
|Landlord and subtenant receivables                                                    |                         |             | 1,918  |             |  |   | 2,030  |       
|Other                                                                                 |                         |             | 1,276  |             |  |   | 735    |       
|                                                                                      |                         |             |        |             |  |   |        |       
|                                                                                      | Gross receivables       |             |        | 114,375     |  |   |        | 90,023 | 
|Allowance for doubtful accounts                                                       |                         |             | (2,736 | )           |  |   | (5,230 | )     
|                                                                                      |                         |             |        |             |  |   |        |       
|                                                                                      | Net accounts receivable |             | $      | 111,639     |  |   | $      | 84,793 | 
|                                                                                      |                         |             |        |             |  |   |        |       

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):

|                                                |  |             |          |             |  |                       |          |   |  |  |                               | 
|----------------------------------------------- |  | ----------- | -------- | ----------- |  | --------------------- | -------- | - |  |  | ----------------------------- | 
|                                                |  | February 2, |          | February 3, |  |                      
|                                                |  | 2003        |          | 2002        |  | Estimated Useful Life
|                                                |  |             |          |             |  |                      
|Land                                            |  | $           | 348      |             |  | $                     | 553      |   |  |  |                               | 
|Buildings                                       |  |             | 413      |             |  |                       | 743      |   |  |  | 25 years                      | 
|Leasehold improvements                          |  |             | 95,949   |             |  |                       | 93,935   |   |  |  | 15 years or life of lease     | 
|Furniture, fixtures and equipment               |  |             | 119,689  |             |  |                       | 117,300  |   |  |  | 10 years                      | 
|Property under capital leases                   |  |             | 93,193   |             |  |                       | 88,743   |   |  |  | 5  15 years or life of lease | 
|Purchased software                              |  |             | 11,347   |             |  |                       | 12,044   |   |  |  | 5 years                       | 
|                                                |  |             |          |             |  |                       |          |   |  |  |                               | 
|                                                |  |             | 320,939  |             |  |                       | 313,318  |   |  |  |                               | 
|Less: accumulated depreciation and amortization |  |             | (190,194 | )           |  |                       | (162,937 | ) |  |  |                               | 
|                                                |  |             |          |             |  |                       |          |   |  |  |                               | 
|Property and equipment, net                     |  | $           | 130,745  |             |  | $                     | 150,381  |   |  |  |                               | 
|                                                |  |             |          |             |  |                       |          |   |  |  |                               | 

Accumulated amortization of property under
capital leases totaled $66.0 million and $54.1 million
at February 2, 2003 and February 3, 2002, 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 is
recognized. Such evaluation is based on the expected utilization
of the related asset and the corresponding useful life.

Note 8  Goodwill and Other
Intangibles

We adopted SFAS No. 142 effective
February 4, 2002. SFAS No. 142 provides that separable
intangible assets that have finite lives will continue to be
amortized over their useful lives and that goodwill and
indefinite-lived intangible assets will no longer be amortized
but will be reviewed for impairment annually, or more frequently
if impairment indicators arise. We completed the transitional
impairment test during the

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

second quarter of 2002 and determined that there
was no impairment of existing goodwill. Also, we will complete
our annual impairment test during the last quarter of each
fiscal year. In accordance with SFAS No. 142, we ceased
amortization of our remaining goodwill upon adoption of the
standard on February 4, 2002.

SFAS No. 142 requires the presentation of
net income (loss) and related earnings (loss) per
share data adjusted for the effect of goodwill amortization. The
following table provides net income (loss) and earnings
(loss) per share data for fiscal 2002, 2001 and 2000, to
illustrate the impact of goodwill amortization on the results of
fiscal 2001 and 2000 ($ in thousands except per share amounts):

|                                       |                                       |             |        |      |  |      |         |       |   |   |       |      | 
|-------------------------------------- | ------------------------------------- | ----------- | ------ | ---- |  | ---- | ------- | ----- | - | - | ----- | ---- | 
|                                       |                                       |            
|                                       |                                       | Fiscal Year
|                                       |                                       |            
|                                       |                                       | 2002        |        | 2001 |  | 2000
|                                       |                                       |             |        |      |  |     
|Reported net income (loss)             |                                       | $           | 21,812 |      |  | $    | (17,192 | )     |   | $ | 5,000 |     
|Add: goodwill amortization, net of tax |                                       |             |       |      |  |      | 2,947   |       |   |   | 2,951 |     
|                                       |                                       |             |        |      |  |      |         |       |   |   |       |     
|Pro forma net income (loss)            |                                       | $           | 21,812 |      |  | $    | (14,245 | )     |   | $ | 7,951 |     
|                                       |                                       |             |        |      |  |      |         |       |   |   |       |     
|Basic earnings per share:              |                                       |             |        |      |  |      |         |       |   |   |       |     
|Earnings (loss) per share as reported  |                                       | $           | 0.54   |      |  | $    | (0.61   | )     |   | $ | 0.18  |     
|                                       | Goodwill amortization, net of tax     |             |        |     |  |      |         | 0.10  |   |   |       | 0.11 | 
|                                       |                                       |             |        |      |  |      |         |       |   |   |       |     
|                                       | Pro forma earnings (loss) per share   |             | $      | 0.54 |  |      | $       | (0.51 | ) |   | $     | 0.29 | 
|                                       |                                       |             |        |      |  |      |         |       |   |   |       |     
|Diluted earnings per share:            |                                       |             |        |      |  |      |         |       |   |   |       |     
|                                       | Earnings (loss) per share as reported |             | $      | 0.54 |  |      | $       | (0.61 | ) |   | $     | 0.18 | 
|                                       | Goodwill amortization, net of tax     |             |        |     |  |      |         | 0.10  |   |   |       | 0.11 | 
|                                       |                                       |             |        |      |  |      |         |       |   |   |       |     
|                                       | Pro forma earnings (loss) per share   |             | $      | 0.54 |  |      | $       | (0.51 | ) |   | $     | 0.29 | 
|                                       |                                       |             |        |      |  |      |         |       |   |   |       |     

Our intangible assets, excluding goodwill,
consist of favorable leasehold interests resulting from business
acquisitions. Amortization expense 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 2003 |       | $ | 1,638 |      
|Fiscal 2004 |       |   | 1,370 |      
|Fiscal 2005 |       |   | 1,265 |      
|Fiscal 2006 |       |   | 1,186 |      
|Fiscal 2007 |       |   | 1,135 |      
|            |       |   |       |      
|            | Total |   | $     | 6,594 | 
|            |       |   |       |      

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The changes in intangible assets, including
goodwill, for the fiscal year 2002 are as follows ($ in
thousands):

|                               |                          |             |         |              |   |             |  |             |   |  |  |        |      |   |         |         |  
|------------------------------ | ------------------------ | ----------- | ------- | ------------ | - | ----------- |  | ----------- | - |  |  | ------ | ---- | - | ------- | ------- | -
|                               |                          | Carrying    |         |              |   |             |  | Carrying   
|                               |                          | Value as of |         |              |   |             |  | Value as of
|                               |                          | February 3, |         |              |   |             |  | February 2,
|                               |                          | 2002        |         | Amortization |   | Adjustments |  | 2003       
|                               |                          |             |         |              |   |             |  |            
|Amortized intangible assets:   |                          |             |         |              |   |             |  |             |   |  |  |        |      |   |         |        
|                               | Leasehold interests      |             | $       | 26,325       |   |             |  |            |   |  |  | (1,926 | )    |   | $       | 24,399  |  
|                               | Accumulated amortization |             |         | (9,744       | ) |             |  | (1,722      | ) |  |  | 1,084  |      |   |         | (10,382 | )
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |      |   |         |        
|                               | Leasehold interests, net |             |         | 16,581       |   |             |  | (1,722      | ) |  |  | (842   | )(a) |   |         | 14,017  |  
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |      |   |         |        
|Unamortized intangible assets: |                          |             |         |              |   |             |  |             |   |  |  |        |      |   |         |        
|                               | Goodwill                 |             |         | 126,846      |   |             |  |            |   |  |  | 223    | (b)  |   |         | 127,069 |  
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |      |   |         |        
|Total intangible assets, net   |                          | $           | 143,427 |              |   |             |  |             |   |  |  |        |      | $ | 141,086 |        
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |      |   |         |        



---



|    |                                                                                                   
|--- | --------------------------------------------------------------------------------------------------
|(a) | Represents write-offs for stores identified for
    closure.                                      
|   
|(b) | Represents a contingent payment made for
    acquisition of stores consummated during fiscal 2000.

Note 9  Long Term Debt and
Extraordinary Losses



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

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

|                                                               |                                                                                                                       |                         |         |             |         |   |         |        |         | 
|-------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ----------------------- | ------- | ----------- | ------- | - | ------- | ------ | ------- | 
|                                                               |                                                                                                                       | February 2,             |         | February 3,
|                                                               |                                                                                                                       | 2003                    |         | 2002       
|                                                               |                                                                                                                       |                         |         |            
|Senior credit facility  term loan                             |                                                                                                                       | $                       | 170,000 |             |         | $ | 170,000 |       
|Senior credit facility  revolving
    credit commitment       |                                                                                                                       |                         | 32,000  |             |         |   | 57,000  |       
|12% Senior Notes                                               |                                                                                                                       |                         | 280,000 |             |         |   | 280,000 |       
|                                                               | Unamortized original issue discount on 12% senior
    notes                                                           |                         |         | (3,744      | )       |   |         | (4,584 | )      
|                                                               | Fair market value adjustment on
    $100.0 million of 12% senior notes (SFAS No. 133
    hedge accounting adjustment) |                         |         | 4,804       |         |   |         |       |        
|7% convertible debentures, converted to stock in
    May 2002. |                                                                                                                       |                         |        |             |         |   | 50,000  |       
|                                                               | Beneficial conversion feature of 7% convertible
    debentures                                                        |                         |         |            |         |   |         | (900   | )      
|11% Senior Subordinated Notes                                  |                                                                                                                       |                         | 9,547   |             |         |   | 81,250  |       
|                                                               |                                                                                                                       |                         |         |             |         |   |         |       
|                                                               |                                                                                                                       | Total (all non-current) |         | $           | 492,607 |   |         | $      | 632,766 | 
|                                                               |                                                                                                                       |                         |         |             |         |   |         |       

At February 2, 2003, the estimated
maturities of long term debt, excluding capital leases, were
$202.0 million due in fiscal 2004 and $290.6 million
due in fiscal 2006.

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 February 2, 2003 and
anticipate continued compliance through the end of fiscal 2003.

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                    
| | -------------------
| | Recent Transactions

On July 2, 2002, we sold shares of common
stock in an underwritten public offering and used proceeds from
the sale of those shares to retire approximately
$71.7 million of our $81.25 million of outstanding 11%
Senior Subordinated Notes. The early extinguishment of this debt
resulted in an extraordinary loss of approximately
$3.7 million, net of approximately $2.3 million of income
tax benefit, primarily as a result of the payment of an early
redemption premium and the write off of deferred debt issuance
costs.

On December 21, 2001, we completed several
additional transactions affecting our capital structure. We used
the proceeds from a note offering, which were approximately
$275.3 million, net of a discount of $4.7 million,
together with borrowings under a $300.0 million senior
collateralized, asset based credit facility and the gross
proceeds of a $50.0 million private placement of 7%
convertible subordinated debentures to refinance our prior
credit facility and to pay fees and expenses in connection with
these transactions. As part of the Refinancing, we incurred an
extraordinary loss of $3.1 million, which was a write off
of $5.1 million of unamortized deferred financing costs
associated with the prior senior credit facility, net of a
$2.0 million income tax benefit.

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.

On August 14, 2001, we issued a
$30.0 million aggregate principal amount 7% convertible
subordinated notes. In December 2001, the notes were converted
into approximately 4.5 million shares of our common stock
at a conversion price of $6.63 per share, which represented
a 10% premium to the average closing price of our stock on the
NYSE for the 10 days preceding the issuance of the note. At
the time of the conversion, the $30.0 million principal and
approximately $0.7 million of accrued interest were
converted to common stock and additional paid in capital. The
following table illustrates the book value of the
$50 million debentures and the $30 million notes at
the time of conversion ($ in thousands):

|                                                   |                            |             |        |             |  |   |        |        | 
|-------------------------------------------------- | -------------------------- | ----------- | ------ | ----------- |  | - | ------ | ------ | 
|                                                   |                            | $50 Million |        | $30 Million
|                                                   |                            | Debentures  |        | Note       
|                                                   |                            |             |        |            
|Face value of Convertible Subordinated Instruments |                            | $           | 50,000 |             |  | $ | 30,000 |       
|Accrued interest                                   |                            |             |       |             |  |   | 746    |       
|Unamortized debt discount                          |                            |             | (838   | )           |  |   |       |       
|Unamortized debt issuance costs                    |                            |             | (3,046 | )           |  |   |       |       
|                                                   |                            |             |        |             |  |   |        |       
|                                                   | Amount converted to equity |             | $      | 46,116      |  |   | $      | 30,746 | 
|                                                   |                            |             |        |             |  |   |        |       

Senior Credit
Facility

In connection with the Refinancing, we entered
into a $300.0 million senior collateralized, asset based
credit facility that matures on December 21, 2004. The
senior credit facility is comprised of a $130 million
revolving credit facility and a $170.0 million
non-amortizing term loan. Availability under the senior credit
facility is subject to a borrowing base formula equal to the
lesser of $300.0 million and the sum of certain percentages
of eligible inventory and eligible accounts receivable owned by
us. Under the borrowing base formula, the borrowing capacity at
February 2, 2003 was limited to approximately
$275.5 million of which $202.0 million was borrowed
and an additional $18.8 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 our capital stock.
The senior credit facility provides that we may from time to
time make

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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.

Interest accrues under the 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 5.4%
and 5.7% for fiscal years 2002 and 2001, respectively. The
average interest rate on the revolver portion of the facility
was 5.8% and 6.2% for fiscal years 2002 and 2001, respectively.
Interest is payable upon borrowing maturity or quarterly
depending on the type of loan.

12% Senior
Notes

In connection with the Refinancing, we issued
$280.0 million of 12% Senior Notes due June 15, 2006.
The proceeds received, after deducting the original issue
discount of $4.7 million, were $275.3 million. The
effective interest rate was approximately 11.4% and 12.5% in
fiscal year 2002 and 2001, respectively. Interest is payable
semi-annually on December 15 and June 15. The lower
effective rate in fiscal 2002 resulted from the interest rate
swap (see Note 10). The effective interest rate of 12.5% in
fiscal 2001 was due to amortization of the original issue
discount.

We will not have the right to redeem any of the
12% Senior Notes prior to December 15, 2004, other than
from the net cash proceeds of any equity offering. Upon the
consummation of an equity offering of our common stock for cash,
a portion of the notes can be redeemed at a redemption price
equal to 112% of principal, together with accrued and unpaid
interest and liquidated damages. At any time on or after
December 15, 2004, 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);
December 15, 2004 through December 15, 2005, 106%;
December 15, 2005 through maturity, 100%. If we experience
a change of control (as defined in the indenture), 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 to the date of the
repurchase.

The notes are unsecured senior obligations of CSK
Auto, Inc. They rank senior in right of payment to our
subordinated indebtedness and effectively junior to our senior
secured indebtedness, including borrowings under the new senior
credit facility, to the extent of the collateral securing such
secured indebtedness.

11% Senior
Subordinated Notes

The 11% Senior Subordinated Notes are general,
unsecured senior subordinated obligations and are due in
November 2006. Interest is payable semi-annually on May 1
and November 1.

The indenture provides that upon a change of
control, as defined therein, each holder of 11% Senior
Subordinated Notes will have the right to require us to
repurchase all or any part of such holders notes at a purchase
price in cash equal to 101% of the principal amount plus accrued
and unpaid interest, if any, to the date of purchase. The 11%
Senior Subordinated Notes are redeemable, at our option, in
whole or in part, at the following redemption prices (expressed
in percentages of principal amount); until November 1,
2004, 101.833%; November 1, 2004 and thereafter, 100.000%.

Note 10  Derivative Financial
Instrument

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. At the time the contract
commenced, our fixed rate debt was approximately 66% of our
outstanding debt. Our fixed rate debt, on average, carries
higher interest rates than our variable rate debt. The interest
rate swap is intended to provide a better balance of fixed and
variable rate

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

debt instruments and to hedge the fair value of
these notes against potential movements in market interest
rates. For accounting purposes, the interest rate swap is
designated and qualifies as a fair value hedge of a portion of
our fixed rate debt instruments. As the critical terms of the
swap match those of the underlying hedged debt, the change in
fair value of the swap is perfectly offset by changes in fair
value of the debt.

At February 2, 2003, the fair value of the
interest rate swap approximated $4.8 million. This amount
is included in other long-term assets with an identical amount
reflected as a basis adjustment to the 12% Senior Notes on the
accompanying Consolidated Balance Sheet. The differential to be
paid or received under this agreement is accrued consistent with
the terms of the agreement and is recognized in interest expense
over the term of the related debt. The related amounts payable
to or receivable from the counter party are included in other
liabilities or assets. Cash flows related to the interest rate
swap agreement are classified as operating activities in the
Consolidated Statement of Cash Flows. For the fiscal year ended
February 2, 2003, we reduced interest expense by
approximately $2.4 million as a result of the interest rate
swap. There were no interest rate swaps in place during fiscal
years 2001 and 2000.

Note 11  Leases

We lease our office and warehouse facilities, all
but one of our retail stores, and a majority 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
|                                                                                                 |  |            
|                                                                                                 |  | 2002        |         | 2001 |  | 2000
|                                                                                                 |  |             |         |      |  |     
|Minimum rentals                                                                                  |  | $           | 123,971 |      |  | $    | 124,751 |   |  | $ | 123,298 |  
|Contingent rentals                                                                               |  |             | 1,150   |      |  |      | 1,261   |   |  |   | 945     |  
|Sublease rentals                                                                                 |  |             | (10,121 | )    |  |      | (9,059  | ) |  |   | (6,970  | )
|                                                                                                 |  |             |         |      |  |      |         |   |  |   |         |  
|                                                                                                 |  | $           | 115,000 |      |  | $    | 116,953 |   |  | $ | 117,273 |  
|                                                                                                 |  |             |         |      |  |      |         |   |  |   |         |  
|The above amounts include rental expense under
    leases with former affiliates (see note 5) of |  | $           | 2,528   |      |  | $    | 2,516   |   |  | $ | 2,702   |  
|                                                                                                 |  |             |         |      |  |      |         |   |  |   |         |  

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Future minimum lease obligations
(income) under non-cancelable leases at February 2,
2003 are as follows ($ in thousands):

|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|----------------------------------- |  | ------- | ------- | --------- |  | -------- | ------- |  |  | - | ------- | -
|                                    |  | Capital |         | Operating |  | Sublease
|For Fiscal Years                    |  | Leases  |         | Leases    |  | Rentals 
|                                    |  |         |         |           |  |         
|2003                                |  | $       | 15,363  |           |  | $        | 122,569 |  |  | $ | (9,422  | )
|2004                                |  |         | 13,847  |           |  |          | 109,168 |  |  |   | (7,431  | )
|2005                                |  |         | 6,810   |           |  |          | 99,312  |  |  |   | (6,112  | )
|2006                                |  |         | 2,865   |           |  |          | 89,590  |  |  |   | (5,076  | )
|2007                                |  |         | 1,208   |           |  |          | 77,723  |  |  |   | (3,270  | )
|Thereafter                          |  |         | 2,393   |           |  |          | 322,057 |  |  |   | (2,645  | )
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|                                    |  |         | 42,486  |           |  | $        | 820,419 |  |  | $ | (33,956 | )
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|Less: amounts representing interest |  |         | (10,126 | )         |  |          |         |  |  |   |         |  
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|Present value of obligations        |  |         | 32,360  |           |  |          |         |  |  |   |         |  
|Less: current portion               |  |         | (10,604 | )         |  |          |         |  |  |   |         |  
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|Long term obligation                |  | $       | 21,756  |           |  |          |         |  |  |   |         |  
|                                    |  |         |         |           |  |          |         |  |  |   |         |  

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.

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 participants base salary. Participant
contributions are subject to certain restrictions as set forth
in the Internal Revenue Code. Our matching contributions totaled
$1.3 million, $1.2 million, and $1.4 million for
fiscal years 2002, 2001, and 2000, respectively.

Directors
Stock Plan

Directors who are currently associated with the
Investcorp Group do not receive any compensation for serving as
directors. In June 1998, our Board of Directors adopted a
non-employee director stock plan, which was approved by our
shareholders in June 1999. The plan provides for the issuance of
an aggregate of up to 50,000 shares of our common stock in the
form of restricted stock grants or stock options. The Board of
Directors also adopted a policy which provides the non-employee
directors who are not associated with the Investcorp Group an
annual stipend of $25,000, of which at least $10,000 must be
paid in the form of

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

restricted stock grants. Pursuant to this policy,
these directors were granted a total of 3,212, 3,764 and 1,854
shares of restricted stock during fiscal years 2002, 2001 and
2000, respectively.

Stock Option
Plans

We have adopted three stock option plans in order
to attract, retain and motivate qualified individuals to serve
as our employees: (1) the 1996 Associate Stock Option Plan;
(2) the 1996 Executive Stock Option Plan; and (3) the
1999 Executive Stock Option Plan. The Associate Plan and the
1999 Plan were established for our executives, store managers
and salaried corporate employees. The Executive Plan was
established solely for our executives. In addition, we have
issued stock options to our Chief Executive Officer and former
President under their employment agreements. Except for options
issued under these employment agreements, all stock option plans
have been approved by our shareholders.

In the event of a sale of more than 80% of the
outstanding shares of our capital stock or 80% of our assets, as
defined, all options under the plans and employment agreements
become vested. All plans are administered by the Compensation
Committee of our Board of Directors, which has broad authority
in administering and interpreting the plans.

The following table summarizes options by plan
(net of cancellations and exercises) as of February 2, 2003:

|                               |                           |           |           |           |  |           |           |            |  |       |         |         |  |  |           |   |  |  |           |         | 
|------------------------------ | ------------------------- | --------- | --------- | --------- |  | --------- | --------- | ---------- |  | ----- | ------- | ------- |  |  | --------- | - |  |  | --------- | ------- | 
|                               |                           | Associate |           | Executive |  |           |           | Employment |  |      
|                               |                           | Plan      |           | Plan      |  | 1999 Plan |           | Agreements |  | Total
|                               |                           |           |           |           |  |           |           |            |  |      
|Total authorized               |                           |           | 1,026,300 |           |  |           | 744,200   |            |  |       | 750,000 |         |  |  | 957,879   |   |  |  | 3,478,379 |        
|Issued and outstanding         |                           |           | 935,795   |           |  |           | 702,139   |            |  |       | 620,004 |         |  |  | 957,879   |   |  |  | 3,215,817 |        
|Exercised since plan inception |                           |           | 86,040    |           |  |           | 29,937    |            |  |       | 1,358   |         |  |  |          |   |  |  | 117,335   |        
|                               |                           |           |           |           |  |           |           |            |  |       |         |         |  |  |           |   |  |  |           |        
|                               | Total available for grant |           |           | 4,465     |  |           |           | 12,124     |  |       |         | 128,638 |  |  |           |  |  |  |           | 145,227 | 
|                               |                           |           |           |           |  |           |           |            |  |       |         |         |  |  |           |   |  |  |           |        
|Vesting term                   |                           |           | 3 years   |           |  |           | 3-4 years |            |  |       | 3 years |         |  |  | 3-4 years |   |  |  |           |        
|Maximum term                   |                           |           | 7 years   |           |  |           | 7 years   |            |  |       | 7 years |         |  |  | 7 years   |   |  |  |           |        

Performance
Vesting

Some of the options granted under the Executive
Plan are subject to four year vesting as to 84% of such options
and performance vesting (over the same four years) as to the
remaining 16%. The performance vesting criteria is based upon
achieving specified operating results. Partial vesting of
options subject to performance vesting occurs if we achieve less
than 95% of the specified operating results. Any portion of
options granted under the Executive Plan which are subject to
performance vesting and which do not vest during the four years
will automatically vest 90 days prior to the end of the
options term. If the specified operating results are
exceeded for any year by at least 10%, the executive will
receive options for up to an additional 5% (20% on a cumulative
basis) of his or her original option grant at an exercise price
equal to that of the original grant. As a result of exceeding
the specified results, additional option grants of approximately
15,000 and 18,000 were granted in April 2001 and 2000,
respectively. Specified results were not met in fiscal 2001 and,
accordingly, no additional performance options were granted in
fiscal 2002.

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

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

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.

Options
Activity

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

|                            |                            |           |           |                |   |            |       |             |  |  |   |      |  |  |           |  | 
|--------------------------- | -------------------------- | --------- | --------- | -------------- | - | ---------- | ----- | ----------- |  |  | - | ---- |  |  | --------- |  | 
|                            |                            |           |           | Weighted       |   | Weighted   |       |            
|                            |                            | Number of |           | Average        |   | Average    |       | Options    
|                            |                            | Shares    |           | Exercise Price |   | Fair Value |       | Exercisable
|                            |                            |           |           |                |   |            |       |            
|Balance at January 30, 2000 |                            |           | 2,977,061 |                |   | $          | 17.78 |             |  |  |   |      |  |  | 601,038   | 
|                            | Granted at market price    |           |           | 294,844        |   |            |       | 9.54        |  |  | $ | 7.64 |  |  |           |  | 
|                            | Granted above market price |           |           | 18,531         |   |            |       | 12.04       |  |  | $ | 9.79 |  |  |           |  | 
|                            | Exercised                  |           |           | (6,604         | ) |            |       | 12.04       |  |  |   |      |  |  |           |  | 
|                            | Cancelled                  |           |           | (287,642       | ) |            |       | 19.50       |  |  |   |      |  |  |           |  | 
|                            |                            |           |           |                |   |            |       |             |  |  |   |      |  |  |           | 
|Balance at February 4, 2001 |                            |           | 2,996,190 |                |   |            | 16.77 |             |  |  |   |      |  |  | 1,613,574 | 
|                            | Granted at market price    |           |           | 156,380        |   |            |       | 7.50        |  |  | $ | 4.20 |  |  |           |  | 
|                            | Granted above market price |           |           | 60,719         |   |            |       | 8.59        |  |  | $ | 3.39 |  |  |           |  | 
|                            | Exercised                  |           |           | (918           | ) |            |       | 3.88        |  |  |   |      |  |  |           |  | 
|                            | Cancelled                  |           |           | (772,382       | ) |            |       | 23.76       |  |  |   |      |  |  |           |  | 
|                            |                            |           |           |                |   |            |       |             |  |  |   |      |  |  |           | 
|Balance at February 3, 2002 |                            |           | 2,439,989 |                |   |            | 14.07 |             |  |  |   |      |  |  | 1,752,258 | 
|                            | 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        |  |  |   |      |  |  |           |  | 
|                            | Cancelled                  |           |           | (158,067       | ) |            |       | 15.30       |  |  |   |      |  |  |           |  | 
|                            |                            |           |           |                |   |            |       |             |  |  |   |      |  |  |           | 
|Balance at February 2, 2003 |                            |           | 3,215,817 |                |   | $          | 13.04 |             |  |  |   |      |  |  | 2,255,424 | 
|                            |                            |           |           |                |   |            |       |             |  |  |   |      |  |  |           | 

The following table summarizes information about
our stock options at February 2, 2003:

|                         |                 |                     |  |                     |           |                  |  |             |      |                   |  |   |       |  |  |  |           |  |  |   |       | 
|------------------------ | --------------- | ------------------- |  | ------------------- | --------- | ---------------- |  | ----------- | ---- | ----------------- |  | - | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |                 |                     |  |                    
|                         |                 | Options Outstanding |  | Options Exercisable
|                         |                 |                     |  |                    
|                         |                 |                     |  | Weighted Average    |           |                  |  |             |      | Weighted         
|                         |                 | Number              |  | Remaining           |           | Weighted Average |  |             |      | Average          
|Range of Exercise Prices |                 | Outstanding         |  | Contractual Life    |           | Exercise Price   |  | Exercisable |      | Exercisable Price
|                         |                 |                     |  |                     |           |                  |  |             |      |                  
|                         | $ 2.72  $ 9.87 |                     |  |                     | 583,029   |                  |  |             | 5.78 |                   |  | $ | 8.58  |  |  |  | 38,993    |  |  | $ | 6.87  | 
|                         | $ 9.90  $11.00 |                     |  |                     | 528,367   |                  |  |             | 5.71 |                   |  |   | 10.98 |  |  |  | 491,507   |  |  |   | 11.00 | 
|                         | $11.02  $12.04 |                     |  |                     | 1,387,027 |                  |  |             | 1.18 |                   |  |   | 12.03 |  |  |  | 1,330,254 |  |  |   | 12.04 | 
|                         | $12.05  $17.50 |                     |  |                     | 384,102   |                  |  |             | 4.35 |                   |  |   | 14.36 |  |  |  | 196,924   |  |  |   | 14.18 | 
|                         | $17.72  $36.53 |                     |  |                     | 333,292   |                  |  |             | 2.88 |                   |  |   | 26.79 |  |  |  | 197,746   |  |  |   | 25.96 | 
|                         |                 |                     |  |                     |           |                  |  |             |      |                   |  |   |       |  |  |  |           |  |  |   |       | 
|                         | $ 2.72  $36.53 |                     |  |                     | 3,215,817 |                  |  |             | 3.32 |                   |  | $ | 13.04 |  |  |  | 2,255,424 |  |  | $ | 13.13 | 
|                         |                 |                     |  |                     |           |                  |  |             |      |                   |  |   |       |  |  |  |           |  |  |   |       | 

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

Note 13  Income Taxes

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

|          |         |             |        |        |        |      |        |        |        |   |     |       |     | 
|--------- | ------- | ----------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | --- | ----- | --- | 
|          |         |            
|          |         | Fiscal Year
|          |         |            
|          |         | 2002        |        | 2001   |        | 2000
|          |         |             |        |        |        |     
|Current:  |         |             |        |        |        |      |        |        |        |   |     |      
|          | Federal |             | $      | (529   | )      |      | $      |       |        |   | $   |      |    
|          | State   |             |        | 50     |        |      |        |       |        |   |     |      |    
|          |         |             |        |        |        |      |        |        |        |   |     |      
|          |         |             | (479   | )      |        |      |       |        |        |   |    |      
|Deferred: |         |             |        |        |        |      |        |        |        |   |     |      
|          | Federal |             |        | 12,449 |        |      |        | (7,327 | )      |   |     | 1,052 |    
|          | State   |             |        | 2,791  |        |      |        | (1,559 | )      |   |     | (859  | )  
|          |         |             |        |        |        |      |        |        |        |   |     |      
|          |         |             | 15,240 |        |        |      | (8,886 | )      |        |   | 193 |      
|          |         |             |        |        |        |      |        |        |        |   |     |      
|          |         | Total       |        | $      | 14,761 |      |        | $      | (8,886 | ) |     | $     | 193 | 
|          |         |             |        |        |        |      |        |        |        |   |     |      

Excluded from fiscal 2002 results of operations
is $2.3 million of tax benefit relating to the
extraordinary loss incurred in connection with the retirement of
$71.7 million of our outstanding 11% Senior Subordinated
Notes. Excluded from fiscal 2001 results of operations is
$2.0 million of tax benefit relating to the extraordinary
loss incurred in connection with our Refinancing.

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

|                                                                                                           |  |             |        |      |  |      |         |   |  |   |        |  
|---------------------------------------------------------------------------------------------------------- |  | ----------- | ------ | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                                                                           |  |            
|                                                                                                           |  | Fiscal Year
|                                                                                                           |  |            
|                                                                                                           |  | 2002        |        | 2001 |  | 2000
|                                                                                                           |  |             |        |      |  |     
|Income before income taxes, extraordinary loss
    and cumulative effect of change in accounting principle |  | $           | 40,268 |      |  | $    | (22,941 | ) |  | $ | 5,193  |  
|Federal income tax rate                                                                                    |  |             | 35     | %    |  |      | 35      | % |  |   | 34     | %
|                                                                                                           |  |             |        |      |  |      |         |   |  |   |        |  
|Expected provision (benefit) for income taxes                                                              |  |             | 14,094 |      |  |      | (8,029  | ) |  |   | 1,766  |  
|Non-deductible goodwill and other permanent
    differences                                                |  |             | 774    |      |  |      | 702     |   |  |   | 406    |  
|State taxes, net of federal benefit                                                                        |  |             | 1,847  |      |  |      | (734    | ) |  |   | 243    |  
|Reversal of reserves no longer required                                                                    |  |             | (312   | )    |  |      |        |   |  |   | (1,222 | )
|Tax credits and other                                                                                      |  |             | (1,642 | )    |  |      | (825    | ) |  |   | (1,000 | )
|                                                                                                           |  |             |        |      |  |      |         |   |  |   |        |  
|Actual provision (benefit) for income taxes                                                                |  | $           | 14,761 |      |  | $    | (8,886  | ) |  | $ | 193    |  
|                                                                                                           |  |             |        |      |  |      |         |   |  |   |        |  

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                   |                                 |                                         |        |             |        |   |       |         |       | 
|---------------------------------- | ------------------------------- | --------------------------------------- | ------ | ----------- | ------ | - | ----- | ------- | ----- | 
|                                   |                                 | February 2,                             |        | February 3,
|                                   |                                 | 2003                                    |        | 2002       
|                                   |                                 |                                         |        |            
|Current deferred income taxes:     |                                 |                                         |        |             |        |   |       |        
|                                   | Store closing costs             |                                         | $      | 1,517       |        |   | $     | 2,295   |      
|                                   | Accrued employee benefits       |                                         |        | 8,636       |        |   |       | 7,028   |      
|                                   | Credits and other benefits      |                                         |        | 1,000       |        |   |       | 325     |      
|                                   | Property taxes                  |                                         |        | (2,781      | )      |   |       |        |      
|                                   | Provision for bad debts         |                                         |        | 1,066       |        |   |       | 2,606   |      
|                                   | Tax loss carryforwards          |                                         |        | 15,868      |        |   |       | 13,265  |      
|                                   | Inventory valuation differences |                                         |        | (31,560     | )      |   |       | (23,929 | )    
|                                   | Other                           |                                         |        | 248         |        |   |       | 1,128   |      
|                                   |                                 |                                         |        |             |        |   |       |        
|                                   |                                 | Total current deferred income taxes     |        |             | (6,006 | ) |       |         | 2,718 | 
|                                   |                                 |                                         |        |             |        |   |       |        
|Non-current deferred income taxes: |                                 |                                         |        |             |        |   |       |        
|                                   | Store closing costs             |                                         |        | 237         |        |   |       | 390     |      
|                                   | Capital lease expenditures      |                                         |        | 2,039       |        |   |       | 857     |      
|                                   | Tax loss carryforwards          |                                         |        | 7,669       |        |   |       | 10,772  |      
|                                   | Credits and other benefits      |                                         |        | 5,392       |        |   |       | 3,856   |      
|                                   | Depreciation and amortization   |                                         |        | (15,960     | )      |   |       | (9,073  | )    
|                                   | Site selection costs            |                                         |        |            |        |   |       | (5,012  | )    
|                                   | Other                           |                                         |        | (2,841      | )      |   |       | (1,051  | )    
|                                   |                                 |                                         |        |             |        |   |       |        
|                                   |                                 | Total non-current deferred income taxes |        |             | (3,464 | ) |       |         | 739   | 
|                                   |                                 |                                         |        |             |        |   |       |        
|Net deferred tax asset (liability) |                                 | $                                       | (9,470 | )           |        | $ | 3,457 |        
|                                   |                                 |                                         |        |             |        |   |       |        

We have recorded deferred tax assets of
approximately $23.5 million as of February 2, 2003
reflecting the benefit of federal and state tax loss
carryforwards approximating $66.1 million and
$9.5 million, which begin to expire in 2014 and 2007,
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. Accordingly, we believe that no valuation allowance
is required for deferred tax assets.

Note 14  Store Closing,
Restructuring and Other Profitability Enhancement Program
Charges

During the second quarter of fiscal 2001, we
implemented a Profitability Enhancement Program (PEP) to
reduce costs, improve operating efficiencies and close
under-performing stores. As a result of the

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

PEP, we recorded total restructuring and other
charges of $44.6 million, as more fully described in the
following paragraphs. The table below summarizes the charges
relating to the PEP:

|                                                                 |                                                                                            |       |             |        |        |        | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----- | ----------- | ------ | ------ | ------ | 
|Amounts recorded as store closing and
    restructuring charges: |                                                                                            |       |             |       
|                                                                 | Reserve for store closing costs                                                            |       | $           | 13,698 |       
|                                                                 | Write down for impairment of store site costs and
    store related property and equipment |       |             | 6,649  |       
|                                                                 | Reserve for workforce reduction                                                            |       |             | 400    |       
|                                                                 | Other                                                                                      |       |             | 729    |       
|                                                                 |                                                                                            |       |             |       
|                                                                 |                                                                                            | Total |             |        | 21,476 |       
|                                                                 |                                                                                            |       |             |       
|Amounts recorded as charges to cost of
    sales:                |                                                                                            |       |             |       
|                                                                 | Provision for excess inventories                                                           |       |             | 17,292 |       
|                                                                 | Actual costs incurred for inventory review and
    disposal                                |       |             | 5,800  |       
|                                                                 |                                                                                            |       |             |       
|                                                                 |                                                                                            | Total |             |        | 23,092 |       
|                                                                 |                                                                                            |       |             |       
|                                                                 |                                                                                            |       | Grand total |        | $      | 44,568 | 
|                                                                 |                                                                                            |       |             |       

Store Closing
Costs

We provide an allowance for estimated costs and
losses 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 designated for closure. As a result of our
acquisitions over the last several years, we have closed
numerous locations as a result of store overlap with previously
existing store locations.

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. 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
requires companies to recognize the present value of costs
associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by the standard include
lease rental and termination costs and certain employee
severance costs that are associated with a restructuring,
discontinued operation, store closing, or other exit or disposal
activity. SFAS No. 146 is to be applied prospectively
to exit or disposal activities initiated after December 31,
2002, with early implementation encouraged. We did not incur any
new liability related to a store closure between our adoption of
this statement on January 1, 2003 and the end of our fiscal
year. The adoption of this pronouncement will impact the timing
of recognition of future closed store charges, which will be
recorded at fair value when a store is vacated.

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of February 2, 2003, we had a total of
218 store locations included in the allowance for store
closing costs. Of this total, 45 locations were vacant,
166 locations were subleased and 7 locations were
identified for closure but remained open as of year-end. In
addition to these stores, we had 58 service centers of
which 1 was vacant and 57 were subleased. Future rents
will be incurred through the expiration of the non-cancelable
leases, the longest of which runs through March 2018.

Activity in the provision for store closings and
the related store closing costs for the three fiscal years ended
February 2, 2003, including the PEP, is as follows
($ in thousands):

|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |        |         |  
|-------------------------------- | ---------------------------------------- | ------------------------------------- | ----- | ------ | ------ | ---- | ----- | ------ | ------ | - | ----- | ------ | ------- | -
|                                 |                                          |                                      
|                                 |                                          | Fiscal Year                          
|                                 |                                          |                                      
|                                 |                                          | 2002                                  |       | 2001   |        | 2000
|                                 |                                          |                                       |       |        |        |     
|Balance, beginning of year       |                                          | $                                     | 6,771 |        |        | $    | 1,552 |        |        | $ | 4,802 |       
|Store closing costs:             |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 | Store closing costs, gross               |                                       |       | 1,314  |        |      |       | 7,530  |        |   |       | 6,101  |        
|                                 | Adjustments to prior plans               |                                       |       | (1,196 | )      |      |       | (1,536 | )      |   |       | (41    | )      
|                                 | Revisions in estimates                   |                                       |       | 4,908  |        |      |       | 8,638  |        |   |       |       |        
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 |                                          | Store closing costs, net              |       |        | 5,026  |      |       |        | 14,632 |   |       |        | 6,060   |  
|Purchase accounting adjustments: |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 | Als and Grand Auto Supply               |                                       |       |       |        |      |       |       |        |   |       | 2,744  |        
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 |                                          | Total purchase accounting adjustments |       |        |       |      |       |        |       |   |       |        | 2,744   |  
|Payments:                        |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 | Rent expense, net of sublease recoveries |                                       |       | (5,030 | )      |      |       | (6,051 | )      |   |       | (6,570 | )      
|                                 | Occupancy and other expenses             |                                       |       | (1,837 | )      |      |       | (2,839 | )      |   |       | (4,846 | )      
|                                 | Sublease commissions and buyouts         |                                       |       | (508   | )      |      |       | (523   | )      |   |       | (638   | )      
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|                                 |                                          | Total payments                        |       |        | (7,375 | )    |       |        | (9,413 | ) |       |        | (12,054 | )
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       
|Balance, end of year             |                                          | $                                     | 4,422 |        |        | $    | 6,771 |        |        | $ | 1,552 |       
|                                 |                                          |                                       |       |        |        |      |       |        |        |   |       |       

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 our 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.

During fiscal 2001, we recorded the following:
(1) gross store closing costs of $7.5 million
($6.8 million from the PEP) relating to the identification
of 46 stores for closure; (2) an adjustment to prior plans
of $1.5 million due to two stores previously identified for
closure under our PEP that were subsequently removed as they
were sold and the lease commitments were transferred to the new
owner; and (3) revisions in estimates of $8.6 million
($1.3 million for plan year 2000, $0.8 million for
plan year 1999 and $6.5 million for plan years prior to
1999) relating to existing closed stores that have had longer
than anticipated vacancy periods as a result of the economic
slowdown.

During fiscal 2000, we recorded the following:
(1) gross store closing costs of $6.1 million relating
to the identification of 24 stores for closure
($3.7 million of which relates to a 1999 closure plan for
current stores

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

that overlapped with the acquired AGA stores);
and (2) purchase accounting adjustments of
$2.7 million relating to a 1999 closure plan of certain
acquired AGA stores.

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

|                           |  |                               |    |        |  |            |    |        |  |            |    |   |  |  |     |   |  |  |   | 
|-------------------------- |  | ----------------------------- | -- | ------ |  | ---------- | -- | ------ |  | ---------- | -- | - |  |  | --- | - |  |  | - | 
|                           |  |                               |    |       
|                           |  | Number of Stores to be Closed |    |       
|                           |  |                               |    |       
|                           |  | Beginning                     |    | Stores |  | Plan       |    | Stores |  | Balance to
|Store Count by Fiscal Year |  | Balance                       |    | Added  |  | Amendments |    | Closed |  | be Closed 
|                           |  |                               |    |        |  |            |    |        |  |           
|2000                       |  |                               | 28 |        |  |            | 24 |        |  |            | (1 | ) |  |  | (42 | ) |  |  | 9 | 
|2001                       |  |                               | 9  |        |  |            | 46 |        |  |            | (2 | ) |  |  | (46 | ) |  |  | 7 | 
|2002                       |  |                               | 7  |        |  |            | 25 |        |  |            |   |   |  |  | (25 | ) |  |  | 7 | 

At February 2, 2003, there were
7 stores remaining to be closed under our store closing
plans, comprised of the following:

|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  |   | 
|------------------------------------- |  | ------------ | -- | ---------- |  | ------ | -- | ---------- |  |  | --- | - |  |  | - | 
|                                      |  | Stores in    |    | Plan       |  | Stores |    | Balance to
|Store Count by Fiscal Year of Accrual |  | Closing Plan |    | Amendments |  | Closed |    | be Closed 
|                                      |  |              |    |            |  |        |    |           
|2000                                  |  |              | 24 |            |  |        |   |            |  |  | (24 | ) |  |  |  | 
|2001                                  |  |              | 46 |            |  |        | (2 | )          |  |  | (44 | ) |  |  |  | 
|2002                                  |  |              | 25 |            |  |        |   |            |  |  | (18 | ) |  |  | 7 | 
|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  |   | 
|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  | 7 | 
|                                      |  |              |    |            |  |        |    |            |  |  |     |   |  |  |   | 

We expect cash outflows for closed store
locations of approximately $3 million during fiscal 2003
and the remainder of cash outflows to occur during fiscal 2004
and 2005. We plan to fund these outflows from normal operating
cash flows and borrowings under our Senior Credit Facility. We
anticipate that we will close or relocate approximately
20 stores during fiscal 2003. We anticipate that the
majority of these closures will occur at the end of the lease
term, resulting in minimal closed store costs.

Workforce
Reduction

As a result of an internal review of general and
administrative functions, we terminated 36 employees. The
terminated employees worked primarily in human resources,
information technology and real estate. As a result of these
actions, a provision was made for estimated severance and
benefits of approximately $0.4 million, all of which was
paid prior to February 3, 2002.

Other
Restructuring Charges

Other restructuring costs include estimates for
early terminations of equipment operating leases
($0.5 million) and other costs. All such costs were paid
prior to February 3, 2002.

Provision for
Excess Inventory and Related Charges

In conjunction with the PEP, we completed an
inventory review to: (1) increase inventory turnover;
(2) provide an optimal inventory level at each store and
depot location; (3) write down the inventory of the
36 stores planned for closure; and (4) liquidate
inventory not meeting our new asset return levels. As a result
of the analysis, we established a reserve for excess inventories
resulting from the decision to eliminate certain products and to
liquidate inventory from closed stores. In conjunction with this
decision, a provision of $17.3 million was recorded to
reduce inventory values. In addition, we incurred actual costs
of approximately $5.8 million related to labor, warehouse
and distribution, freight and other operating costs associated
with the inventory review and disposal. These costs are
reflected as cost of sales in the accompanying statement of
operations for the fiscal year ended February 3, 2002. All
costs incurred for inventory review and disposal were

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

paid prior to February 3, 2002. The balance
in the inventory reserve as of February 3, 2002 was
$0.9 million. There was no balance outstanding as of
February 2, 2003.

Note 15  Stockholders
Equity

Issuance of
Common Stock

On July 2, 2002, CSK Auto Corporation sold
6,878,300 primary shares of common stock in an underwritten
public offering at $12 per share. In addition, a selling
stockholder sold an additional 2.6 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 an extraordinary loss of
approximately $3.7 million, net of approximately
$2.3 million of income tax benefit, primarily as a result
of the payment of an early redemption premium and the write off
of deferred debt issuance costs. The components of this
transaction are as follows ($ in thousands):

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

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 mature in 2003 and 2005, respectively. All loans are
reflected as stockholder receivables in the accompanying
Consolidated Statements of Stockholders Equity.

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 non-employee directors compensation
policy. Upon receipt of the shares, we cancelled and retired the
shares.

Note 16  Legal Matters

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

On May 4, 1998, a lawsuit was filed against
us in the Superior Court in San Diego, California. The case was
brought by two former store managers and a former senior
assistant manager. It purported to be a class action for all
present and former California store managers and senior
assistant managers and sought overtime pay for a period
beginning in May 1995 as well as injunctive relief requiring
overtime pay in the future. We were also served with two other
lawsuits purporting to be class actions filed in California
state courts in Orange and Fresno Counties by thirteen other
former and current employees. We have finalized a settlement of
all of these lawsuits. The final amount of the settlement was
approximately $8.8 million (which includes plaintiffs
attorneys fees and costs and other miscellaneous
expenses), is reflected in our results of operations for fiscal
year 2000 and was paid in fiscal 2001.

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.
Although the amount of liability that may result from these
matters cannot be ascertained, we do not currently believe that
any of the legal claims, individually or in the aggregate, will
result in liabilities material to our consolidated financial
position, results of operations or cash flows.

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 2, 2003 |         | February 3, 2002
|                                                        |                                                                          |                  |         |                 
|                                                        |                                                                          | Carrying         |         | Estimated        |   | Carrying |         | Estimated 
|                                                        |                                                                          | Amount           |         | Fair Value       |   | Amount   |         | Fair Value
|                                                        |                                                                          |                  |         |                  |   |          |         |           
|Receivables                                             |                                                                          |                  | 111,639 |                  |   |          | 111,639 |            |  |  | 84,793  |        |   |  | 84,793  |     
|Amounts due under senior credit facility                |                                                                          |                  | 202,000 |                  |   |          | 202,000 |            |  |  | 227,000 |        |   |  | 227,000 |     
|Obligations under 12% senior notes                      |                                                                          |                  | 280,000 |                  |   |          | 301,000 |            |  |  | 280,000 |        |   |  | 280,000 |     
|                                                        | Fair market value of rate swap on
    $100.0 million of 12% senior notes |                  |         | 4,804            |   |          |         | 4,804      |  |  |         |       |   |  |         |     |  
|                                                        | Unamortized original issue discount on
    12% senior notes              |                  |         | (3,744           | ) |          |         | N/A        |  |  |         | (4,584 | ) |  |         | N/A  |  
|Obligations under 11% Senior Subordinated Notes         |                                                                          |                  | 9,547   |                  |   |          | 9,642   |            |  |  | 81,250  |        |   |  | 76,680  |     
|Obligations under 7% convertible subordinated
    notes |                                                                          |                  |        |                  |   |          |        |            |  |  | 50,000  |        |   |  | 50,000  |     
|                                                        | Beneficial conversion feature of 7% convertible
    notes                |                  |         |                 |   |          |         |           |  |  |         | (900   | ) |  |         | (900 | )

Note 18  Guarantees

The following is a summary of items that we
believe are within the scope of FIN 45.

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 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

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 standby letters of credit related to
insurance, landlord and other activities that expire during
fiscal 2003. As of February 2, 2003, total amounts
committed under these letters of credit were $18.8 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.

The following table sets forth certain quarterly
unaudited operating data for fiscal 2002 and 2001. The unaudited
quarterly information includes all adjustments which management
considers necessary for a fair presentation of the information
shown.

|                                                                   |  |                                            |         |         |  |         |         |         |  |   |         |  |  |   |         | 
|------------------------------------------------------------------ |  | ------------------------------------------ | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- |  |  | - | ------- | 
|                                                                   |  |                                           
|                                                                   |  | Fiscal 2002                               
|                                                                   |  |                                           
|                                                                   |  | First                                      |         | Second  |  | Third   |         | Fourth 
|                                                                   |  | Quarter                                    |         | Quarter |  | Quarter |         | Quarter
|                                                                   |  |                                            |         |         |  |         |         |        
|                                                                   |  |                                           
|                                                                   |  | ($ in thousands, except per share amounts)
|Net sales                                                          |  | $                                          | 375,550 |         |  | $       | 398,306 |         |  | $ | 383,045 |  |  | $ | 349,745 | 
|Gross profit                                                       |  |                                            | 165,130 |         |  |         | 182,068 |         |  |   | 180,779 |  |  |   | 172,208 | 
|Store closing and restructuring costs                              |  |                                            | 300     |         |  |         | 239     |         |  |   | 12      |  |  |   | 4,475   | 
|Sale of stores                                                     |  |                                            |        |         |  |         | 847     |         |  |   |        |  |  |   |        | 
|Secondary offering costs                                           |  |                                            |        |         |  |         | 265     |         |  |   |        |  |  |   | 214     | 
|Operating profit (loss)                                            |  |                                            | 23,192  |         |  |         | 28,152  |         |  |   | 31,400  |  |  |   | 19,785  | 
|Income (loss) before extraordinary loss                            |  |                                            | 3,380   |         |  |         | 7,782   |         |  |   | 10,686  |  |  |   | 3,659   | 
|Extraordinary loss net of $2,313 of income taxes                   |  |                                            |        |         |  |         | (3,695  | )       |  |   |        |  |  |   |        | 
|Net income (loss)                                                  |  | $                                          | 3,380   |         |  | $       | 4,087   |         |  | $ | 10,686  |  |  | $ | 3,659   | 
|Basic earnings (loss) per share before
    extraordinary loss(2)   |  | $                                          | 0.10    |         |  | $       | 0.19    |         |  | $ | 0.24    |  |  | $ | 0.08    | 
|Diluted earnings (loss) per share before
    extraordinary loss(2) |  | $                                          | 0.10    |         |  | $       | 0.19    |         |  | $ | 0.24    |  |  | $ | 0.08    | 
|Basic earnings (loss) per share(2)                                 |  | $                                          | 0.10    |         |  | $       | 0.10    |         |  | $ | 0.24    |  |  | $ | 0.08    | 
|Diluted earnings (loss) per share(2)                               |  | $                                          | 0.10    |         |  | $       | 0.10    |         |  | $ | 0.24    |  |  | $ | 0.08    | 

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                   |  |                                            |         |            |  |         |         |         |  |   |         |  |  |   |         |  
|------------------------------------------------------------------ |  | ------------------------------------------ | ------- | ---------- |  | ------- | ------- | ------- |  | - | ------- |  |  | - | ------- | -
|                                                                   |  |                                           
|                                                                   |  | Fiscal 2001                               
|                                                                   |  |                                           
|                                                                   |  | First                                      |         | Second     |  | Third   |         | Fourth 
|                                                                   |  | Quarter                                    |         | Quarter(1) |  | Quarter |         | Quarter
|                                                                   |  |                                            |         |            |  |         |         |        
|                                                                   |  |                                           
|                                                                   |  | ($ in thousands, except per share amounts)
|Net sales                                                          |  | $                                          | 356,121 |            |  | $       | 381,722 |         |  | $ | 366,741 |  |  | $ | 334,001 |  
|Gross profit                                                       |  |                                            | 168,586 |            |  |         | 147,074 |         |  |   | 171,113 |  |  |   | 161,227 |  
|Store closing and restructuring costs                              |  |                                            | 2,295   |            |  |         | 21,476  |         |  |   | 11      |  |  |   | (1,390  | )
|Legal settlement                                                   |  |                                            |        |            |  |         | 2,000   |         |  |   |        |  |  |   |        |  
|Operating profit (loss)                                            |  |                                            | 20,187  |            |  |         | (23,959 | )       |  |   | 23,663  |  |  |   | 18,776  |  
|Income (loss) before extraordinary loss                            |  |                                            | 2,253   |            |  |         | (23,837 | )       |  |   | 5,934   |  |  |   | 1,595   |  
|Extraordinary loss net of $1,964 of income taxes                   |  |                                            |        |            |  |         |        |         |  |   |        |  |  |   | (3,137  | )
|Net income (loss)                                                  |  | $                                          | 2,253   |            |  | $       | (23,837 | )       |  | $ | 5,934   |  |  | $ | (1,542  | )
|Basic earnings (loss) per share before
    extraordinary loss(2)   |  | $                                          | 0.08    |            |  | $       | (0.86   | )       |  | $ | 0.21    |  |  | $ | 0.05    |  
|Diluted earnings (loss) per share before
    extraordinary loss(2) |  | $                                          | 0.08    |            |  | $       | (0.86   | )       |  | $ | 0.19    |  |  | $ | 0.05    |  
|Basic earnings (loss) per share(2)                                 |  | $                                          | 0.08    |            |  | $       | (0.86   | )       |  | $ | 0.21    |  |  | $ | (0.05   | )
|Diluted earnings (loss) per share(2)                               |  | $                                          | 0.08    |            |  | $       | (0.86   | )       |  | $ | 0.19    |  |  | $ | (0.05   | )



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During the second quarter of fiscal 2001 we
    recorded a charge of $23.1 million to cost of sales,
    reducing gross profit and a charge of $21.5 million for
    store closing and restructuring costs as part of the
    Profitability Enhancement Program. See the Profitability
    Enhancement Program discussion in Item 7 Management
    Discussion and Analysis of Financial Condition and Results of
    Operations.
|   
|(2) | 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.                                                                                                                                                                         

68



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

None




PART III




Item 10.     Directors
and Executive Officers of the Registrant

The information required by this item with
respect to Directors is incorporated by reference from the
information under the caption Election of Directors contained in
our definitive proxy statement in connection with the
solicitation of proxies for our 2003 Annual Meeting of
Stockholders to be held on June 11, 2003 (the Proxy
Statement).

The required information concerning our Executive
Officers is incorporated by reference from the Proxy Statement.




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.     Controls
and Procedures

Within the 90-day period prior to the filing of
this report, an evaluation was carried out under the supervision
and with the participation of our management, including the
Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), of the effectiveness of our
disclosure controls and procedures. Based on that evaluation,
the CEO and CFO have concluded that our disclosure controls and
procedures are effective to ensure that information required to
be disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 are recorded, processed,
summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms. Subsequent
to the date of such evaluation, there were no significant
changes in our internal controls or in other factors that could
significantly affect the internal controls, including any
corrective actions with regard to significant deficiencies and
material weaknesses.




Item 15.     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.

69



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##### Table of Contents






PART IV




Item 16.     Exhibits,
Financial Statement Schedules and Reports on
Form 8-K

(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 Accountants                                                                                                  
|
| | Consolidated Statements of Operations 
    Fiscal Years Ended                                                                     
|
| | February 2, 2003, February 3, 2002, and
    February 4, 2001                                                                       
|
| | Consolidated Balance Sheets 
    February 2, 2003 and February 3, 2002                                                            
|
| | Consolidated Statements of Stockholders
    Equity Fiscal Years Ended February 2, 2003,
    February 3, 2002, and February 4, 2001
|
| | Consolidated Statements of Cash Flows 
    Fiscal Years Ended February 2, 2003, February 3, 2002,
    and February 4, 2001        

Notes to Consolidated Financial Statements

(a)(2) The following financial statement
schedules of CSK Auto Corporation for the three years ended
February 2, 2003 are included in this Report on
Form 10-K, as required by Item 14(d): Schedule I
Financial Information of the Registrant; Schedule II
Valuation and Qualifying Accounts and Report of Independent
Accountants thereon. Other schedules have been omitted because
information is not required or otherwise is included in the
Notes to Consolidated Financial Statements.

(a)(3) 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).                                                                                                                                     
|        | 3.02.1 |                         |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of CSK Auto Corporation,
    incorporated herein by reference to Exhibit 3.02.1 of our
    Report on Form 10-Q, filed on September 18, 2002 (File
    No. 001-13927).                                                                                                                           
|        | 3.03   |                         |  | Amended and Restated By-laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of our
    Annual Report on Form 10-K, filed on April 28, 1999
    (File No. 001-13927).                                                                                                                                                                                
|        | 3.03.1 |                         |  | First Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our annual report on Form 10-K,
    filed on May 1, 2001 (File No. 001-13927).                                                                                                                                                              
|        | 4.02   |                         |  | Indenture, dated as of October 30, 1996, by
    and among CSK Auto, Inc. (Auto), Kragen Auto Supply Co., Schucks
    Distribution Co. and The Bank of New York (as successor to Wells
    Fargo Bank, N.A.), as Trustee, including form of Note,
    incorporated herein by reference to CSK Auto, Inc.s
    Registration Statement on Form S-4 (File
    No. 333-22511).
|        | 4.03   |                         |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                

70



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|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ------- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 4.04.2  |                         |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc., as Guarantors;
    and Credit Suisse First Boston Corporation, J.P. Morgan
    Securities Inc. and UBS Warburg LLC as Purchasers, incorporated
    herein by reference to Exhibit 99.4 of our Current Report
    on Form 8-K, filed January 18, 2002.
|        | 4.05    |                         |  | Credit Agreement, dated as of December 21,
    2001, by and among CSK Auto, Inc., the lenders from time to time
    a party thereto, and JP Morgan Chase Bank, Credit Suisse First
    Boston, and UBS AG, Stamford Branch, incorporated herein by
    reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed January 18, 2002.                                                                        
|        | 4.05.1  |                         |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc., as
    subsidiary guarantors; and the Bank of New York, as Trustee,
    incorporated herein by reference to Exhibit 99.3 of our
    Current Report on Form 8-K, filed January 18, 2002.                                                       
|        | 4.06    |                         |  | ISDA master agreement executed as of March 2002
    between Lehman Brothers Special Financing Inc. and CSK Auto,
    Inc., incorporated herein by reference to our Annual Report on
    Form 10-K, filed on April 23, 2002 (File
    No. 001-13927).                                                                                                                                                                   
|        | 10.01.1 |                         |  | 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).                                                                                                                                                             
|        | 10.01.2 |                         |  | 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).                                                                                                                                                                       
|        | 10.02   |                         |  | Stock Option Agreement, dated January 27,
    1997, between the Company and Maynard Jenkins, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-67231).                                                                                                                                                                                                                  
|        | 10.03   |                         |  | Stock Option Agreement, dated February 1,
    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   |                         |  | 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).                                                                                                                                                                                                                     
|        | 10.05   |                         |  | Restated 1996 Associate Stock Option Plan,
    incorporated herein by reference to our Registration Statement
    on Form S-1 (File No. 333-67231).                                                                                                                                                                                                                                                                    
|        | 10.06   |                         |  | Supplemental Executive Retirement Plan Agreement,
    dated August 28, 2000 between CSK Auto, Inc. and
    Maynard Jenkins, incorporated herein by reference to our
    Quarterly Report on Form 10-Q, filed on September 13,
    2000 (File No. 001-13927).                                                                                                                                                           
|        | 10.07   |                         |  | 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).                                                                                                                                                                                                             
|        | 10.08   |                         |  | 1999 Employee Stock Option Plan, incorporated by
    reference to our definitive Proxy Statement, filed on
    May 11, 1999 (File No. 001-13927).                                                                                                                                                                                                                                                                      
|        | 10.09   |                         |  | 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).                                                                                                                                                                                                                                            
|        | 10.10   |                         |  | 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).                                                                                                                                                                                            
|        | 10.11   |                         |  | 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).                                                                                                                                                                                                                
|        | 10.12   |                         |  | 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).                                                                                                                                            

71



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|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                 
|------- | ------- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 10.13   |                         |  | 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).                                                              
|        | 10.14   |                         |  | 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).                                                                          
|        | 10.15   |                         |  | 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).                                                      
|        | 10.16   |                         |  | Lease dated April 20, 2000 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated February 23, 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   |                         |  | 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).                                                   
|        | 10.18.1 |                         |  | Stockholders Agreement, dated October 30,
    1996, by and among the Initial Investcorp Group, Cantrade Trust
    Company Limited in its capacity as trustee of The Carmel Trust,
    the Company and Auto, incorporated herein by reference to CSK
    Auto, Incs Registration Statement on Form S-4 (File
    No. 333-22511).
|        | 10.18.2 |                         |  | Form of Supplemental Stockholders Agreement
    Signature Page, incorporated herein by reference to our
    Registration Statement on Form S-1 (File
    No. 333-43211).                                                                                                                                                        
|        | 10.18.3 |                         |  | Amendment to the Stockholders Agreement, dated
    June 12, 1998, incorporated herein by reference to our
    Registration Statement on Form S-1 (File
    No. 333-67231).                                                                                                                                                      
|        | 10.18.4 |                         |  | Letter Agreement re: Stockholders Agreement,
    incorporated herein by reference to our Annual Report on
    Form 10-K, filed on April 28, 1999 (File
    No. 001-13927).                                                                                                                                                      
|        | 10.18.5 |                         |  | Second Amendment to Stockholders Agreement dated
    December 7, 2001, incorporated herein by reference to our
    Registration Statement on Form S-4 filed February 11,
    2002.                                                                                                                                              
|        | 10.18.6 |                         |  | Third Amendment to Stockholders Agreement,
    incorporated herein by reference to Exhibit 10.18.6 to our
    Registration Statement on Form S-4 filed on June 6,
    2002 (File No. 333-82492).                                                                                                                               
|        | 10.18.7 |                         |  | Fourth Amendment to Stockholders Agreement,
    incorporated herein by reference to Exhibit 99.1 to our
    Report on Form 8-K filed on November 15, 2002.                                                                                                                                                                     
|        | 10.19   |                         |  | CSK Auto Corporation 1997 Senior Executive Stock
    Loan Plan, incorporated herein by reference to our Registration
    Statement on Form S-1 (File No. 333-43211).                                                                                                                                                            
|        | 10.20   |                         |  | Form of Stock Purchase Agreement pursuant to the
    CSK Auto Corporation 1997 Stock Loan Plan, incorporated herein
    by reference to our Registration Statement on Form S-1
    (File No. 333-43211).                                                                                                                        
|        | 10.21   |                         |  | 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).                                                                                            
|        | 10.22   |                         |  | 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).                                                                                                                      
|        | 10.23   |                         |  | 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).                                                                                         

72



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|        |       |                         |  |                                                                                                                                                                                                                                                                                
|------- | ----- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Exhibits
|        |       |                        
|        | 10.24 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Don Watson, incorporated herein by reference to
    Exhibit 10.03 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                                                  
|        | 10.25 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Lon Novatt, incorporated herein by reference to
    Exhibit 10.02 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                                                  
|        | 10.26 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Dale Ward, incorporated herein by reference to
    Exhibit 10.04 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                                                   
|        | 10.27 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Martin Fraser, incorporated herein by reference
    to Exhibit 10.01 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                                               
|        | 10.28 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Larry Buresh, incorporated herein by reference to
    Exhibit 10.05 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                                                
|        | 10.29 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Larry Ellis, incorporated herein by reference to
    Exhibit 10.06 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                                                 
|        | 10.30 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Bill Evans, incorporated herein by reference to
    Exhibit 10.07 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                                                  
|        | 10.31 |                         |  | 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).                       
|        | 10.32 |                         |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Dale Ward, dated
    February 14, 2002                                                                                                                                                   
|        | 10.33 |                         |  | 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).                       
|        | 10.34 |                         |  | 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).                    
|        | 10.35 |                         |  | 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).                      
|        | 10.36 |                         |  | 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).                     
|        | 10.37 |                         |  | 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).                       
|        | 10.38 |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Hal Smith, dated February 14, 2002.                                                                                                                                                                           
|        | 10.39 |                         |  | 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.

73



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|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ------- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 10.40   |                         |  | Voting Agreement dated December 7, 2001,
    incorporated by reference to our Registration Statement on
    Form S-4 filed February 11, 2002.                                                                                                                                                                                                                                                                                          
|        | 10.41   |                         |  | Form of CSK Auto Corporation Option Exchange
    Agreement, incorporated herein by reference to our Annual Report
    on Form 10-K, filed on April 23, 2002 (File
    No. 001-13927).                                                                                                                                                                                                                                                  
|        | 10.42   |                         |  | Amendment No. 1 to the Third Amended and
    Restated Credit Agreement, dated as of February 17, 2000,
    incorporated herein by reference to Exhibit 4.01.1 of our
    Annual Report on Form 10-K, filed on May 1, 2001 (File
    No. 001-13927).                                                                                                                                                                                    
|        | 10.43   |                         |  | Amendment No. 2 to the Third Amended and
    Restated Credit Agreement, dated as of December 4, 2000,
    incorporated herein by reference to Exhibit 4.01.2 of our
    Annual Report on Form 10-K, filed on May 1, 2001 (File
    No. 001-13927).                                                                                                                                                                                     
|        | 10.44   |                         |  | Securities Purchase Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., including form of
    Debenture and form of Make Whole Warrant, incorporated herein by
    reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed December 11, 2001.                                                                                            
|        | 10.44.1 |                         |  | Amendment No. 1 to the Securities Purchase
    Agreement, dated as of May 16, 2002, by and between CSK
    Auto Corporation, LBI Group Inc. and Investcorp CSK Holdings
    L.P., incorporated herein by reference to Exhibit 4.04.01
    to our Registration Statement on Form S-3, filed
    May 17, 2002 (File No. 333-77008).                                                                                                      
|        | 10.45   |                         |  | Registration Rights Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., incorporated herein
    by reference to Exhibit 99.3 of our Current Report on
    Form 8-K, filed December 11, 2001.                                                                                                                                                            
|        | 10.45.1 |                         |  | 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).                                                                                                               
|        | 10.46   |                         |  | Registration Rights Agreement, dated
    December 21, 2001, by and among CSK Auto, Inc; CSK Auto
    Corporation, Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First Boston
    Corporation, J.P. Morgan Securities Inc. and UBS Warburg LLC as
    Purchasers, incorporated herein by reference to
    Exhibit 99.5 of our Current Report on Form 8-K, filed
    January 18, 2002.
|        | 10.47   |                         |  | Employment Agreement, dated March 30, 2000,
    between CSK Auto, Inc. and Jim Bazlen.                                                                                                                                                                                                                                                                                                                                                 
|        | 21.01   |                         |  | Subsidiaries of the Company, incorporated herein
    by reference to our Annual Report on Form 10-K, filed on
    April 23, 2002 (File No. 001-13927).                                                                                                                                                                                                                                                                                 
|        | 23.01   |                         |  | Consent of Independent Accountants dated
    April 24, 2003.                                                                                                                                                                                                                                                                                                                                                                           
|        | 99.1    |                         |  | Certification by the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    dated May 5, 2003.                                                                                                                                                                                                                                                   
|        | 99.2    |                         |  | Certification by the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    dated May 5, 2003.                                                                                                                                                                                                                                                   



| |     |                     
| | --- | --------------------
| | (b) | Reports on Form 8-K:



| |                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On November 15, 2002, we filed a current
    report on Form 8-K, to report under item 5 thereof,
    the Fourth Amendment to the Stockholders Agreement.                                                                                                                                                                                                                                        
|
| | On November 15, 2002, we filed a current
    report on Form 8-K, to report under item 5 thereof,
    selected recent events including our sales for the thirteen
    weeks ended November 3, 2002. We also filed an exhibit
    which was a press release announcing the sale of approximately
    3.0 million shares of CSK Auto Corporation common stock by
    affiliates of the Carmel Group.

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| |                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On November 18, 2002, we filed a current
    report on form 8-K/A, to report under item 5 thereof, a
    clarification of when our financial results for the thirteen
    weeks ended November 3, 2002 would be released and when our
    Form 10-Q would be filed.                                                                                                  
|
| | On November 19, 2002, we filed a current
    report on Form 8-K, to file under item 7 thereof, a
    Purchase Agreement relating to the sale by certain selling
    stockholders of approximately 3.0 million shares of CSK
    Auto Corporation common stock by and between CSK Auto
    Corporation, the selling stockholders and the purchaser of such
    shares.
|
| | On December 19, 2002, we filed a current
    report on Form 8-K, to report under item 5 thereof, an
    amendment to our Credit Agreement that provides for an increase
    in CSK AutoIncs letter of credit limits, to support
    increased collateral requirements in connection with the
    Companys insurance coverage renewal obligations.                  

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Report of Independent Accountants on

Financial Statement Schedules


To the Board of Directors and Shareholders


of CSK Auto
Corporation:


Our audits of the consolidated financial
statements referred to in our report dated April 24, 2003
appearing in this Annual Report on Form 10-K of CSK Auto
Corporation and its subsidiaries also included an audit of the
financial statement schedules listed in Item 16(a)(2) of
this Form 10-K. In our opinion, these financial statement
schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.

PRICEWATERHOUSECOOPERS LLP

Phoenix, Arizona

April 24, 2003


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Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


BALANCE SHEETS

|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |          |         | 
|---------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------- | - | ------- | -------- | ------- | 
|                                         |                                                                                                                                                                                         | February 2,                                |         | February 3,
|                                         |                                                                                                                                                                                         | 2003                                       |         | 2002       
|                                         |                                                                                                                                                                                         |                                            |         |            
|                                         |                                                                                                                                                                                         |                                           
|                                         |                                                                                                                                                                                         | (in thousands,                            
|                                         |                                                                                                                                                                                         | except share data)                        
|ASSETS                                  
|Investment in subsidiaries               |                                                                                                                                                                                         | $                                          | 302,182 |             |         | $ | 154,286 |         
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total assets                               |         | $           | 302,182 |   |         | $        | 154,286 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Stockholders equity:                    |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         | Common stock, $0.01 par value, 58,000,000 shares
    authorized, 45,148,230 and 32,370,746 shares issued and
    outstanding at February 2, 2003 and February 3, 2002,
    respectively |                                            |         | 452         |         |   |         | 324      |        
|                                         | Additional paid-in capital                                                                                                                                                              |                                            |         | 448,279     |         |   |         | 322,667  |        
|                                         | Stockholder receivable                                                                                                                                                                  |                                            |         | (342        | )       |   |         | (686     | )      
|                                         | Accumulated deficit                                                                                                                                                                     |                                            |         | (146,207    | )       |   |         | (168,019 | )      
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total stockholders equity                 |         |             | 302,182 |   |         |          | 154,286 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total liabilities and stockholders equity |         | $           | 302,182 |   |         | $        | 154,286 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         

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

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Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


STATEMENTS OF OPERATIONS

|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |            | 
|-------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------------- | ------ | ----------- | - | ----------- | ------- | ---------- | - | - | ----- | ---------- | 
|                                                                                 |                                            |                                                  
|                                                                                 |                                            | Fiscal Year Ended                                
|                                                                                 |                                            |                                                  
|                                                                                 |                                            | February 2,                                       |        | February 3, |   | February 4,
|                                                                                 |                                            | 2003                                              |        | 2002        |   | 2001       
|                                                                                 |                                            |                                                   |        |             |   |            
|                                                                                 |                                            |                                                  
|                                                                                 |                                            | ($ in thousands, except share and per share data)
|Equity interest in income (loss) from
    subsidiaries                           |                                            |                                                   | 40,268 |             |   |             | (22,941 | )          |   |   | 5,193 |           
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|Income (loss) before income taxes, and
    extraordinary loss                    |                                            |                                                   | 40,268 |             |   |             | (22,941 | )          |   |   | 5,193 |           
|Income tax expense (benefit)                                                     |                                            |                                                   | 14,761 |             |   |             | (8,886  | )          |   |   | 193   |           
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|Income (loss) before extraordinary loss                                          |                                            |                                                   | 25,507 |             |   |             | (14,055 | )          |   |   | 5,000 |           
|Extraordinary loss, net of income taxes of $2,313
    in 2002 and $1,964 in 2001 |                                            |                                                   | (3,695 | )           |   |             | (3,137  | )          |   |   |      |           
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|Net income (loss)                                                                |                                            | $                                                 | 21,812 |             |   | $           | (17,192 | )          |   | $ | 5,000 |           
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|Basic earnings (loss) per share:                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|                                                                                 | Income (loss) before extraordinary loss    |                                                   | $      | 0.63        |   |             | $       | (0.50      | ) |   | $     | 0.18       | 
|                                                                                 | Extraordinary loss, net of income taxes    |                                                   |        | (0.09       | ) |             |         | (0.11      | ) |   |       |           | 
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|                                                                                 | Net income (loss) per share                |                                                   | $      | 0.54        |   |             | $       | (0.61      | ) |   | $     | 0.18       | 
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|                                                                                 | Shares used in computing per share amounts |                                                   |        | 40,634,522  |   |             |         | 28,390,582 |   |   |       | 27,839,348 | 
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|Diluted earnings (loss) per share:                                               |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|                                                                                 | Income (loss) before extraordinary loss    |                                                   | $      | 0.63        |   |             | $       | (0.50      | ) |   | $     | 0.18       | 
|                                                                                 | Extraordinary loss, net of income taxes    |                                                   |        | (0.09       | ) |             |         | (0.11      | ) |   |       |           | 
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|                                                                                 | Net income (loss) per share                |                                                   | $      | 0.54        |   |             | $       | (0.61      | ) |   | $     | 0.18       | 
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           
|                                                                                 | Shares used in computing per share amounts |                                                   |        | 40,751,802  |   |             |         | 28,390,582 |   |   |       | 27,839,348 | 
|                                                                                 |                                            |                                                   |        |             |   |             |         |            |   |   |       |           

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

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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 January 30, 2000                      |  |                                     | 27,834,574 |            |  | $           | 278 |            |  | $            | 291,004 |         |  | $      | (584 | ) |  | $ | (324 | ) |  | $ | (155,827 | ) |  | $ | 134,547 |  
|Amortization of deferred compensation             |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   | 168  |   |  |   |         |   |  |   | 168     |  
|Recovery of stockholder receivable                |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | 28   |   |  |   |     |   |  |   |         |   |  |   | 28      |  
|Advances to stockholders                          |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | (189 | ) |  |   |     |   |  |   |         |   |  |   | (189    | )
|Exercise of options                               |  |                                     | 6,604      |            |  |             |    |            |  |              | 59      |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 59      |  
|Net income                                        |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | 5,000    |   |  |   | 5,000   |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 4, 2001                      |  |                                     | 27,841,178 |            |  | $           | 278 |            |  | $            | 291,063 |         |  | $      | (745 | ) |  | $ | (156 | ) |  | $ | (150,827 | ) |  | $ | 139,613 |  
|Amortization of deferred compensation             |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   | 156  |   |  |   |         |   |  |   | 156     |  
|Conversion of notes                               |  |                                     | 4,524,886  |            |  |             | 45  |            |  |              | 30,701  |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 30,746  |  
|Issuances of restricted stock                     |  |                                     | 3,764      |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   |        |  
|Beneficial conversion feature of debentures       |  |                                     |           |            |  |             |    |            |  |              | 900     |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 900     |  
|Recovery of stockholder receivable                |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | 59   |   |  |   |     |   |  |   |         |   |  |   | 59      |  
|Exercise of options                               |  |                                     | 918        |            |  |             | 1   |            |  |              | 3       |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 4       |  
|Net loss                                          |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | (17,192  | ) |  |   | (17,192 | )
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 3, 2002                      |  |                                     | 32,370,746 |            |  | $           | 324 |            |  | $            | 322,667 |         |  | $      | (686 | ) |  | $ |     |   |  | $ | (168,019 | ) |  | $ | 154,286 |  
|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     |  
|Issuances of restricted stock                     |  |                                     | 3,212      |            |  |             |    |            |  |              | 43      |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 43      |  
|Net income                                        |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | 21,812   |   |  |   | 21,812  |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 2, 2003                      |  |                                     | 45,148,230 |            |  | $           | 452 |            |  | $            | 448,279 |         |  | $      | (342 | ) |  | $ |     |   |  | $ | (146,207 | ) |  | $ | 302,182 |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  

The accompanying note is an integral part of
these financial statements

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Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


STATEMENTS OF CASH FLOWS

|                                                           |                   |                                                                                                 |                                                 |                                                          |  |             |   |         |   |        |   |       |  |        |   | 
|---------------------------------------------------------- | ----------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------- | -------------------------------------------------------- |  | ----------- | - | ------- | - | ------ | - | ----- |  | ------ | - | 
|                                                           |                   |                                                                                                
|                                                           |                   | Fiscal Year Ended                                                                              
|                                                           |                   |                                                                                                
|                                                           |                   | February 2,                                                                                     |                                                 | February 3,                                              |  | February 4,
|                                                           |                   | 2003                                                                                            |                                                 | 2002                                                     |  | 2001       
|                                                           |                   |                                                                                                 |                                                 |                                                          |  |            
|                                                           |                   |                                                                                                
|                                                           |                   | ($ in thousands)                                                                               
|Cash flows provided by (used in) operating
    activities: |                   |                                                                                                 |                                                 |                                                          |  |             |   |         |   |        |   |      
|                                                           | Net income (loss) |                                                                                                 | $                                               | 21,812                                                   |  |             | $ | (17,192 | ) |        | $ | 5,000 | 
|                                                           |                   | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                 |                                                          |  |             |   |         |   |        |   |       |  |       
|                                                           |                   |                                                                                                 | Equity interest in net income from subsidiaries |                                                          |  | (21,812     | ) |         |   | 17,192 |   |       |  | (5,000 | )
|                                                           |                   |                                                                                                 |                                                 |                                                          |  |             |   |         |   |        |   |      
|                                                           |                   |                                                                                                 |                                                 | Net cash provided by (used in) 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

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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 Autos 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.

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CSK AUTO CORPORATION AND
SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING
ACCOUNTS

For the Fiscal Years 2002, 2001, and
2000


|                                          |                             |                |   |            |  |             |  |            |  |            |  |       |  |  |  |         |   |  |   |        | 
|----------------------------------------- | --------------------------- | -------------- | - | ---------- |  | ----------- |  | ---------- |  | ---------- |  | ----- |  |  |  | ------- | - |  | - | ------ | 
|                                          |                             | Balance at     |   | Charged to |  | Purchase    |  |            |  | Balance at
|                                          |                             | Beginning of   |   | Costs and  |  | Accounting  |  |            |  | End of    
|Description                               |                             | Period         |   | Expenses   |  | Adjustments |  | Deductions |  | Period    
|                                          |                             |                |   |            |  |             |  |            |  |           
|                                          |                             |               
|                                          |                             | (in thousands)
|Allowance for Bad Debts:                  |                             |                |   |            |  |             |  |            |  |            |  |       |  |  |  |         |   |  |   |       
|                                          | Year Ended February 4, 2001 |                | $ | 3,294      |  |             |  | 6,119      |  |            |  | 1,289 |  |  |  | (6,466  | ) |  | $ | 4,236  | 
|                                          | Year Ended February 3, 2002 |                | $ | 4,236      |  |             |  | 5,353      |  |            |  |      |  |  |  | (4,359  | ) |  | $ | 5,230  | 
|                                          | Year Ended February 2, 2003 |                | $ | 5,230      |  |             |  | 4,383      |  |            |  |      |  |  |  | (6,877  | ) |  | $ | 2,736  | 
|Allowance for Closed Stores:              |                             |                |   |            |  |             |  |            |  |            |  |       |  |  |  |         |   |  |   |       
|                                          | Year Ended February 4, 2001 |                | $ | 4,802      |  |             |  | 6,060      |  |            |  | 2,744 |  |  |  | (12,054 | ) |  | $ | 1,552  | 
|                                          | Year Ended February 3, 2002 |                | $ | 1,552      |  |             |  | 14,632     |  |            |  |      |  |  |  | (9,413  | ) |  | $ | 6,771  | 
|                                          | Year Ended February 2, 2003 |                | $ | 6,771      |  |             |  | 5,026      |  |            |  |      |  |  |  | (7,375  | ) |  | $ | 4,422  | 
|Allowance for Inventory Shrink:           |                             |                |   |            |  |             |  |            |  |            |  |       |  |  |  |         |   |  |   |       
|                                          | Year Ended February 4, 2001 |                | $ | 8,738      |  |             |  | 20,769     |  |            |  |      |  |  |  | (17,683 | ) |  | $ | 11,824 | 
|                                          | Year Ended February 3, 2002 |                | $ | 11,824     |  |             |  | 25,878     |  |            |  |      |  |  |  | (17,052 | ) |  | $ | 20,650 | 
|                                          | Year Ended February 2, 2003 |                | $ | 20,650     |  |             |  | 30,795     |  |            |  |      |  |  |  | (35,246 | ) |  | $ | 16,199 | 
|Allowance for Inventory
    Obsolescence: |                             |                |   |            |  |             |  |            |  |            |  |       |  |  |  |         |   |  |   |       
|                                          | Year Ended February 4, 2001 |                | $ |           |  |             |  |           |  |            |  |      |  |  |  |        |   |  | $ |       | 
|                                          | Year Ended February 3, 2002 |                | $ |           |  |             |  | 17,292     |  |            |  |      |  |  |  | (16,390 | ) |  | $ | 902    | 
|                                          | Year Ended February 2, 2003 |                | $ | 902        |  |             |  |           |  |            |  |      |  |  |  | (902    | ) |  | $ |       | 

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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
5th day of May 2003.



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



| |     |                    
| | --- | -------------------
| | By: | /s/ MAYNARD JENKINS

| |                                     
| | ------------------------------------
| |                                     
| | Maynard Jenkins                     
| | 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
5th day of May 2003.

|                                                 |  |                                                                                                                          |  |  |  | 
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------ |  |  |  | 
|                                                
|/s/ MAYNARD JENKINSMaynard Jenkins               |  | Chairman of the Board and
    Chief Executive Officer
    (Principal Executive Officer)                                  |  | 
|                                                
|                                                
|/s/ JAMES G. BAZLENJames G. Bazlen               |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ JAMES O. EGANJames O. Egan                   |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ MORTON GODLASMorton Godlas                   |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ CHARLES K. MARQUISCharles K. Marquis         |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ SIMON MOORESimon Moore                       |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ TERILYN HENDERSONTerilyn Henderson           |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ CHRISTOPHER J. STADLERChristopher J. Stadler |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ SAVIO W. TUNGSavio W. Tung                   |  | Director                                                                                                                 |  | 
|                                                
|                                                
|/s/ DON W. WATSONDon W. Watson                   |  | Senior Vice President and Chief Financial
    Officer
    (Principal Financial Officer and Principal Accounting Officer) |  | 

83



---



##### Table of Contents



CERTIFICATION

I, Maynard L. Jenkins, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of CSK Auto Corporation;                                                                                                                                                                                                                                                                    
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this annual report;                       
|
| | 4.     The
    registrants other certifying officer and I are responsible
    for establishing and maintaining disclosure controls and
    procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                        



| |                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a.     designed such
    disclosure controls and procedures to ensure that material
    information relating to the registrant, including its
    consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this
    annual report is being prepared;
|
| | b.     evaluated the
    effectiveness of the registrants disclosure controls and
    procedures as of a date within 90 days prior to the filing
    date of this annual report (the Evaluation Date); and                                                                                                          
|
| | c.     presented in this
    annual report our conclusions about the effectiveness of the
    disclosure controls and procedures based on our evaluation as of
    the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officer and I have disclosed,
    based on our most recent evaluation, to the registrants
    auditors and the audit committee of the registrants board
    of directors (or persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a.     all significant
    deficiencies in the design or operation of internal controls
    which could adversely affect the registrants ability to
    record, process, summarize, and report financial data and have
    identified for the registrants auditors any material
    weaknesses in internal controls; and
|
| | b.     any fraud,
    whether or not material, that involves management or other
    employees who have a significant role in the registrants
    internal controls; and                                                                                                                                                 



| |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officer and I have indicated
    in this annual report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |                        
| | -----------------------
| | /s/ MAYNARD L. JENKINS 
| |                        
| | Maynard L. Jenkins     
| | Chief Executive Officer

May 5, 2003

84



---



##### Table of Contents



CERTIFICATION

I, Don W. Watson, certify that:



| |                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.     I have reviewed
    this annual report on Form 10-K of CSK Auto Corporation;                                                                                                                                                                                                                                                                    
|
| | 2.     Based on my
    knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the
    circumstances under which such statements were made, not
    misleading with respect to the period covered by this annual
    report;
|
| | 3.     Based on my
    knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in
    all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the
    periods presented in this annual report;                       
|
| | 4.     The
    registrants other certifying officer and I are responsible
    for establishing and maintaining disclosure controls and
    procedures (as defined in Exchange Act Rules 13a-14 and
    15d-14) for the registrant and we have:                                                                                                        



| |                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a.     designed such
    disclosure controls and procedures to ensure that material
    information relating to the registrant, including its
    consolidated subsidiaries, is made known to us by others within
    those entities, particularly during the period in which this
    annual report is being prepared;
|
| | b.     evaluated the
    effectiveness of the registrants disclosure controls and
    procedures as of a date within 90 days prior to the filing
    date of this annual report (the Evaluation Date); and                                                                                                          
|
| | c.     presented in this
    annual report our conclusions about the effectiveness of the
    disclosure controls and procedures based on our evaluation as of
    the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5.     The
    registrants other certifying officer and I have disclosed,
    based on our most recent evaluation, to the registrants
    auditors and the audit committee of the registrants board
    of directors (or persons performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a.     all significant
    deficiencies in the design or operation of internal controls
    which could adversely affect the registrants ability to
    record, process, summarize, and report financial data and have
    identified for the registrants auditors any material
    weaknesses in internal controls; and
|
| | b.     any fraud,
    whether or not material, that involves management or other
    employees who have a significant role in the registrants
    internal controls; and                                                                                                                                                 



| |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.     The
    registrants other certifying officer and I have indicated
    in this annual report whether or not there were significant
    changes in internal controls or in other factors that could
    significantly affect internal controls subsequent to the date of
    our most recent evaluation, including any corrective actions
    with regard to significant deficiencies and material weaknesses.



| |                        
| | -----------------------
| | /s/ DON W. WATSON      
| |                        
| | Don W. Watson          
| | Chief Financial Officer

May 5, 2003

85



---



##### Table of Contents



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).                                                                                                                                                                                  
|        | 3.02.1  |                         |  | Certificate of Amendment to the Restated
    Certificate of Incorporation of CSK Auto Corporation,
    incorporated herein by reference to Exhibit 3.02.1 of our
    Report on Form 10-Q, filed on September 18, 2002 (File
    No. 001-13927).                                                                                                                                                                        
|        | 3.03    |                         |  | Amended and Restated By-laws of the Company,
    incorporated herein by reference to Exhibit 3.03 of our
    Annual Report on Form 10-K, filed on April 28, 1999
    (File No. 001-13927).                                                                                                                                                                                                                             
|        | 3.03.1  |                         |  | First Amendment to Amended and Restated By-laws
    of the Company, incorporated herein by reference to
    Exhibit 3.03.1 of our annual report on Form 10-K,
    filed on May 1, 2001 (File No. 001-13927).                                                                                                                                                                                                           
|        | 4.02    |                         |  | Indenture, dated as of October 30, 1996, by
    and among CSK Auto, Inc. (Auto), Kragen Auto Supply Co., Schucks
    Distribution Co. and The Bank of New York (as successor to Wells
    Fargo Bank, N.A.), as Trustee, including form of Note,
    incorporated herein by reference to CSK Auto, Inc.s
    Registration Statement on Form S-4 (File
    No. 333-22511).                                             
|        | 4.03    |                         |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                                                             
|        | 4.04.2  |                         |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation, Automotive
    Information Systems, Inc. and CSKAUTO.COM, Inc., as Guarantors;
    and Credit Suisse First Boston Corporation, J.P. Morgan
    Securities Inc. and UBS Warburg LLC as Purchasers, incorporated
    herein by reference to Exhibit 99.4 of our Current Report
    on Form 8-K, filed January 18, 2002.
|        | 4.05    |                         |  | Credit Agreement, dated as of December 21,
    2001, by and among CSK Auto, Inc., the lenders from time to time
    a party thereto, and JP Morgan Chase Bank, Credit Suisse
    First Boston, and UBS AG, Stamford Branch, incorporated herein
    by reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed January 18, 2002.                                                                        
|        | 4.05.1  |                         |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and CSKAUTO.COM, Inc., as
    subsidiary guarantors; and the Bank of New York, as Trustee,
    incorporated herein by reference to Exhibit 99.3 of our
    Current Report on Form 8-K, filed January 18, 2002.                                                       
|        | 4.06    |                         |  | ISDA master agreement executed as of March 2002
    between Lehman Brothers Special Financing Inc. and CSK Auto,
    Inc., incorporated herein by reference to our Annual Report on
    Form 10-K, filed on April 23, 2002 (File
    No. 001-13927).                                                                                                                                                                   
|        | 10.01.1 |                         |  | 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).                                                                                                                                                             
|        | 10.01.2 |                         |  | 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).                                                                                                                                                                       
|        | 10.02   |                         |  | Stock Option Agreement, dated January 27,
    1997, between the Company and Maynard Jenkins, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-67231).                                                                                                                                                                                                                  
|        | 10.03   |                         |  | Stock Option Agreement, dated February 1,
    1998, between the Company and Maynard Jenkins, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                  



---



##### Table of Contents



|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                 
|------- | ------- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 10.04   |                         |  | 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).                                                                                                                              
|        | 10.05   |                         |  | Restated 1996 Associate Stock Option Plan,
    incorporated herein by reference to our Registration Statement
    on Form S-1 (File No. 333-67231).                                                                                                                                                                             
|        | 10.06   |                         |  | Supplemental Executive Retirement Plan Agreement,
    dated August 28, 2000 between CSK Auto, Inc. and Maynard
    Jenkins, incorporated herein by reference to our Quarterly
    Report on Form 10-Q, filed on September 13, 2000 (File
    No. 001-13927).                                                                    
|        | 10.07   |                         |  | 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).                                                                                                                      
|        | 10.08   |                         |  | 1999 Employee Stock Option Plan, incorporated by
    reference to our definitive Proxy Statement, filed on
    May 11, 1999 (File No. 001-13927).                                                                                                                                                                               
|        | 10.09   |                         |  | 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).                                                                                                                                                 
|        | 10.10   |                         |  | 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).                                                                                                     
|        | 10.11   |                         |  | 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).                                                                                                                         
|        | 10.12   |                         |  | 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).                                                     
|        | 10.13   |                         |  | 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).                                                              
|        | 10.14   |                         |  | 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).                                                                          
|        | 10.15   |                         |  | 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).                                                      
|        | 10.16   |                         |  | Lease dated April 20, 2000 between Missouri
    Falls Partners and CSK Auto, Inc.; First Amendment to Lease
    dated February 23, 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   |                         |  | 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).                                                   
|        | 10.18.1 |                         |  | Stockholders Agreement, dated October 30,
    1996, by and among the Initial Investcorp Group, Cantrade Trust
    Company Limited in its capacity as trustee of The Carmel Trust,
    the Company and Auto, incorporated herein by reference to CSK
    Auto, Incs Registration Statement on Form S-4 (File
    No. 333-22511).
|        | 10.18.2 |                         |  | Form of Supplemental Stockholders Agreement
    Signature Page, incorporated herein by reference to our
    Registration Statement on Form S-1 (File
    No. 333-43211).                                                                                                                                                        
|        | 10.18.3 |                         |  | Amendment to the Stockholders Agreement, dated
    June 12, 1998, incorporated herein by reference to our
    Registration Statement on Form S-1 (File
    No. 333-67231).                                                                                                                                                      
|        | 10.18.4 |                         |  | Letter Agreement re: Stockholders Agreement,
    incorporated herein by reference to our Annual Report on
    Form 10-K, filed on April 28, 1999 (File
    No. 001-13927).                                                                                                                                                      



---



##### Table of Contents



|        |         |                         |  |                                                                                                                                                                                                                                                         
|------- | ------- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 10.18.5 |                         |  | Second Amendment to Stockholders Agreement dated
    December 7, 2001, incorporated herein by reference to our
    Registration Statement on Form S-4 filed February 11,
    2002.                                                                      
|        | 10.18.6 |                         |  | Third Amendment to Stockholders Agreement,
    incorporated herein by reference to Exhibit 10.18.6 to our
    Registration Statement on Form S-4 filed on June 6,
    2002 (File No. 333-82492).                                                       
|        | 10.18.7 |                         |  | Fourth Amendment to Stockholders Agreement,
    incorporated herein by reference to Exhibit 99.1 to our
    Report on Form 8-K filed on November 15, 2002.                                                                                             
|        | 10.19   |                         |  | CSK Auto Corporation 1997 Senior Executive Stock
    Loan Plan, incorporated herein by reference to our Registration
    Statement on Form S-1 (File No. 333-43211).                                                                                    
|        | 10.20   |                         |  | Form of Stock Purchase Agreement pursuant to the
    CSK Auto Corporation 1997 Stock Loan Plan, incorporated herein
    by reference to our Registration Statement on Form S-1
    (File No. 333-43211).                                                
|        | 10.21   |                         |  | 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).                    
|        | 10.22   |                         |  | 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).                                              
|        | 10.23   |                         |  | 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).                 
|        | 10.24   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Don Watson, incorporated herein by reference to
    Exhibit 10.03 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                           
|        | 10.25   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Lon Novatt, incorporated herein by reference to
    Exhibit 10.02 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                           
|        | 10.26   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Dale Ward, incorporated herein by reference to
    Exhibit 10.04 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                            
|        | 10.27   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Martin Fraser, incorporated herein by reference
    to Exhibit 10.01 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                        
|        | 10.28   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Larry Buresh, incorporated herein by reference to
    Exhibit 10.05 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                         
|        | 10.29   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Larry Ellis, incorporated herein by reference to
    Exhibit 10.06 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                          
|        | 10.30   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Bill Evans, incorporated herein by reference to
    Exhibit 10.07 of our Quarterly Report on Form 10-Q,
    filed on December 19, 2001 (File No. 001-13927).                           
|        | 10.31   |                         |  | 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).
|        | 10.32   |                         |  | Amended and Restated Severance and Retention
    Agreement between CSK Auto, Inc. and Dale Ward, dated
    February 14, 2002.                                                                                                                           



---



##### Table of Contents



|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                            
|------- | ------- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 10.33   |                         |  | 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).                                                                                   
|        | 10.34   |                         |  | 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).                                                                                
|        | 10.35   |                         |  | 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).                                                                                  
|        | 10.36   |                         |  | 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).                                                                                 
|        | 10.37   |                         |  | 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).                                                                                   
|        | 10.38   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Hal Smith, dated February 14, 2002.                                                                                                                                                                                                                                       
|        | 10.39   |                         |  | 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.                                                            
|        | 10.40   |                         |  | Voting Agreement dated December 7, 2001,
    incorporated by reference to our Registration Statement on
    Form S-4 filed February 11, 2002.                                                                                                                                                                                              
|        | 10.41   |                         |  | Form of CSK Auto Corporation Option Exchange
    Agreement, incorporated herein by reference to our Annual Report
    on Form 10-K, filed on April 23, 2002 (File
    No. 001-13927).                                                                                                                                                      
|        | 10.42   |                         |  | Amendment No. 1 to the Third Amended and
    Restated Credit Agreement, dated as of February 17, 2000,
    incorporated herein by reference to Exhibit 4.01.1 of our
    Annual Report on Form 10-K, filed on May 1, 2001 (File
    No. 001-13927).                                                                                        
|        | 10.43   |                         |  | Amendment No. 2 to the Third Amended and
    Restated Credit Agreement, dated as of December 4, 2000,
    incorporated herein by reference to Exhibit 4.01.2 of our
    Annual Report on Form 10-K, filed on May 1, 2001 (File
    No. 001-13927).                                                                                         
|        | 10.44   |                         |  | Securities Purchase Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., including form of
    Debenture and form of Make Whole Warrant, incorporated herein by
    reference to Exhibit 99.2 of our Current Report on
    Form 8-K, filed December 11, 2001.
|        | 10.44.1 |                         |  | Amendment No. 1 to the Securities Purchase
    Agreement, dated as of May 16, 2002, by and between CSK
    Auto Corporation, LBI Group Inc. and Investcorp CSK Holdings
    L.P., incorporated herein by reference to Exhibit 4.04.01
    to our Registration Statement on Form S-3, filed
    May 17, 2002 (File No. 333-77008).          
|        | 10.45   |                         |  | Registration Rights Agreement dated as of
    December 7, 2001 by and among CSK Auto Corporation, LBI
    Group Inc. and Investcorp CSK Holdings L.P., incorporated herein
    by reference to Exhibit 99.3 of our Current Report on
    Form 8-K, filed December 11, 2001.                                                                
|        | 10.45.1 |                         |  | 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).                   



---



##### Table of Contents



|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ----- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Exhibits
|        |       |                        
|        | 10.46 |                         |  | Registration Rights Agreement, dated
    December 21, 2001, by and among CSK Auto, Inc; CSK Auto
    Corporation, Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First Boston
    Corporation, J.P. Morgan Securities Inc. and UBS Warburg
    LLC as Purchasers, incorporated herein by reference to
    Exhibit 99.5 of our Current Report on Form 8-K, filed
    January 18, 2002.
|        | 10.47 |                         |  | Employment Agreement, dated March 30, 2000,
    between CSK Auto, Inc. and Jim Bazlen.                                                                                                                                                                                                                                                                                                                                                 
|        | 21.01 |                         |  | Subsidiaries of the Company, incorporated herein
    by reference to our Annual Report on Form 10-K, filed on
    April 23, 2002 (File No. 001-13927).                                                                                                                                                                                                                                                                                 
|        | 23.01 |                         |  | Consent of Independent Accountants dated
    April 24, 2003.                                                                                                                                                                                                                                                                                                                                                                           
|        | 99.1  |                         |  | Certification by the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    dated May 5, 2003.                                                                                                                                                                                                                                                   
|        | 99.2  |                         |  | Certification by the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
    dated May 5, 2003.