##### 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 1,
2004.



|  |                                                  
|- | -------------------------------------------------
|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 registrants knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any
amendment to this
Form 10-K.     o

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

As of August 4, 2003, the aggregate market
value of our voting and non-voting common stock held by
non-affiliates was approximately $521.5 million. For
purposes of the above statement only, all directors and
executive officers of the registrant are assumed to be
affiliates. As of April 12, 2004, there were
46,516,840 shares of our common stock outstanding.

Documents Incorporated by Reference



|  |                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Portions of our definitive Proxy Statement on
    Schedule 14A, with respect to our 2004 Annual Meeting of
    Stockholders, are incorporated by reference into Part III
    of this Form 10-K.



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TABLE OF CONTENTS

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|PART I  
|Item 1.  |  | Business                                                                                  |  |      | 2  | 
|Item 2.  |  | Properties                                                                                |  |      | 10 | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 11 | 
|Item 4.  |  | Submission of Matters to a
    Vote of Security Holders                                   |  |      | 11 | 
|PART II 
|Item 5.  |  | Market for Registrants
    Common Stock and Related Stockholder Matters                  |  |      | 11 | 
|Item 6.  |  | Selected Consolidated
    Financial Data                                                  |  |      | 13 | 
|Item 7.  |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |  |      | 16 | 
|Item 7A. |  | Quantitative and Qualitative
    Disclosures About Market Risk                            |  |      | 33 | 
|Item 8.  |  | Consolidated Financial
    Statements and Supplementary Data                              |  |      | 34 | 
|Item 9.  |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure  |  |      | 67 | 
|Item 9A. |  | Controls and Procedures                                                                   |  |      | 67 | 
|PART III
|Item 10. |  | Directors and Executive
    Officers of the Registrant                                    |  |      | 67 | 
|Item 11. |  | Executive Compensation                                                                    |  |      | 67 | 
|Item 12. |  | Security Ownership of
    Certain Beneficial Owners and Management                        |  |      | 67 | 
|Item 13. |  | Certain Relationships and
    Related Transactions                                        |  |      | 67 | 
|Item 14. |  | Principal Accountant Fees
    and Services                                                |  |      | 67 | 
|PART IV 
|Item 15. |  | Exhibits, Financial
    Statement Schedules and Reports on Form 8-K                       |  |      | 67 | 
|EX-10.57
|EX-23.01
|EX-31.1 
|EX-31.2 
|EX-32.0 



Note Concerning Forward-Looking
Information

Some of the information in this Report on
Form 10-K contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these
statements by forward-looking words such as may,
will, expect, anticipate,
believe, estimate and
continue or similar words. You should read
statements that contain these words carefully because they:
(1) discuss our future expectations; (2) contain
projections of our future results of operations or of our
financial condition; or (3) state other forward-looking
information. We believe that it is important to communicate our
future expectations to our investors. However, there may be
events in the future that we are not able to accurately predict
or over which we have no control, the occurrence of which could
have a material adverse effect on our business, operating
results and financial condition. These events may include
changes in laws and regulations, changes in economic and market
conditions 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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##### Table of Contents






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 1, 2004, we operated 1,114
stores in 19 states under one fully integrated operating
format and three brand names:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Checker Auto Parts,
    founded in 1969, with 411 stores in the Southwestern, Rocky
    Mountain and Northern Plains states and Hawaii;
|
| |  | Schucks Auto Supply,
    founded in 1917, with 226 stores in the Pacific Northwest and
    Alaska; and                                 
|
| |  | Kragen Auto Parts,
    founded in 1947, with 477 stores primarily in California.                                                       

We offer a broad selection of national brand
name, private-label and generic automotive products for domestic
and imported cars and light trucks. Our products include new and
remanufactured automotive replacement parts, maintenance items
and accessories. Our stores average approximately
7,300 square feet in size and typically offer a store
specific mix averaging approximately 18,000 stock-keeping
units, or SKUs. We also operate a highly efficient network of
strategically located depots to provide approximately 75% of our
stores an additional 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
2003. The DIFM market is comprised of auto repair professionals,
fleet owners, governments and municipalities and accounted for
over 75% of the annual sales in the U.S. automotive
aftermarket industry in 2002, according to statistics published
by Lang Marketing Resources, Inc. Sales to the DIFM market
represented approximately 17% of our net sales for fiscal 2003.
In 1994, we began targeting the DIFM market to leverage our
existing store base, fixed costs, inventory and in-store
personnel. We believe we are well positioned to effectively and
profitably further penetrate the highly fragmented DIFM market
because of our sales force dedicated to DIFM customers,
experienced in-store sales associates, level of customer
service, conveniently located stores, efficient depot delivery
network, attractive pricing, and ability to provide timely
availability of a broad selection of national brand name
products.

Through our subsidiary, Automotive Information
Systems, Inc. (AIS), 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
high quality diagnostic information to our DIY, DIFM, and
Internet customers in order to assist them with correctly
identifying problems and efficiently obtaining the parts they
need. We are currently considering alternatives that will allow
us to maximize the potential value of AIS without significantly
increasing our capital commitment. Possibilities include joint
ventures or a sale in a manner that would allow us to retain
certain of the attributes of AIS we deem most valuable to our
business.

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
Relations. Information contained on our website is not
part of this Report.

2



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Industry Overview

We compete in the U.S. automotive
aftermarket industry, which has annual sales in excess of
$110 billion. This industry includes replacement parts
(excluding tires), accessories, maintenance items, batteries and
automotive fluids for cars and light trucks. The industry is
comprised of the DIY market and the DIFM market. 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 automotives in use;                                                                                                                                                                                                                 
|
| |  | the number of miles driven annually per vehicle;                                                                                                                                                                                                        
|
| |  | the number of licensed drivers;                                                                                                                                                                                                                         
|
| |  | the percentage of the total light vehicle fleet
    represented by light trucks (including SUVs), which generate
    higher average aftermarket product purchases versus such
    purchases generated per car; and                                      
|
| |  | the number of light vehicles coming off warranty,
    particularly leased vehicles, which we believe are often
    under-maintained and, therefore, may require higher than average
    maintenance and repair expenditures in the post-warranty period.

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.

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. Research conducted by a third party market research
company indicates that, on an aggregate basis for our key
markets, we have better brand name recognition than our major
competitors. 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 promise of
G.R.E.A.T. service, our internally developed
customer service initiative, has been well received. 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. Research conducted by a third
party market research company indicates that, on an aggregate
basis for our key markets, consumers rate our sales associates
as the most knowledgeable and helpful more
frequently than those of our major competitors. 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.

3



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Timely Availability of a Broad Selection of
Brand Name Products.Our stores
typically offer a store specific mix of approximately 18,000
SKUs. We also operate a highly efficient network of
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, trends and seasonality.
Our systems have enhanced our ability to predict the size and
timing of product requirements by closely monitoring service
level goals, vendor lead times and cost of inventory
assumptions. Our store level replenishment system generates
orders based upon store on-hand and store model stock
quantities. Store model stock quantities are determined by an
automatic model stock adjustment system that utilizes historical
sales patterns, seasonality and store presentation requirements.
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 strategically located depots, which operate
using state-of-the-art technology, have allowed us to
significantly improve distribution efficiency. In addition,
these investments have allowed us to both improve our in-stock
inventory levels and reduce delivery costs and times for
products.

Profitable Commercial Sales
Program.We are well positioned to
effectively service our DIFM customers, who typically require
convenient locations, a higher level of customer service and
timely availability of brand name products. Beginning in 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. This has enabled
us to add significant sales volume to each of our stores with
minimal incremental cost. We currently operate DIFM sales
centers in approximately half of our stores and DIFM sales have
grown from $89.6 million, or approximately 11%, of net
sales in fiscal 1996 to $260.8 million, or approximately
17%, of net sales in fiscal 2003. Our commercial sales program
growth has increased the sales base for participating stores,
created improved efficiencies and allowed us to enhance the
product selection for our DIY customers.

Highly Experienced and Proven Management
Team.We are led by an innovative
management team with a wealth of automotive aftermarket and
retail industry experience. Maynard Jenkins, our Chairman and
Chief Executive Officer, has served in his current position
since January 1997 and has 38 years of retail management
experience, including 17 years as a Chief Executive
Officer. Martin Fraser, our President and Chief Operating
Officer, has been with us for 26 years, serving in a number
of key positions prior to his current role, including Executive
Vice President  Merchandising, Distribution and
Commercial and Sr. Vice President  Merchandising,
Transportation, Replenishment and Marketing. Our senior
management team averages over 28 years of retail industry
experience. We believe the strength and experience of our
management team has enabled us to deliver exceptional operating
and financial results and to emerge as a leader in our highly
competitive industry.

Store Operations

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

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The table below sets forth, as of
February 1, 2004, 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   |         |  |  | 463 |     |  |  | 466 |      
|Washington   |       |            |    |             |  |            | 144 |         |  |  |    |     |  |  | 144 |      
|Arizona      |       |            | 103 |             |  |            |    |         |  |  |    |     |  |  | 103 |      
|Colorado     |       |            | 68  |             |  |            |    |         |  |  |    |     |  |  | 68  |      
|Minnesota    |       |            | 57  |             |  |            |    |         |  |  |    |     |  |  | 57  |      
|Oregon       |       |            |    |             |  |            | 46  |         |  |  |    |     |  |  | 46  |      
|Utah         |       |            | 38  |             |  |            |    |         |  |  |    |     |  |  | 38  |      
|Nevada       |       |            | 21  |             |  |            |    |         |  |  | 14  |     |  |  | 35  |      
|Wisconsin    |       |            | 32  |             |  |            |    |         |  |  |    |     |  |  | 32  |      
|Idaho        |       |            | 8   |             |  |            | 23  |         |  |  |    |     |  |  | 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 |            |     | 411         |  |            |     | 226     |  |  |     | 477 |  |  |     | 1,114 | 
|             |       |            |     |             |  |            |     |         |  |  |     |     |  |  |     |      

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.

Store Formats

Approximately 63% 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 7,300 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 1, 2004:

|                          |  |                  |       | 
|------------------------- |  | ---------------- | ----- | 
|Store Size                |  | Number of Stores
|                          |  |                 
|10,000 sq. ft. or greater |  |                  | 106   | 
|8,000  9,999 sq. ft      |  |                  | 207   | 
|6,000  7,999 sq. ft      |  |                  | 534   | 
|5,000  5,999 sq. ft      |  |                  | 191   | 
|Less than 5,000 sq. ft    |  |                  | 76    | 
|                          |  |                  |       | 
|                          |  |                  | 1,114 | 
|                          |  |                  |       | 

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

5



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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
|                                           |  |            
|                                           |  | 2003        |       | 2002 |  | 2001
|                                           |  |             |       |      |  |     
|Beginning stores                           |  |             | 1,109 |      |  |      | 1,130 |   |  |  | 1,152 |  
|New stores                                 |  |             | 18    |      |  |      | 12    |   |  |  | 10    |  
|Relocated stores                           |  |             | 7     |      |  |      | 5     |   |  |  | 13    |  
|Closed stores (including relocated stores) |  |             | (20   | )    |  |      | (38   | ) |  |  | (45   | )
|                                           |  |             |       |      |  |      |       |   |  |  |       |  
|Ending stores                              |  |             | 1,114 |      |  |      | 1,109 |   |  |  | 1,130 |  
|                                           |  |             |       |      |  |      |       |   |  |  |       |  
|Expanded stores                            |  |             | 2     |      |  |      | 1     |   |  |  | 2     |  
|Total new, relocated and expanded stores   |  |             | 27    |      |  |      | 18    |   |  |  | 25    |  

We expect to open, relocate or expand
approximately 45 stores in fiscal 2004.

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 stores historical sales. We believe that we
can improve store sales, gross profit margin and inventory
turnover by tailoring individual store inventory mix based on
historical sales patterns for each of the 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 2003.

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

6



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##### Table of Contents



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 values 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 stores
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, Fel Pro, Fram, Havoline, Mobil,
Monroe, Pennzoil, Prestone, Quaker State, RayBestos, Stant,
Sylvania, Turtle Wax and Valvoline. In addition to brand name
products, our stores carry a wide variety of high quality
generic products. Because nationally recognized manufacturers
that produce similar brand name products that enjoy a high
degree of consumer acceptance produce most of our generic
products, we believe that our generic products are of a quality
that is comparable to such brand name products.

Commercial Sales Program

In addition to our primary focus on serving the
DIY consumer, we have significantly increased our marketing
directed at the commercial or DIFM customer in the automotive
replacement parts market. The commercial or DIFM market
constitutes in excess of 75% 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 us, 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 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 1, 2004, we operated
commercial service centers in approximately half of our stores.
Our sales to commercial accounts (including sales by stores
without commercial service centers) decreased 0.7% to
$260.8 million in fiscal 2003 from $262.8 million in
fiscal 2002. On a comparable store basis, commercial sales
increased 4.8% in fiscal 2003 over fiscal 2002.

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

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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.

Associates

As of February 1, 2004, we employed
approximately 8,600 full-time associates and approximately
4,970 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 a limited number of associates located at certain stores in
the Northern California market, who have been represented by a
union for many years, none of our personnel are represented by a
labor union.

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

8



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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.

Trade Names, Service Marks and
Trademarks

We have the right to exclusively use the trade
name Checker nationwide in connection with the automotive parts
retailing business pursuant to a settlement and use agreement
with the owner of the federal registration for such trademark.
We own and have registered the service mark 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 trade name Kragen in connection with the automotive parts
retailing business. In addition, we own and have registered
numerous trademarks with respect to many of our private label
products and advertising and marketing strategies. We believe
that our various trade names, service marks and trademarks are
important to our merchandising strategy, but that our business
is not otherwise dependent on any particular service mark, trade
name or trademark. There are no infringing uses known by us that
materially affect the use of such 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.

Environmental Matters

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

At some of our locations acquired in prior years,
automobiles are serviced in automotive service facilities that
we sublease to third parties. As a result of investigations
undertaken in connection with such acquisitions, we are aware
that soil or groundwater may be contaminated at some of these
properties. Although there can be no assurance, based on current
information and, in some cases, indemnities we obtained from the
former

9



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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 2. | Properties

The following table sets forth certain
information concerning our principal leased facilities as of
February 1, 2004:

|                                          |  |          |                     |             |  |                                                                                     |  |           |         |  |  |  |     | 
|----------------------------------------- |  | -------- | ------------------- | ----------- |  | ----------------------------------------------------------------------------------- |  | --------- | ------- |  |  |  | --- | 
|                                          |  |          |                     |             |  |                                                                                     |  | 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 |  |  |  | 516 | 
|Distribution center(2)                    |  |          | Phoenix, AZ         |             |  | Arizona, Colorado, Idaho, Nevada, New
    Mexico, California, Texas, Utah           |  |           | 273,520 |  |  |  | 497 | 
|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 |  |  |  | 199 | 
|Regional distribution center              |  |          | Aurora, CO          |             |  | Colorado, Wyoming, South Dakota                                                     |  |           | 34,800  |  |  |  | 69  | 
|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 an entity that until
    November 2002 was an affiliate of ours. See Note 4 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.

10



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As of February 1, 2004, 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   
|                  |  |          
|2004  2005       |  |           | 30    | 
|2006  2008       |  |           | 48    | 
|2009  2010       |  |           | 63    | 
|2011  2020       |  |           | 420   | 
|2021  2030       |  |           | 480   | 
|2031  thereafter |  |           | 72    | 
|                  |  |           |       | 
|                  |  |           | 1,113 | 
|                  |  |           |       | 

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






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

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

We believe that we have a strong basis under
California law for disputing the payment of this assessment and
have filed a Petition for Redetermination with the Board. Our
practices through December 2002 relative to the handling of
taxes on battery cores had been consistent for over a decade,
and it is our position that our consistent treatment of battery
core charges, together with prior tax audits and tax
auditors written commentary concerning our handling of
such charges, permits us to rely upon precedent set in prior
audits. Reliance on prior audits is a position that is
supportable under California law. We also have other defenses,
and intend to vigorously defend our position with regard to this
matter. A liability for the potential sales tax and related
interest payments has not been recorded in our consolidated
financial statements.

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

11



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|        |                                                        
|------- | -------------------------------------------------------
|Item 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 2003.




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 12, 2004, there were
46,516,840 shares of our common stock outstanding and there
were approximately 75 record holders of our common stock.

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 2003: |                |                |   |       |  |  |   |      
|             | First Quarter  |                | $ | 10.78 |  |  | $ | 7.75  | 
|             | Second Quarter |                |   | 15.32 |  |  |   | 10.38 | 
|             | Third Quarter  |                |   | 17.62 |  |  |   | 13.56 | 
|             | Fourth Quarter |                |   | 19.69 |  |  |   | 16.50 | 
|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  | 

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

We are a holding company with no business
operations of our own. We therefore depend upon payments,
dividends and distributions from CSK Auto, Inc., our wholly
owned subsidiary, for funds to pay dividends to our
stockholders. CSK Auto, Inc. currently intends to retain
its earnings to fund its working capital, debt repayment and
capital expenditure needs and for other general corporate
purposes. CSK Auto, Inc. has no current intention of paying
dividends or making other distributions to us in excess of
amounts necessary to pay our operating expenses and taxes. CSK
Auto, Inc.s senior credit facility and the indentures
governing its senior notes contain restrictions on its ability
to pay dividends or make payments or other distributions to us.
See Note 8 to the Consolidated Financial Statements.

The required table and information relating to
equity compensation plans is incorporated by reference from the
information contained under the caption Report of the
Compensation Committee on Executive Compensation in our
definitive proxy statement in connection with the solicitation
of proxies for our 2004 Annual Meeting of Stockholders to be
held on June 16, 2004 (the Proxy Statement).

12



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##### Table of Contents








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

The following table sets forth our selected
consolidated financial and operating data. The selected
statement of operations, balance sheet and cash flow data are
derived from our consolidated financial statements.
PricewaterhouseCoopers LLP, independent accountants, have
audited our consolidated financial statements for each of the
five years ended February 1, 2004. 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)                                                  
|                                                                                              |  |                                                                 
|                                                                                              |  | 2003                                                             |           | 2002 |  | 2001 |           | 2000 |  | 1999
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |     
|                                                                                              |  |                                                                 
|                                                                                              |  | (in thousands, except per share amounts and selected store data)
|Statement of Operations Data                                                                  |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Net sales                                                                                     |  | $                                                                | 1,578,056 |      |  | $    | 1,506,646 |      |  | $    | 1,438,585 |   |  | $ | 1,452,109 |   |  | $ | 1,231,455 |  
|Cost of sales(2)                                                                              |  |                                                                  | 829,900   |      |  |      | 806,461   |      |  |      | 790,585   |   |  |   | 769,043   |   |  |   | 636,239   |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Gross profit                                                                                  |  |                                                                  | 748,156   |      |  |      | 700,185   |      |  |      | 648,000   |   |  |   | 683,066   |   |  |   | 595,216   |  
|Other costs and expenses:                                                                     |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Operating and administrative(2)(3)                                                            |  |                                                                  | 618,879   |      |  |      | 592,630   |      |  |      | 580,134   |   |  |   | 592,691   |   |  |   | 501,527   |  
|Store closing and other restructuring costs(4)                                                |  |                                                                  | 12,669    |      |  |      | 5,026     |      |  |      | 22,392    |   |  |   | 6,060     |   |  |   | 4,900     |  
|Legal settlement(5)                                                                           |  |                                                                  |          |      |  |      |          |      |  |      | 2,000     |   |  |   | 8,800     |   |  |   |          |  
|Goodwill amortization(6)                                                                      |  |                                                                  |          |      |  |      |          |      |  |      | 4,807     |   |  |   | 4,799     |   |  |   | 1,941     |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Operating profit                                                                              |  |                                                                  | 116,608   |      |  |      | 102,529   |      |  |      | 38,667    |   |  |   | 70,716    |   |  |   | 86,848    |  
|Interest expense                                                                              |  |                                                                  | 50,991    |      |  |      | 62,261    |      |  |      | 61,608    |   |  |   | 62,355    |   |  |   | 41,300    |  
|Loss on debt retirement(7)                                                                    |  |                                                                  | 49,494    |      |  |      | 6,008     |      |  |      | 5,101     |   |  |   |          |   |  |   |          |  
|Equity in loss on joint venture(8)                                                            |  |                                                                  |          |      |  |      |          |      |  |      |          |   |  |   | 3,168     |   |  |   |          |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Income (loss) before income taxes and cumulative
    effect of change in accounting principle |  |                                                                  | 16,123    |      |  |      | 34,260    |      |  |      | (28,042   | ) |  |   | 5,193     |   |  |   | 45,548    |  
|Income tax expense (benefit)                                                                  |  |                                                                  | 5,326     |      |  |      | 12,448    |      |  |      | (10,850   | ) |  |   | 193       |   |  |   | 17,436    |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Income (loss) before cumulative effect of change
    in accounting principle                  |  |                                                                  | 10,797    |      |  |      | 21,812    |      |  |      | (17,192   | ) |  |   | 5,000     |   |  |   | 28,112    |  
|Cumulative effect of change in accounting
    principle, net of income taxes                  |  |                                                                  |          |      |  |      |          |      |  |      |          |   |  |   |          |   |  |   | (741      | )
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Net income (loss)                                                                             |  | $                                                                | 10,797    |      |  | $    | 21,812    |      |  | $    | (17,192   | ) |  | $ | 5,000     |   |  | $ | 27,371    |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Basic earnings (loss) per share                                                               |  | $                                                                | 0.24      |      |  | $    | 0.54      |      |  | $    | (0.61     | ) |  | $ | 0.18      |   |  | $ | 0.98      |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Diluted earnings (loss) per share                                                             |  | $                                                                | 0.23      |      |  | $    | 0.54      |      |  | $    | (0.61     | ) |  | $ | 0.18      |   |  | $ | 0.96      |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Shares used in computing basic per share amounts                                              |  |                                                                  | 45,658    |      |  |      | 40,635    |      |  |      | 28,391    |   |  |   | 27,839    |   |  |   | 27,815    |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Shares used in computing diluted per share amounts                                            |  |                                                                  | 45,964    |      |  |      | 40,752    |      |  |      | 28,391    |   |  |   | 27,839    |   |  |   | 28,627    |  
|                                                                                              |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Other Data                                                                                    |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Net cash provided by (used in) operating
    activities                                       |  | $                                                                | 50,614    |      |  | $    | 35,919    |      |  | $    | (7,914    | ) |  | $ | 32,469    |   |  | $ | (4,031    | )
|Net cash used in investing activities                                                         |  |                                                                  | (19,217   | )    |  |      | (6,552    | )    |  |      | (10,143   | ) |  |   | (34,542   | ) |  |   | (260,221  | )
|Net cash provided by (used in) financing
    activities                                       |  |                                                                  | (9,695    | )    |  |      | (29,932   | )    |  |      | 23,010    |   |  |   | 1,442     |   |  |   | 268,524   |  
|Capital expenditures                                                                          |  |                                                                  | 16,056    |      |  |      | 9,573     |      |  |      | 12,200    |   |  |   | 32,080    |   |  |   | 41,358    |  
|Rent expense                                                                                  |  |                                                                  | 114,382   |      |  |      | 115,000   |      |  |      | 116,953   |   |  |   | 117,273   |   |  |   | 93,329    |  
|Depreciation and amortization                                                                 |  |                                                                  | 34,233    |      |  |      | 35,566    |      |  |      | 41,146    |   |  |   | 40,827    |   |  |   | 29,375    |  
|Commercial sales(9)                                                                           |  |                                                                  | 260,842   |      |  |      | 262,773   |      |  |      | 259,096   |   |  |   | 249,314   |   |  |   | 217,696   |  
|Selected Store Data                                                                           |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Number of stores (end of period)                                                              |  |                                                                  | 1,114     |      |  |      | 1,109     |      |  |      | 1,130     |   |  |   | 1,152     |   |  |   | 1,120     |  
|Percentage increase in comparable store net
    sales(10)                                     |  |                                                                  | 6         | %    |  |      | 7         | %    |  |      | 1         | % |  |   | 2         | % |  |   | 4         | %
|Balance Sheet Data (end of period)                                                            |  |                                                                  |           |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Cash and cash equivalents                                                                     |  | $                                                                | 37,221    |      |  | $    | 15,519    |      |  | $    | 16,084    |   |  | $ | 11,131    |   |  | $ | 11,762    |  
|Working capital                                                                               |  |                                                                  | 574,862   |      |  |      | 528,749   |      |  |      | 498,914   |   |  |   | 401,523   |   |  |   | 456,594   |  
|Total assets                                                                                  |  |                                                                  | 1,153,465 |      |  |      | 1,101,349 |      |  |      | 1,068,577 |   |  |   | 1,066,806 |   |  |   | 1,035,652 |  
|Total debt (including current maturities)                                                     |  |                                                                  | 520,270   |      |  |      | 524,967   |      |  |      | 670,843   |   |  |   | 647,881   |   |  |   | 627,133   |  
|Stockholders equity                                                                           |  |                                                                  | 331,558   |      |  |      | 302,182   |      |  |      | 154,286   |   |  |   | 139,613   |   |  |   | 134,547   |  

See accompanying notes on pages 14 and 15

13



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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) In March 2003, the Emerging Issues Task
Force (EITF) of the Financial Accounting Standards
Board (FASB) reached consensus on certain matters
discussed in EITF 02-16, Accounting by a Customer
(including a Reseller) for Certain Consideration Received from a
Vendor. EITF 02-16 states that allowances
provided by our vendors are presumed to be a reduction in the
costs of purchasing inventories (to be recognized in inventory
and cost of sales), except for that portion that is a
reimbursement for costs incurred by us to sell the vendors
products. In order to qualify as a reimbursement, the costs must
be specific, identifiable and incremental, to be recognized as a
reduction to operating and administrative expenses. Under
previous accounting guidance, we accounted for all
non-performance based vendor allowances as a reduction of
inventory cost and allocated performance based vendor allowances
as a reduction of advertising expense or cost of goods sold, as
appropriate, in the period the expense was incurred. During the
first quarter of fiscal 2003, we adopted the provisions of
EITF 02-16 and implemented a policy of considering all
cooperative advertising arrangements and other vendor allowances
to be a reduction of product costs, unless we are specifically
required to substantiate costs incurred to the vendor and do so
in the normal course of business. For fiscal 2002, 2001, 2000
and 1999, vendor allowances totaling approximately
$19.2 million, $20.0 million, $17.9 million and
$17.4 million, respectively, were classified as a reduction
to advertising expense (in operating and administrative expense)
rather than as a reduction to cost of sales as currently
required by EITF 02-16.

(3) During fiscal 2001, 2000 and 1999, we
incurred transition and integration costs associated with
certain store acquisitions of $0.2 million,
$23.8 million and $30.2 million, respectively. These
costs have been included in operating and administrative
expenses.

(4) Amounts relate to costs incurred in
connection with the closure of existing stores. See discussions
under Store Closures in Managements Discussion and
Analysis of Financial Condition and Results of Operations.

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

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

(7) Effective February 3, 2003, we
adopted SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections. In accordance with
SFAS No. 145, extraordinary losses as a result of the
write-off of deferred debt issuance costs and other costs
incurred in connection with the early extinguishments of debt
that were previously classified as extraordinary have been
reclassified to loss on debt retirement. In fiscal 2003 we
recorded a loss on debt retirement of $49.5 million as a
separate line in our consolidated statement of operations as a
component of income before income taxes. In fiscal 2002 and
2001, we incurred pre-tax extraordinary losses of
$6.0 million and $5.1 million, respectively, which we
have reclassified as required by SFAS No. 145.

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

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##### Table of Contents



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

(10) 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.

15



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

General

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



| |   |                                                               
| | - | --------------------------------------------------------------
| |  | Fiscal 2003 means the 52 weeks ended
    February 1, 2004;    
|
| |  | Fiscal 2002 means the 52 weeks ended
    February 2, 2003; and
|
| |  | Fiscal 2001 means the 52 weeks ended
    February 3, 2002.    

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 1, 2004, we operated 1,114 stores
under one fully integrated operating format and three brand
names:



| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
| |  | Checker Auto Parts, founded in 1969, with 411
    stores in the Southwestern, Rocky Mountain and Northern Plains
    states and Hawaii;
|
| |  | Schucks Auto Supply, founded in 1917, with 226
    stores in the Pacific Northwest and Alaska; and                                     
|
| |  | Kragen Auto Parts, founded in 1947, with 477
    stores primarily in California.                                                       

Executive Summary

In fiscal 2003, we increased our comparable store
sales by 6% while maintaining our gross margins, allowing us to
increase our operating profit 14% over fiscal 2002. Our fiscal
2003 operating profit of $116.6 million included
$12.7 million of store closing costs. Additionally, in the
fourth quarter of 2003, we completed a refinancing which will
significantly reduce our future annual interest costs. However,
expenses related to refinancing activities in fiscal 2003
reduced our pre-tax income by $49.5 million. Our
improvement in operating results reflects the following key
business strategies:

Drive Customer Traffic and Increase Sales
Base.Our marketing and merchandising
strategy is designed to drive customer traffic and build market
share. Our strategy is to make available to our customers one of
the broadest selections of quality brand name products on a
timely basis in order to maximize customer satisfaction and
generate loyal repeat customers. We also strive to be the
industry leader in introducing new and innovative product
offerings, supported by our 52-week promotional print
advertising programs. 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.

Targeted Pricing
Philosophy.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.

Focus on Customer
Service.We aim to provide the highest
level of customer service in our industry in order to generate
repeat business by, among other things, 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.

16



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##### Table of Contents



Accelerate Growth of Hispanic Customer
Base.Long-term upward trends in the
Hispanic population, particularly in key markets in the
Southwest and California, present an opportunity for increased
sales and market share. We have implemented a Hispanic marketing
initiative using Spanish language media and marketing messages
to focus on this growing market segment. Seventeen of our key
markets are currently included in the program.

Continue to 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 cash flow. In
recent years we have generated increased cash flows and lowered
outstanding debt balances. This was due largely to our improved
operating results, which were fueled by strong comparable store
sales, and by improving our gross margins and successfully
leveraging our operating and administrative costs.

Results of operations and outlook:

We are very pleased with our operating results
for fiscal 2003. Our merchandising department continues to
improve our category management. This improvement has allowed us
to achieve 6% annual comparable store sales increases, while at
the same time control our inventory levels, which increased by
only 2.4% during fiscal 2003 relative to fiscal 2002. Comparable
sales were strong in all regions. Balanced growth across all
regions demonstrates the strength of our merchandise and
operational model. Superior customer service has resulted in
higher dollar average transactions, fewer returns, and improved
customer satisfaction. We believe our new items give our
customers quality automotive related products at exceptional
values. These new items have also enhanced the customer
experience inside the store, giving our customers additional
reasons to shop our stores.

Our marketing program continues to drive
sales. Weekly print advertising featuring exceptional
values and new products has been very well received by our
customers. Our promotional activities also played an important
part in achieving our sales objectives for comparable store
sales. Our Spanish language marketing campaign that we started
in the spring of 2002 continues to be effective in communicating
with our Spanish speaking customers.

During fiscal 2003, we rolled out our Free
Automotive Systems Test (called F.A.S.T.) diagnostic program to
approximately half of our stores. This program allows customers
to put a security deposit down to use diagnostic equipment that
reads their vehicles onboard computer and retrieves
diagnostic information. The information is then uploaded into
our stores computers and the customer receives a print-out
of the results. By assisting DIY customers with this
information, we can get them the right parts the first time,
improving customer service and lowering returns. Customer use of
this program continues to increase and we remain committed to
improving this new customer service.

For fiscal 2004, we will continue our focus on
top-line growth by increasing sales of existing product
offerings and offering new products to attract new customers
into our stores. We expect our sales to continue to grow, and we
will use that growth to take advantage of lower product costs
and the increased dollar average of sales, which should increase
our operating margin dollars. At the same time, we expect to
continue to improve our financial position.

For fiscal 2004, we are forecasting same store
sales increases in the low to mid single digit range. We expect
our gross profit percentage for fiscal 2004 to approximate the
levels of fiscal 2003. In January 2004, we completed a
refinancing of our debt and expect pre-tax annual savings during
fiscal 2004 of approximately $11.0 million to
$13.0 million in interest expense, assuming no significant
changes in variable interest rates.

Overview

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In June 2003, we refinanced our senior credit
    facility, increasing the availability and reducing the interest
    rate. In January 2004, we redeemed approximately 94% of our
    12% senior notes, issued 7% senior subordinated notes,
    and amended our credit facility, increasing the availability and
    reducing the interest rate. We refer to these transactions as
    our 2003 Refinancing.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In July 2002, we sold approximately
    6.9 million shares of common stock in an underwritten
    public offering at $12 per share. In addition, a selling
    stockholder sold approximately 2.6 million shares in this
    offering and, together with other affiliated stockholders, this
    stockholder group sold their remaining approximately
    3.0 million shares on November 20, 2002. These
    transactions are referred to collectively as the secondary
    offerings.
|
| |  | In August 2001, we initiated a refinancing of our
    capital structure that included the issuance of a convertible
    note and convertible debentures and a refinancing of our credit
    facility. We refer to these transactions as our 2001 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.                                                                                                                                                                                                                                                                                          

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
|                                                  |  |            
|                                                  |  | 2003        |       | 2002 |  | 2001
|                                                  |  |             |       |      |  |     
|Net sales                                         |  |             | 100.0 | %    |  |      | 100.0 | % |  |  | 100.0 | % 
|Cost of sales                                     |  |             | 52.6  |      |  |      | 53.5  |   |  |  | 55.0  |   
|                                                  |  |             |       |      |  |      |       |   |  |  |       |   
|Gross profit                                      |  |             | 47.4  |      |  |      | 46.5  |   |  |  | 45.0  |   
|Operating and administrative expenses             |  |             | 39.2  |      |  |      | 39.3  |   |  |  | 40.3  |   
|Store closing costs and other restructuring costs |  |             | 0.8   |      |  |      | 0.4   |   |  |  | 1.6   |   
|Legal settlement                                  |  |             |      |      |  |      |      |   |  |  | 0.1   |   
|Goodwill amortization                             |  |             |      |      |  |      |      |   |  |  | 0.3   |   
|                                                  |  |             |       |      |  |      |       |   |  |  |       |   
|Operating profit                                  |  |             | 7.4   |      |  |      | 6.8   |   |  |  | 2.7   |   
|Interest expense                                  |  |             | 3.2   |      |  |      | 4.1   |   |  |  | 4.3   |   
|Loss on debt retirement                           |  |             | 3.1   |      |  |      | 0.5   |   |  |  | 0.4   |   
|                                                  |  |             |       |      |  |      |       |   |  |  |       |   
|Income (loss) before income taxes                 |  |             | 1.1   |      |  |      | 2.2   |   |  |  | (2.0  | ) 
|Income tax expense (benefit)                      |  |             | 0.4   |      |  |      | 0.8   |   |  |  | (0.8  | ) 
|                                                  |  |             |       |      |  |      |       |   |  |  |       |   
|Net income (loss)                                 |  |             | 0.7   | %    |  |      | 1.4   | % |  |  | (1.2  | )%
|                                                  |  |             |       |      |  |      |       |   |  |  |       |   

Net
Sales

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

|                                                |  |                        |           |      |  |      |           |   |  |   |           |   
|----------------------------------------------- |  | ---------------------- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | --
|                                                |  |                       
|                                                |  | Net Sales & Sales Data
|                                                |  |                       
|                                                |  | 2003                   |           | 2002 |  | 2001
|                                                |  |                        |           |      |  |     
|Retail sales                                    |  | $                      | 1,311,357 |      |  | $    | 1,238,474 |   |  | $ | 1,174,490 |   
|Commercial sales                                |  |                        | 260,842   |      |  |      | 262,773   |   |  |   | 259,096   |   
|Other sales                                     |  |                        | 5,857     |      |  |      | 5,399     |   |  |   | 4,999     |   
|                                                |  |                        |           |      |  |      |           |   |  |   |           |   
|Total net sales                                 |  | $                      | 1,578,056 |      |  | $    | 1,506,646 |   |  | $ | 1,438,585 |   
|                                                |  |                        |           |      |  |      |           |   |  |   |           |   
|Sales growth  retail sales                     |  |                        | 5.9       | %    |  |      | 5.4       | % |  |   | (0.2      | )%
|Sales growth  commercial sales                 |  |                        | (0.7      | )%   |  |      | 1.4       | % |  |   | 5.8       | % 
|Sales growth  comparable retail stores         |  |                        | 6.0       | %    |  |      | 7.0       | % |  |   |          |   
|Sales growth  comparable commercial
    stores |  |                        | 4.8       | %    |  |      | 8.0       | % |  |   | 10.0      | % 
|Number of stores open (at end of year)          |  |                        | 1,114     |      |  |      | 1,109     |   |  |   | 1,130     |   

Retail sales represent sales to the
do-it-yourself customer. Commercial sales represent sales to
commercial accounts, including sales from stores without
commercial sales centers. We evaluate comparable (or same-store)
sales based on the change in net sales commencing after the time
a new or acquired store has been open for twelve months.
Therefore, sales for the first twelve months a new or acquired
store is open are

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not included in the comparable store calculation.
Stores that have been relocated are included in comparable store
sales.


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

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

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 2003 was
$748.2 million, or 47.4% of net sales, compared to
$700.2 million, or 46.5% of net sales for fiscal 2002.
Adjusting fiscal 2002 for the effects of EITF 02-16 would
have increased fiscal 2002 gross profit by
$19.2 million and gross profit as a percent of net sales to
47.7%, which, as a percent of net sales, is relatively
consistent with fiscal 2003. During fiscal 2003, we began
selling several new product offerings, which resulted in higher
average dollar transactions and higher gross profit dollars, but
carry slightly lower gross profit rates. Sales of these new
products allows us to further leverage our fixed store level
selling and operational costs. The lower margins on new products
are partially offset by our continued emphasis on lowering
acquisition costs of inventory in our existing product
categories.

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. Gross profit was
negatively impacted in fiscal 2001 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. 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 a class action lawsuit settlement and 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, secondary offering costs 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.

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Operating expenses increased by approximately
$33.9 million to $631.5 million, or 40.0% of net
sales, in fiscal 2003 from $597.7 million, or 39.7% of net
sales, in fiscal 2002. The following items impacted the
comparability of operating expenses for the fiscal years
indicated:



| |   |                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net advertising expense in fiscal 2002 included
    $19.2 million of vendor allowances, which reduced operating
    expenses and, as a result of EITF 02-16, similar allowances
    were classified in cost of sales during fiscal 2003.                                                                                                       
|
| |  | Store closing and other restructuring costs were
    $7.6 million higher during fiscal 2003 than in fiscal 2002,
    primarily as a result of charges associated with our change in
    closed store strategy during the fourth quarter of fiscal 2003
    (see Note 13 to the Consolidated Financial Statements).                             
|
| |  | During fiscal 2002, we incurred a charge for
    workers compensation of approximately $4.9 million
    reflecting increased loss reserves for claims incurred during
    plan years 1999 through 2001 and claims relating to the acquired
    PACCAR stores, in response to increasing medical and claims
    costs, primarily in California.
|
| |  | Operating expenses as a percent of sales continue
    to be favorably impacted by our ability to leverage our fixed
    operating costs over our increasing sales and our continued
    focus on expense controls.                                                                                                                             

Operating expenses decreased by approximately
$11.6 million to $597.7 million, or 39.7% of net
sales, in fiscal 2002 from $609.3 million, or 42.3% of net
sales, in fiscal 2001. Operating expenses in fiscal 2001 were
impacted by the following:



| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | Store closing and other restructuring charges of
    $21.5 million associated with our PEP.                            
|
| |  | Charges of $4.8 million for amortization of
    goodwill, which in subsequent fiscal years, is no longer
    amortized.
|
| |  | The settlement of a lawsuit for $2.0 million.                                                                          

Interest
Expense

Interest expense for fiscal 2003 decreased to
$51.0 million from $62.3 million for fiscal 2002. This
decrease primarily reflects a $7.0 million reduction in
interest expense due to lower average outstanding debt levels
throughout the year and a $3.1 million reduction in
interest expense as a result of lower average interest rates
due, in part, to our 2003 Refinancing.

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 2001 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. In
addition, during February 2002, we entered into an interest rate
swap agreement, which reduced our interest expense by
$2.4 million during fiscal 2002.



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

In January 2004, we completed a refinancing of
our debt that included the redemption of approximately 94% of
our outstanding $280.0 million 12% senior notes, the
issuance of $225.0 million 7% senior subordinated
notes and the amendment of our senior credit facility. In
conjunction with these transactions, we incurred a loss on debt
retirement of $45.2 million that included early redemption
premiums, the write-off of certain deferred financing fees and
other direct costs partially offset by a prorata adjustment
representing the unamortized gain on a terminated interest rate
swap. In June 2003, we refinanced our senior credit facility and
redeemed the remaining balance of our outstanding
11% senior subordinated notes. In conjunction with these
transactions, we incurred a loss on debt retirement of
approximately $4.3 million that included early redemption
premiums, the write-off of certain financing fees and other
direct costs. As a result of all of these transactions, we
recorded a total of $49.5 million in loss on debt
retirement during fiscal 2003.

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

During fiscal 2001, we used the proceeds from a
note offering together with borrowings under a
$300.0 million credit facility and the gross proceeds of a
$50.0 million private placement of 7% convertible
subordinated debentures to refinance our prior credit facility.
In conjunction with these transactions, we incurred a loss on
debt retirement of approximately $5.1 million for the
write-off of certain financing fees.



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

Income tax expense for fiscal 2003 was
$5.3 million or 33.0% of income before income taxes,
compared to $12.4 million or 36.3% for fiscal 2002. The
effective tax rate in fiscal 2003 is lower than the effective
tax rate in fiscal 2002 primarily due to an adjustment of tax
reserves in 2003 relating to a matter for which the statute of
limitations expired.

Income tax expense for fiscal 2002 was
$12.4 million or 36.3%, compared to an income tax benefit
of $10.9 million or 38.7% for fiscal 2001. The effective
tax rate in fiscal 2002 is lower than the effective tax rate
benefit in fiscal 2001 primarily as a result of 2002 state tax
credits.

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 two 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 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s Discussion and
Analysis of

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Financial Condition and Results of Operations for
further discussion regarding closed stores 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

As a part of the PEP, 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 2003 and 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 their remaining open for a portion of the
year. All stores were closed prior to the end of fiscal 2002.

Liquidity and Capital Resources



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

In January 2004, we completed a refinancing of
our debt that included the redemption of approximately 94% of
our outstanding $280.0 million 12% senior notes and
the issuance of $225.0 million 7% senior subordinated
notes. The new 7% senior subordinated notes mature on
January 15, 2014 and require semi-annual interest payments
on January 15 and July 15. We also amended our senior
credit facility, increasing the amount of our facility by
$75.0 million to $400.0 million, consisting of a
$255.0 million term loan and a $145.0 million
revolving credit facility. The new term loan is to be repaid in
eleven installments consisting of nine $1.275 million
dollar payments made semiannually beginning in June 2004. The
last two payments are for approximately $121.8 million each
in December 2008 and at maturity, June 2009. The revolving
credit facility matures in June 2008. At February 1, 2004
there were no borrowings under the revolving credit facility.
Interest accrues under the new credit facility at a variable
rate, which is a function of the spread over the Alternate Base
Rate (as defined in the agreement) or the Eurodollar Rate (as
defined in the agreement) depending on our borrowing decisions.
The senior credit facility that we amended was established in
June 2003 when we replaced our $300.0 million senior credit
facility with a new $325.0 million senior collateralized,
asset based credit facility consisting of a $200.0 million
term loan and a $125.0 million revolving credit commitment.
We used proceeds from the June 2003 senior credit facility to
redeem the remaining $9.5 million in aggregate principal
amount of our 11% senior subordinated notes, including
accrued and unpaid interest

22



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associated therewith. As of February 1,
2004, we were in compliance with the financial covenants and we
anticipate meeting all required covenants under our senior
credit facility during fiscal 2004.


In conjunction with the above mentioned
transactions, we applied the provisions of EITF 98-14
Debtors Accounting for Changes in Line of Credit or
Revolving Debt Arrangements for the revolving credit
portion of the credit facilities and EITF 96-19
Debtors Accounting for a Modification or Exchange of
Debt Instruments for the term portion of the credit
facilities. In total in 2003, we incurred a loss on debt
retirement of $49.5 million that included early redemption
premiums, the write-off of certain financing fees, a prorata
adjustment representing the unamortized fair market value swap
adjustment (as noted below) and other direct costs. The carrying
value of deferred debt issuance costs totaling
$10.3 million (as of the January 2004 transaction date) is
being amortized to interest expense over the corresponding life
of the respective portion of the senior credit facility or the
7% senior subordinated notes.

Our intention is to redeem the remaining
$14.9 million of the 12% senior notes in December 2004
when callable at 106% of their principal amount plus accrued and
unpaid interest. We anticipate that we will incur a charge
associated with this transaction of approximately
$0.9 million for the redemption premium, write-offs
associated with deferred financing fees and fair value
adjustment of the related interest rate swap that we entered
into in February 2002 as discussed below.

During February 2002, we entered into an interest
rate swap agreement that effectively converted the interest rate
payment obligation on $100.0 million of our 12% senior
notes to a floating rate in order to hedge the fair value of
such notes against potential movements in market interest rates.
On June 5, 2003, we terminated the swap agreement and
received in consideration thereof the sum of $6.0 million,
which represented the fair market value of the swap agreement on
that date. Upon redemption in January 2004 of approximately 94%
of the 12% senior notes associated with the swap agreement,
we wrote off approximately 94% of the unamortized fair market
value adjustment as an offset to the loss on debt retirement.
The remaining fair market value adjustment is currently
reflected on our consolidated balance sheet as part of our
long-term debt. This amount will be amortized as an offset to
interest expense through the maturity date of the
12% senior notes (June 15, 2006) or will be written
off upon their anticipated earlier redemption as described above.

On April 5, 2004, we entered into an
interest rate swap agreement to effectively convert
$100.0 million of our 7% senior subordinated notes due
2014 to a floating rate, set quarterly in arrears, equal to the
6 month LIBOR + 283 basis points. The agreement is for
the term of the notes. The hedge will be accounted for as a
fair value hedge; accordingly, the fair value of the
derivative and changes in the fair value of the underlying debt
will be reported on our consolidated balance sheet and
recognized in results of operations. Based upon our assessment
of effectiveness of the hedge, changes in the fair value of this
derivative and the underlying debt are not expected to result in
a material impact on net income.



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

Debt is an important part of our overall
capitalization. While we are still highly leveraged, our
outstanding debt continues to decline. Our outstanding debt
balance at the end of fiscal 2003 was $520.3 million, a
decrease of $150.5 million from our outstanding debt of
$670.8 million at the end of fiscal 2001. Our primary cash
requirements include working capital (primarily inventory),
interest on our debt and capital expenditures. We intend to
finance our cash requirements with cash flow from operations,
borrowings under our senior credit facility and short-term trade
credit relating to extended payment terms for inventory

23



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purchases. The following table outlines certain
key financial measures that impact our liquidity ($ in
thousands, except ratio):


|                                                               |  |             |         |             |  |             |         |  |  |   |         | 
|-------------------------------------------------------------- |  | ----------- | ------- | ----------- |  | ----------- | ------- |  |  | - | ------- | 
|                                                               |  | February 1, |         | February 2, |  | February 3,
|                                                               |  | 2004        |         | 2003        |  | 2002       
|                                                               |  |             |         |             |  |            
|Cash                                                           |  | $           | 37,221  |             |  | $           | 15,519  |  |  | $ | 16,084  | 
|Availability under revolving credit facility                   |  |             | 120,068 |             |  |             | 54,698  |  |  |   | 35,885  | 
|Working capital                                                |  |             | 574,862 |             |  |             | 528,749 |  |  |   | 498,914 | 
|Debt (including capital lease obligations) to
    equity ratio |  |             | 1.6     |             |  |             | 1.7     |  |  |   | 4.3     | 

Our cash balance has improved due to higher sales
and operating profit and reduced interest expense. The
availability under our senior credit facility has increased
$100.0 million as a result of our 2003 Refinancing. This
increase in availability is partially offset by the outstanding
loan balance of our senior credit facility being
$53.0 million higher in fiscal 2003 than in fiscal 2002
primarily due to the increase in the term portion of the credit
facility and $6.1 million of additional letter of credit
commitments relative to fiscal 2002. Finally, our borrowing
capacity was $24.5 million lower at February 3, 2003
due to borrowing base restrictions under our prior credit
facility.

At the end of fiscal 2003, we had net working
capital of $574.9 million, an increase of
$46.1 million, or 8.7%, compared to fiscal 2002. Working
capital increased primarily due to: (1) a
$21.7 million increase in cash due to our increasing sales
and profitability; (2) a $15.5 million increase in
inventories consistent with the acquisition of new product types
in support of our new merchandise programs; and (3) a
$15.6 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 $3.4 million increase in accounts payable
relating to increased inventory purchases; (2) a
$6.1 million increase in accrued payroll related expenses
primarily as a result of increased workers compensation
reserves; and (3) a $2.6 million increase in current
liabilities due to the required amortization payments on our new
term loan.

Analysis of Cash Flows



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

During fiscal 2003, net cash provided by
operating activities was $50.6 million compared to
$35.9 million of cash provided by operating activities
during fiscal 2002. The most significant components of the
change are: (1) a cash outflow of $39.2 million during
fiscal 2003 related to premiums paid to purchase debt;
(2) a cash inflow during fiscal 2003 of $6.0 million
associated with the termination of our interest rate swap
agreement; and (3) a decrease in cash used to support
working capital requirements as inventory growth offset by
accounts payable was $12.1 million during fiscal 2003
compared to $18.4 million during fiscal 2002.

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) 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 certain class action lawsuits.



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

Net cash used in investing activities totaled
$19.2 million in fiscal 2003, compared to $6.6 million
used in investing activities during fiscal 2002. Capital
expenditures increased to $16.1 million during fiscal 2003
as compared to $9.6 million during the comparable period in
fiscal 2002. The increase in capital expenditures relates to the
upgrade of certain information systems along with the purchase
of certain leased assets. In addition, during the fiscal 2002
period we received $2.2 million in proceeds from certain
fixed asset sales and $4.2 million in cash proceeds from
the sale of 13 stores in west Texas.

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##### Table of Contents



Net cash used in investing activities totaled
$6.6 million in 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; 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.

We have budgeted approximately $20.0 million
for capital expenditures for fiscal 2004, primarily for new
stores and general corporate purposes. We opened, relocated or
expanded 27 stores in fiscal 2003 and expect to open, relocate
or expand approximately 45 stores in fiscal 2004. 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

Net cash used in financing activities totaled
$9.7 million in fiscal 2003, compared to $29.9 million
used in financing activities during fiscal 2002. As a result of
our 2003 Refinancing, we generated $22.5 million of net
financing proceeds. In fiscal 2002, we sold approximately
6.9 million shares of our common stock in an underwritten
public offering and used the proceeds to redeem a portion of our
11% senior subordinated notes. The stock sales and note
redemption resulted in net cash proceeds of $6.4 million.
The most significant components of the change in financing
activities year over year relate to: (1) net cash received
from the 2003 Refinancing provided $16.1 million more in
cash than the sale of stock and note redemption in fiscal 2002;
(2) net payments on normal loan activity during fiscal 2003
were $7.0 million higher than net loan payments in fiscal
2002; (3) payments on capital lease obligations in fiscal
2003 were $6.0 million higher than in fiscal 2002 primarily
resulting from the buy-out of certain lease obligations; and
(4) stock option exercises in fiscal 2003 provided
$15.8 million of additional cash year over year. The
following table highlights the components of our 2003
Refinancing and its effect on our financing activities for
fiscal 2003 ($ in thousands):

|                                                           |                                           |             |          |                 |  |       |          |         |   |   |          |        |  
|---------------------------------------------------------- | ----------------------------------------- | ----------- | -------- | --------------- |  | ----- | -------- | ------- | - | - | -------- | ------ | -
|                                                           |                                           |             |          | Non-Refinancing |  |      
|                                                           |                                           | Refinancing |          | Activity        |  | Total
|                                                           |                                           |             |          |                 |  |      
|Borrowings under senior credit facility                    |                                           | $           | 455,000  |                 |  | $     | 106,000  |         |   | $ | 561,000  |       
|Payments under senior credit facility                      |                                           |             | (370,000 | )               |  |       | (138,000 | )       |   |   | (508,000 | )     
|Payment of debt issuance costs                             |                                           |             | (12,905  | )               |  |       |         |         |   |   | (12,905  | )     
|Retirement of balance of 11% senior
    subordinated notes |                                           |             | (9,547   | )               |  |       |         |         |   |   | (9,547   | )     
|Retirement of 94% of 12% senior notes                      |                                           |             | (265,090 | )               |  |       |         |         |   |   | (265,090 | )     
|Borrowings under 7% senior subordinated notes              |                                           |             | 225,000  |                 |  |       |         |         |   |   | 225,000  |       
|Payments on capital lease obligations                      |                                           |             |         |                 |  |       | (16,153  | )       |   |   | (16,153  | )     
|Proceeds from repayment of stockholder receivable          |                                           |             |         |                 |  |       | 269      |         |   |   | 269      |       
|Exercise of stock options                                  |                                           |             |         |                 |  |       | 15,955   |         |   |   | 15,955   |       
|Other financing activities                                 |                                           |             |         |                 |  |       | (224     | )       |   |   | (224     | )     
|                                                           |                                           |             |          |                 |  |       |          |         |   |   |          |       
|                                                           | Net cash provided by financing activities |             | $        | 22,458          |  |       | $        | (32,153 | ) |   | $        | (9,695 | )
|                                                           |                                           |             |          |                 |  |       |          |         |   |   |          |       

Net cash used in financing activities totaled
$29.9 million in fiscal 2002 compared to $23.0 million
provided by financing activities in fiscal 2001. In fiscal 2002,
we issued additional stock and used the proceeds to redeem a
portion of our 11% senior subordinated notes. Those fiscal
2002 transactions resulted in net cash proceeds of
$6.4 million. In fiscal 2001 we completed a refinancing
that provided $37.2 million in net cash proceeds. The most
significant components of the change in financing activities
year over year relate to: (1) net cash received from the
refinancing in fiscal 2001 provided $30.8 million more in
cash than the sale of stock and note redemption in fiscal 2002;
(2) net payments on normal loan activity during fiscal 2002
were $23.7 million higher than net loan payments in fiscal
2001.

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Off-Balance Sheet Arrangements and Contractual
Obligations

We lease our office and warehouse facilities, all
but one of our retail stores, and some of our equipment. Certain
of the equipment leases are classified as capital leases and,
accordingly, the equipment and related obligation are recorded
on our balance sheet. However, substantially all of our store
leases are operating leases with private landlords and provide
for monthly rental payments based on a contractual amount. The
majority of these lease agreements are for base lease periods
ranging from 10 to 20 years, with three to five renewal
options of five years each. Certain store leases also provide
for contingent rentals based upon a percentage of sales in
excess of a stipulated minimum. We believe that the long
duration of our store leases 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 4 of the Consolidated Financial Statements.

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

|                               |  |                        |           |        |  |           |         |           |  |         |         |  |  |   |         |  |  |   |         | 
|------------------------------ |  | ---------------------- | --------- | ------ |  | --------- | ------- | --------- |  | ------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                               |  |                       
|                               |  | Payments Due by Period
|                               |  |                       
|                               |  |                        |           | Within |  |           |         | After    
|Contractual obligation         |  | Total                  |           | 1 Year |  | 1-3 Years |         | 3-5 Years |  | 5 Years
|                               |  |                        |           |        |  |           |         |           |  |        
|Long-term debt(1)              |  | $                      | 495,013   |        |  | $         | 2,550   |           |  | $       | 20,113  |  |  | $ | 125,588 |  |  | $ | 346,762 | 
|Capital lease obligations      |  |                        | 30,994    |        |  |           | 13,287  |           |  |         | 13,025  |  |  |   | 2,816   |  |  |   | 1,866   | 
|Operating lease obligations(2) |  |                        | 746,797   |        |  |           | 119,034 |           |  |         | 205,891 |  |  |   | 153,788 |  |  |   | 268,084 | 
|                               |  |                        |           |        |  |           |         |           |  |         |         |  |  |   |         |  |  |   |         | 
|Total contractual obligations  |  | $                      | 1,272,804 |        |  | $         | 134,871 |           |  | $       | 239,029 |  |  | $ | 282,192 |  |  | $ | 616,712 | 
|                               |  |                        |           |        |  |           |         |           |  |         |         |  |  |   |         |  |  |   |         | 



---



|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | See Recent Events for discussion relating to our
    long-term debt.       
|   
|(2) | Operating lease obligations are not reduced to
    reflect sublease income.

Other commercial commitments consist of standby
letters of credit totaling $24.9 million at
February 1, 2004, all of which expire in 2004. Our
inventory purchase commitments are cancelable and therefore not
included in the above table.

Store Closures

We provide an allowance for estimated costs to be
incurred in connection with store closures. On an on-going
basis, store locations are reviewed and analyzed based on
several factors including market saturation, store
profitability, and store size and format. In addition, we
analyze sales trends and geographical and competitive factors to
determine the viability and future profitability of our store
locations. If a store location does not meet our required
projections, it is considered for closure. 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 in accordance with EITF 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a

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##### Table of Contents



Restructuring). No provision was made for
employee termination costs. For stores to be relocated, such
costs were recognized when an agreement for the new location had
been reached with a landlord and site plans met preliminary
municipal approvals. During the period that they remained open
for business, the rent and other operating expenses for the
stores to be closed continued to be reflected in normal
operating expenses.


In July 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities(
SFAS No. 146). SFAS No. 146 requires
companies to recognize the fair value of costs associated with
exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan.
Examples of costs covered by SFAS 146 include lease rental
and termination costs and certain employee severance costs that
are associated with a restructuring, discontinued operation,
store closing, or other exit or disposal activity. We have
applied SFAS No. 146 prospectively to exit or disposal
activities initiated or exit plans substantially modified after
December 31, 2002 as required.

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

As of February 1, 2004, we had a total of
169 store locations included in the allowance for store closing
costs. Of this total, 19 locations were vacant and 150 locations
were subleased. In addition to these stores, we had 58 service
centers of which 5 were vacant and 53 were subleased. Future
rent expense will be incurred through the expiration of the
non-cancelable leases, the longest of which runs through January
2018.

Activity in the allowance for store closings and
the related payments for the three fiscal years ended
February 1, 2004, including the PEP, is as follows ($ in
thousands):

|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |        |        |  
|-------------------------- | --------------------------------------------------------------------------------- | ------------------------ | ------ | ------ | ------ | ---- | ----- | ------ | ------ | - | ----- | ------ | ------ | -
|                           |                                                                                   |                         
|                           |                                                                                   | Fiscal Year             
|                           |                                                                                   |                         
|                           |                                                                                   | 2003                     |        | 2002   |        | 2001
|                           |                                                                                   |                          |        |        |        |     
|Balance, beginning of year |                                                                                   | $                        | 4,422  |        |        | $    | 6,771 |        |        | $ | 1,552 |       
|Store closing costs:       |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           | Adjustment of allowance to reflect change in exit
    strategy under SFAS No. 146 |                          |        | 12,203 |        |      |       |       |        |   |       |       |       
|                           | Provision for store closing costs                                                 |                          |        | 152    |        |      |       | 1,314  |        |   |       | 7,530  |       
|                           | Adjustments to prior plans                                                        |                          |        |       |        |      |       | (1,196 | )      |   |       | (1,536 | )     
|                           | Other revisions in estimates                                                      |                          |        | 314    |        |      |       | 4,908  |        |   |       | 8,638  |       
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           |                                                                                   | Store closing costs, net |        |        | 12,669 |      |       |        | 5,026  |   |       |        | 14,632 |  
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|Payments:                  |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           | Rent expense, net of sublease recoveries                                          |                          |        | (3,303 | )      |      |       | (5,030 | )      |   |       | (6,051 | )     
|                           | Occupancy and other expenses                                                      |                          |        | (859   | )      |      |       | (1,837 | )      |   |       | (2,839 | )     
|                           | Sublease commissions and buyouts                                                  |                          |        | (781   | )      |      |       | (508   | )      |   |       | (523   | )     
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           |                                                                                   | Total payments           |        |        | (4,943 | )    |       |        | (7,375 | ) |       |        | (9,413 | )
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|Balance, end of year       |                                                                                   | $                        | 12,148 |        |        | $    | 4,422 |        |        | $ | 6,771 |       
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       

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

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

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 had longer than anticipated vacancy periods as a result of
the economic slowdown.

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 
|                           |  |                               |   |        |  |            |    |        |  |           
|2001                       |  |                               | 9 |        |  |            | 46 |        |  |            | (2 | ) |  |  | (46 | ) |  |  | 7 | 
|2002                       |  |                               | 7 |        |  |            | 25 |        |  |            |   |   |  |  | (25 | ) |  |  | 7 | 
|2003                       |  |                               | 7 |        |  |            | 13 |        |  |            |   |   |  |  | (20 | ) |  |  |  | 

We expect net cash outflows for closed store
locations of approximately $4.3 million during fiscal 2004
and the remainder of cash outflows to primarily occur during
fiscal 2005, 2006 and 2007. 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 2004. We anticipate that
the majority of these closures will occur at the end of the
lease terms, resulting in minimal closed store costs. We
anticipate total cash outflows relating to these stores of
approximately $0.3 million, which includes estimated
incremental costs to be measured at fair value when incurred.

Factors Affecting Liquidity and Capital
Resources



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

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



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

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

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| |               
| | --------------
| | 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 1, 2004, our Consolidated Leverage
Ratio was 3.15 to 1.00; and our Interest Coverage Ratio was 3.60
to 1.00, both of which were in compliance with the related
covenants. We anticipate meeting all required covenants under
our credit agreement in fiscal 2004.

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

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



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

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

|                    |  |                |  |                   |  | 
|------------------- |  | -------------- |  | ----------------- |  | 
|Description of Debt |  | Moodys Rating |  | Standard & Poors |  | 
|                    |  |                |  |                   |  | 
|Term loan           |  | Ba2            |  | B+                |  | 
|Revolver            |  | Ba2            |  | B+                |  | 
|12% notes           |  | B2             |  | N/A               |  | 
|7% notes            |  | B2             |  | 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, which is 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.

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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
judgments.



| |                              
| | -----------------------------
| | 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,
cost 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 moderately decreasing, as
our increased size, financial performance and cash flows have
enabled us to take advantage of volume discounts and lower
product acquisition costs. Accordingly, it costs us less money
to replace inventory today than the LIFO balances carried for
similar inventory in our financial statements. 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 $17.3 million, $13.0 million
and $9.7 million for fiscal 2003, 2002 and 2001,
respectively.

As a result of the above, the replacement cost of
inventories including capitalization was $552.0 million and
$560.0 million at February 1, 2004 and
February 2, 2003, respectively, as compared to financial
statement carrying values of $666.3 million and
$650.8 million.

While financial statement 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 selling costs and a
normal profit margin to compute our NRV floor.

We evaluate the difference between carrying
balances and the NRV of our inventories at each balance sheet
reporting date. At February 1, 2004, we estimated that the
NRV of our inventories exceeded carrying balances by
approximately $10.0 million.

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 generally as inventory is sold. A few of our
agreements have several year terms thus requiring recognition
over an extended period.

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
$28.1 million and $24.2 million as of February 1,
2004 and February 2, 2003, 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 1, 2004 and
February 2, 2003 were approximately $34.5 million and
$33.0 million, respectively.



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

Included in our net deferred tax liability are
deferred tax assets of $25.2 million as of February 1,
2004, reflecting the benefit of federal and state tax loss
carryforwards approximating $65.6 million and
$34.8 million, which begin to expire in 2015 and 2008,
respectively. Realization is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards.
Utilization of certain of the net operating loss carryforwards
may be limited under Section 382 of the Internal Revenue
Code. Although realization is not assured, management believes
it is more likely than not that all of the deferred tax assets
will be realized. Accordingly, we believe that no valuation
allowance is required for deferred tax assets.

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

During the third quarter of fiscal 2003, we
received notification from the State of California Board of
Equalization (the Board) of an assessment for
approximately $1.2 million for sales tax and approximately
$0.6 million for related interest based on the Boards
audit findings for the tax periods of October 1997 through
September 2000. During this time period, we refunded the sales
tax associated with battery cores to customers who returned a
battery core to our stores. The Board believes that the sales
tax associated with the battery cores should have been remitted
to the taxing authority rather than refunded to the customers.
Based on the Boards position, we could be responsible for
the sales tax and related interest associated with this matter
for the audited periods of October 1997 through September 2000,
plus the additional unaudited time period through December 2002,
when we changed our business practices in this area. We believe
that we have a strong basis under California law for disputing
the payment of this assessment and filed a Petition for
Redetermination with the Board in October 2003. Our practices
through December 2002 relative to the handling of taxes on
battery cores had been consistent for over a decade, and it is
our position that our consistent treatment of battery core
charges, together with prior tax audits and tax auditors
written commentary concerning our handling of such charges,
permits us to rely upon precedent set in prior audits. Reliance
on prior audits is a position that is supportable under
California law. We also have other defenses, and intend to
vigorously defend our position with regard to this matter. We
have not recorded a liability for the potential sales tax and
related interest payments in our consolidated financial
statements.

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



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

We purchase third-party insurance for
workers compensation, automobile, product and general
liability claims that exceed a certain dollar threshold.
However, we are responsible for the payment of claims under
these insured limits. In estimating the obligation associated
with incurred losses, we utilize loss development factors
prepared by independent third-party actuaries. These development
factors utilize historical data to project the future
development of incurred losses. Loss estimates are adjusted
based upon actual claims settlements and reported claims. 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.
Our self-insurance reserves approximated $17.6 million and
$14.2 million at February 1, 2004 and February 2,
2003, respectively, and are included with current liabilities in
the accompanying Consolidated Balance Sheets.



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

If a store location does not meet our required
standards, it is considered for closure. We provide an allowance
for estimated costs to be incurred in connection with store
closures. We establish this allowance based on an assessment of
market conditions for rents and include assumptions for vacancy
periods and sublease rentals. In fiscal 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

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based on the brokers experience and
expertise; (2) estimates for occupancy expenses based on
historical averages and, in the case of real estate taxes,
subject to changes by taxing authorities; and (3) credit
adjusted discount rates. Accordingly, we continuously review
these assumptions and revise the reserve as necessary.


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

Recent Accounting Pronouncements

In June 2001, the FASB issued Statement of
Financial Accounting Standard (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. We adopted SFAS No. 143 on
February 3, 2003. The adoption of this standard did not
have an impact on our consolidated 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 addresses, among other
things, the reporting of debt extinguishments. We adopted
SFAS No. 145 on February 3, 2003. Consistent with
SFAS No. 145, any gain or loss on extinguishment of
debt that previously would have been classified as an
extraordinary item and does not meet the criteria in
APB Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions for
classification as an extraordinary item shall be presented as an
ordinary item before the provision for income taxes. Under
SFAS No. 145, prior periods must be reclassified to be
comparable. In fiscal 2003, we recorded a loss on debt
retirement of $49.5 million in our consolidated statement
of operations as a component of income before income taxes.
Accordingly, for fiscal 2002 and 2001, we reclassified pretax
amounts of $6.0 million and $5.1 million,
respectively, and presented them as losses on debt retirement in
our consolidated statements of operations as a component of
income before income taxes.

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. FIN
No. 45 disclosure requirements were effective for our year
ended February 2, 2003 and the initial recognition and
measurement provisions were applicable on a prospective basis to
guarantees issued or modified after February 2, 2003. 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

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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.


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). FIN No. 46 must be applied to
all the Companys existing relationships no later than the
first quarter of fiscal 2004. We are in process of completing
our analysis; however, we do not expect that
FIN No. 46 will have a material impact on our
consolidated financial statements.

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

For fiscal 2002 and fiscal 2001, vendor
allowances totaling approximately $19.2 million and
$20.0 million, respectively, were classified as a reduction
to advertising expense (in operating and administrative expense)
rather than as a reduction to cost of sales as currently
required by EITF 02-16. The following table adjusts the
amounts reported for cost of sales, gross margin and operating
and administrative expenses from fiscal 2002 and fiscal 2001 to
be comparable with current requirements of EITF 02-16:

|                                     |                                                            |                  |         |              |   |             |         |              |   |  |         |      |   |  |         |      |  
|------------------------------------ | ---------------------------------------------------------- | ---------------- | ------- | ------------ | - | ----------- | ------- | ------------ | - |  | ------- | ---- | - |  | ------- | ---- | -
|                                     |                                                            |                  |         |             
|                                     |                                                            | Fiscal 2002      |         | Fiscal 2001 
|                                     |                                                            |                  |         |             
|                                     |                                                            |                  |         | Adjusted for |   |             |         | Adjusted for
|                                     |                                                            | As Reported      |         | EITF 02-16   |   | As Reported |         | EITF 02-16  
|                                     |                                                            |                  |         |              |   |             |         |             
|                                     |                                                            |                 
|                                     |                                                            | ($ in thousands)
|Cost of sales                        |                                                            |                  | 806,461 |              |   |             | 787,277 |              |   |  | 790,585 |      |   |  | 770,583 |     
|                                     | Cost of sales, percent to sales                            |                  |         | 53.5         | % |             |         | 52.3         | % |  |         | 55.0 | % |  |         | 53.6 | %
|Gross profit                         |                                                            |                  | 700,185 |              |   |             | 719,369 |              |   |  | 648,000 |      |   |  | 668,002 |     
|                                     | Gross profit, percent to sales                             |                  |         | 46.5         | % |             |         | 47.7         | % |  |         | 45.0 | % |  |         | 46.4 | %
|Operating and administrative expense |                                                            |                  | 597,656 |              |   |             | 616,840 |              |   |  | 609,333 |      |   |  | 629,335 |     
|                                     | Operating and administrative expense, percent to
    sales |                  |         | 39.7         | % |             |         | 40.9         | % |  |         | 42.4 | % |  |         | 43.7 | %

The change in accounting principle had no impact
on cash flow. We do not expect EITF 02-16 to have a
material impact on our future net income.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This
Statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for
hedging activities under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging
Activities. This statement was effective for contracts
entered into or modified after June 30, 2003. The adoption
of this statement did not have an impact on our financial
statements.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity. The standard improves the accounting for certain
financial instruments that, under previous guidance, companies
could account for as equity. The standard requires that

33



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##### Table of Contents



those instruments be classified as liabilities in
statements of financial position. This standard was effective
for interim periods beginning after June 15, 2003. The
adoption of this standard did not have an impact on our
financial statements.






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

Financial market risks relating to our operations
result primarily from changes in interest rates. We hold no
securities for purposes of trading. Interest earned on our cash
equivalents as well as interest paid on our variable rate debt
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. On June 5, 2003,
we terminated this swap agreement and received in consideration
thereof the sum of $6.0 million. In January 2004, we
redeemed approximately 94% of the notes associated with this
swap agreement and recorded as an offset to our loss on debt
retirement, 94% of the unamortized balance of the amount
received for the rate swap termination. The remaining balance
will be amortized as an offset to interest expense through the
maturity date of the 12% senior notes (June 15, 2006)
or written off upon their earlier redemption. Our variable rate
debt relates to borrowings under our senior credit facility,
which is primarily vulnerable to movements in the LIBOR rate.
Our variable and fixed rate debt at February 1, 2004
consisted of the following ($ in thousands):

|                                 |                                                                                                                         |         |         |          |   |          |      |     |   |  |          |       | 
|-------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | ------- | ------- | -------- | - | -------- | ---- | --- | - |  | -------- | ----- | 
|                                 |                                                                                                                         |         |         | Average  |   |         
|                                 |                                                                                                                         |         |         | Interest |   | Fixed or
|Debt Facility                    |                                                                                                                         | Balance |         | Rate     |   | Variable
|                                 |                                                                                                                         |         |         |          |   |         
|Senior credit facility term loan |                                                                                                                         | $       | 255,000 |          |   |          | 4.2  | %   |   |  | Variable |      
|Senior credit facility revolver  |                                                                                                                         |         |        |          |   |          | 5.1  | %   |   |  | Variable |      
|12% senior notes                 |                                                                                                                         |         | 14,910  |          |   |          | 11.9 | %*  |   |  | Fixed    |      
|                                 | Unamortized original issue discount on
    12% senior notes                                                             |         |         | (149     | ) |          |      |     |   |  |          |       | 
|                                 | Fair market value of rate swap on
    $100.0 million of 12% senior
    notes (SFAS No. 133 hedge accounting adjustment) |         |         | 252      |   |          |      |     |   |  |          |       | 
|                                 | 7% senior subordinated notes                                                                                            |         |         | 225,000  |   |          |      | 7.0 | % |  |          | Fixed | 
|                                 |                                                                                                                         |         |         |          |   |          |      |     |   |  |          |      
|Total debt (less capital leases) |                                                                                                                         | $       | 495,013 |          |   |          |      |     |   |  |          |      
|                                 |                                                                                                                         |         |         |          |   |          |      |     |   |  |          |      



---



|  |                                                                                                                                                                                                                                   
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The coupon rate of these notes is 12%; however
    the effective interest rate is 11.9% due to amortization of the
    original issue discount net of the reduction in interest expense
    resulting from the interest rate swap.

At February 1, 2004, 52% of our outstanding
debt was at variable interest rates and 48% of our outstanding
debt was at fixed interest rates. With $255.0 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
$2.6 million change in our annual interest expense. This
estimate assumes that our debt balance remains constant for an
annual period and the interest rate change occurs at the
beginning of the period.

During April 2004, we entered into an interest
rate swap agreement to convert $100.0 million of our
7% Senior Notes due 2014 to a floating rate, set quarterly
in arrears, equal to the 6 month LIBOR + 283 basis
points. The agreement is for the term of the notes. The hedge
will be accounted for and recognized in results of operations as
a fair value hedge; accordingly, the fair value of
the derivative and changes in the fair value of the underlying
debt will be reported on our balance sheet. Based upon our
assessment of effectiveness of the hedge, changes in the fair
value of this derivative and the underlying debt are not
expected to result in a material impact on net income. Assuming
the interest rate swap was in effect at the end of fiscal 2003,
approximately 72% of our outstanding debt would have been
variable. A 1% change in the LIBOR rate would result in a $3.6
million change in our annual interest expense.





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

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##### Table of Contents



Report of Independent Auditors

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 1, 2004
and February 2, 2003, and the results of their operations
and their cash flows for each of the three fiscal years in the
period ended February 1, 2004 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 vendor allowances effective February 3, 2003
and its method of accounting for goodwill effective
February 4, 2002.

/s/ PRICEWATERHOUSECOOPERS LLP

Phoenix, Arizona

March 18, 2004, except as to Note 19,


for which the date is April 5, 2004


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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |            |  
|---------------------------------- | ------------------------------------------------- | ----------------------------------------------- | --------- | ----------- |  | ----------- | --------- | ---------- |  | - | --------- | ---------- | -
|                                   |                                                   |                                                
|                                   |                                                   | Fiscal Year Ended                              
|                                   |                                                   |                                                
|                                   |                                                   | February 1,                                     |           | February 2, |  | February 3,
|                                   |                                                   | 2004                                            |           | 2003        |  | 2002       
|                                   |                                                   |                                                 |           |             |  |            
|                                   |                                                   |                                                
|                                   |                                                   | (in thousands, except share and per share data)
|Net sales                          |                                                   | $                                               | 1,578,056 |             |  | $           | 1,506,646 |            |  | $ | 1,438,585 |           
|Cost of sales                      |                                                   |                                                 | 829,900   |             |  |             | 806,461   |            |  |   | 790,585   |           
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|Gross profit                       |                                                   |                                                 | 748,156   |             |  |             | 700,185   |            |  |   | 648,000   |           
|Other costs and expenses:          |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|                                   | Operating and administrative                      |                                                 |           | 618,879     |  |             |           | 592,630    |  |   |           | 580,134    |  
|                                   | Store closing costs and other restructuring costs |                                                 |           | 12,669      |  |             |           | 5,026      |  |   |           | 22,392     |  
|                                   | Legal settlement                                  |                                                 |           |            |  |             |           |           |  |   |           | 2,000      |  
|                                   | Goodwill amortization                             |                                                 |           |            |  |             |           |           |  |   |           | 4,807      |  
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|Operating profit                   |                                                   |                                                 | 116,608   |             |  |             | 102,529   |            |  |   | 38,667    |           
|Interest expense                   |                                                   |                                                 | 50,991    |             |  |             | 62,261    |            |  |   | 61,608    |           
|Loss on debt retirement            |                                                   |                                                 | 49,494    |             |  |             | 6,008     |            |  |   | 5,101     |           
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|Income (loss) before income taxes  |                                                   |                                                 | 16,123    |             |  |             | 34,260    |            |  |   | (28,042   | )         
|Income tax expense (benefit)       |                                                   |                                                 | 5,326     |             |  |             | 12,448    |            |  |   | (10,850   | )         
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|Net income (loss)                  |                                                   | $                                               | 10,797    |             |  | $           | 21,812    |            |  | $ | (17,192   | )         
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|Basic earnings (loss) per share:   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|                                   | Net income (loss) per share                       |                                                 | $         | 0.24        |  |             | $         | 0.54       |  |   | $         | (0.61      | )
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|                                   | Shares used in computing per share amounts        |                                                 |           | 45,657,710  |  |             |           | 40,634,522 |  |   |           | 28,390,582 |  
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|Diluted earnings (loss) per share: |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|                                   | Net income (loss) per share                       |                                                 | $         | 0.23        |  |             | $         | 0.54       |  |   | $         | (0.61      | )
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           
|                                   | Shares used in computing per share amounts        |                                                 |           | 45,963,555  |  |             |           | 40,751,802 |  |   |           | 28,390,582 |  
|                                   |                                                   |                                                 |           |             |  |             |           |            |  |   |           |           

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 1,                                |         | February 2,
|                                                                      |                                                                                                                                                                                         | 2004                                       |         | 2003       
|                                                                      |                                                                                                                                                                                         |                                            |         |            
|                                                                      |                                                                                                                                                                                         |                                           
|                                                                      |                                                                                                                                                                                         | (in thousands, except share data)         
|ASSETS                                                               
|Cash and cash equivalents                                             |                                                                                                                                                                                         | $                                          | 37,221  |             |           | $ | 15,519  |         
|Receivables, net of allowances of $1,577 and
    $2,736, respectively |                                                                                                                                                                                         |                                            | 136,523 |             |           |   | 120,966 |         
|Inventories                                                           |                                                                                                                                                                                         |                                            | 666,263 |             |           |   | 650,783 |         
|Deferred income taxes                                                 |                                                                                                                                                                                         |                                            | 787     |             |           |   |        |         
|Prepaid expenses and other current assets                             |                                                                                                                                                                                         |                                            | 21,123  |             |           |   | 14,871  |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total current assets                       |         |             | 861,917   |   |         |          | 802,139   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Property and equipment, net                                           |                                                                                                                                                                                         |                                            | 124,813 |             |           |   | 130,745 |         
|Leasehold interests, net                                              |                                                                                                                                                                                         |                                            | 12,278  |             |           |   | 14,017  |         
|Goodwill                                                              |                                                                                                                                                                                         |                                            | 127,069 |             |           |   | 127,069 |         
|Other assets, net                                                     |                                                                                                                                                                                         |                                            | 27,388  |             |           |   | 27,379  |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total assets                               |         | $           | 1,153,465 |   |         | $        | 1,101,349 | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY                             
|Accounts payable                                                      |                                                                                                                                                                                         | $                                          | 177,150 |             |           | $ | 173,757 |         
|Accrued payroll and related expenses                                  |                                                                                                                                                                                         |                                            | 47,498  |             |           |   | 41,421  |         
|Accrued expenses and other current liabilities                        |                                                                                                                                                                                         |                                            | 49,617  |             |           |   | 41,602  |         
|Deferred income taxes                                                 |                                                                                                                                                                                         |                                            |        |             |           |   | 6,006   |         
|Current maturities of amounts due under Senior
    Credit Facility    |                                                                                                                                                                                         |                                            | 2,550   |             |           |   |        |         
|Current maturities of capital lease obligations                       |                                                                                                                                                                                         |                                            | 10,240  |             |           |   | 10,604  |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total current liabilities                  |         |             | 287,055   |   |         |          | 273,390   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Long-term debt                                                        |                                                                                                                                                                                         |                                            | 492,463 |             |           |   | 492,607 |         
|Obligations under capital leases                                      |                                                                                                                                                                                         |                                            | 15,017  |             |           |   | 21,756  |         
|Deferred income taxes                                                 |                                                                                                                                                                                         |                                            | 13,121  |             |           |   | 3,464   |         
|Other liabilities                                                     |                                                                                                                                                                                         |                                            | 14,251  |             |           |   | 7,950   |         
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total non-current liabilities              |         |             | 534,852   |   |         |          | 525,777   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Commitments and contingencies                                         |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|Stockholders equity:                                                 |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      | Common stock, $0.01 par value,
    58,000,000 shares authorized, 46,497,936 and
    45,148,230 shares issued and outstanding at
    February 1, 2004 and February 2, 2003, respectively |                                            |         | 465         |           |   |         | 452      |          
|                                                                      | Additional paid-in capital                                                                                                                                                              |                                            |         | 466,576     |           |   |         | 448,279  |          
|                                                                      | Stockholder receivable                                                                                                                                                                  |                                            |         | (73         | )         |   |         | (342     | )        
|                                                                      | Accumulated deficit                                                                                                                                                                     |                                            |         | (135,410    | )         |   |         | (146,207 | )        
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total stockholders equity                 |         |             | 331,558   |   |         |          | 302,182   | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         
|                                                                      |                                                                                                                                                                                         | Total liabilities and stockholders equity |         | $           | 1,153,465 |   |         | $        | 1,101,349 | 
|                                                                      |                                                                                                                                                                                         |                                            |         |             |           |   |         |         

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 February 4, 2001                      |  |                                   | 27,841,178 |            |  | $           | 278 |            |  | $            | 291,063 |         |  | $      | (745 | ) |  | $ | (156 | ) |  | $ | (150,827 | ) |  | $ | 139,613 |  
|Amortization of deferred compensation             |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   | 156  |   |  |   |         |   |  |   | 156     |  
|Conversion of note, 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 |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Exercise of options                               |  |                                   | 1,348,279  |            |  |             | 13  |            |  |              | 15,942  |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 15,955  |  
|Tax benefit relating to stock option exercises    |  |                                   |           |            |  |             |    |            |  |              | 2,333   |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 2,333   |  
|Recovery of stockholder receivable                |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        | 269  |   |  |   |     |   |  |   |         |   |  |   | 269     |  
|Issuances of restricted stock                     |  |                                   | 1,427      |            |  |             |    |            |  |              | 22      |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 22      |  
|Net income                                        |  |                                   |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | 10,797   |   |  |   | 10,797  |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 1, 2004                      |  |                                   | 46,497,936 |            |  | $           | 465 |            |  | $            | 466,576 |         |  | $      | (73  | ) |  | $ |     |   |  | $ | (135,410 | ) |  | $ | 331,558 |  
|                                                  |  |                                   |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  

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 1,                                                                                            |                                                                 | February 2,                                                         |   | February 3,
|                                                      |                                                                           | 2004                                                                                                   |                                                                 | 2003                                                                |   | 2002       
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |            
|                                                      |                                                                           |                                                                                                       
|                                                      |                                                                           | (in thousands)                                                                                        
|Cash flows from operating activities:                 |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Net income (loss)                                                         |                                                                                                        | $                                                               | 10,797                                                              |   |             | $       | 21,812   |   |        | $       | (17,192  | )
|                                                      |                                                                           | Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities: |                                                                 |                                                                     |   |             |         |          |   |        |         |          |   |        
|                                                      |                                                                           |                                                                                                        | Depreciation and amortization of property and
    equipment     |                                                                     |   | 30,290      |         |          |   | 31,746 |         |          |   | 32,799  |        
|                                                      |                                                                           |                                                                                                        | Amortization of deferred financing costs                        |                                                                     |   | 3,961       |         |          |   | 5,292  |         |          |   | 3,741   |        
|                                                      |                                                                           |                                                                                                        | Amortization of other items                                     |                                                                     |   | 3,943       |         |          |   | 3,820  |         |          |   | 8,347   |        
|                                                      |                                                                           |                                                                                                        | Accretion of debt discount                                      |                                                                     |   | 906         |         |          |   | 902    |         |          |   | 98      |        
|                                                      |                                                                           |                                                                                                        | Provision for write down of inventory                           |                                                                     |   |            |         |          |   |       |         |          |   | 17,292  |        
|                                                      |                                                                           |                                                                                                        | Losses on disposal of property, equipment and
    other assets  |                                                                     |   | 722         |         |          |   | 901    |         |          |   | 8,133   |        
|                                                      |                                                                           |                                                                                                        | Premium paid on early retirement of debt                        |                                                                     |   | (39,176     | )       |          |   | (4,368 | )       |          |   |        |        
|                                                      |                                                                           |                                                                                                        | Loss on debt retirement                                         |                                                                     |   | 49,494      |         |          |   | 6,008  |         |          |   | 5,101   |        
|                                                      |                                                                           |                                                                                                        | Loss on sale of stores                                          |                                                                     |   |            |         |          |   | 847    |         |          |   |        |        
|                                                      |                                                                           |                                                                                                        | Deferred income taxes                                           |                                                                     |   | 2,864       |         |          |   | 12,927 |         |          |   | (10,869 | )      
|                                                      |                                                                           |                                                                                                        | Amortization of long term debt fair market value
    adjustment |                                                                     |   | (1,233      | )       |          |   |       |         |          |   |        |        
|                                                      |                                                                           |                                                                                                        | Tax benefit relating to stock option exercises                  |                                                                     |   | 2,333       |         |          |   |       |         |          |   |        |        
|                                                      |                                                                           |                                                                                                        | Proceeds from interest rate swap termination                    |                                                                     |   | 6,031       |         |          |   |       |         |          |   |        |        
|                                                      |                                                                           |                                                                                                        | Change in operating assets and liabilities:                     |                                                                     |   |             |         |          |   |        |         |          |   |         |        
|                                                      |                                                                           |                                                                                                        |                                                                 | Receivables                                                         |   |             | (15,557 | )        |   |        | (36,175 | )        |   |         | (15,067 | )
|                                                      |                                                                           |                                                                                                        |                                                                 | Inventories                                                         |   |             | (15,480 | )        |   |        | (34,827 | )        |   |         | (16,316 | )
|                                                      |                                                                           |                                                                                                        |                                                                 | Prepaid expenses and other current assets                           |   |             | (6,252  | )        |   |        | 4,976   |          |   |         | (771    | )
|                                                      |                                                                           |                                                                                                        |                                                                 | Accounts payable                                                    |   |             | 3,393   |          |   |        | 16,473  |          |   |         | (32,024 | )
|                                                      |                                                                           |                                                                                                        |                                                                 | Accrued payroll, accrued expenses and other
    current liabilities |   |             | 13,266  |          |   |        | 6,715   |          |   |         | 9,240   |  
|                                                      |                                                                           |                                                                                                        |                                                                 | Other operating activities                                          |   |             | 312     |          |   |        | (1,130  | )        |   |         | (426    | )
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                        |                                                                 | Net cash provided by (used in) operating
    activities             |   |             | 50,614  |          |   |        | 35,919  |          |   |         | (7,914  | )
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash flows from investing activities:                 |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Capital expenditures                                                      |                                                                                                        |                                                                 | (16,056                                                             | ) |             |         | (9,573   | ) |        |         | (12,200  | )
|                                                      | Proceeds from sale of property and equipment and
    assets held for sale |                                                                                                        |                                                                 | 26                                                                  |   |             |         | 2,188    |   |        |         | 5,454    |  
|                                                      | Proceeds from sale of stores                                              |                                                                                                        |                                                                 |                                                                    |   |             |         | 4,217    |   |        |         |         |  
|                                                      | Other investing activities                                                |                                                                                                        |                                                                 | (3,187                                                              | ) |             |         | (3,384   | ) |        |         | (3,397   | )
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                        |                                                                 | Net cash used in investing activities                               |   |             | (19,217 | )        |   |        | (6,552  | )        |   |         | (10,143 | )
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash flows from financing activities:                 |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Borrowings under senior credit facility                                   |                                                                                                        |                                                                 | 561,000                                                             |   |             |         | 297,000  |   |        |         | 538,000  |  
|                                                      | Payments under senior credit facility                                     |                                                                                                        |                                                                 | (508,000                                                            | ) |             |         | (322,000 | ) |        |         | (837,480 | )
|                                                      | Payment of debt issuance costs                                            |                                                                                                        |                                                                 | (12,905                                                             | ) |             |         | (1,483   | ) |        |         | (22,019  | )
|                                                      | Issuance of convertible subordinated notes and
    debentures             |                                                                                                        |                                                                 |                                                                    |   |             |         |         |   |        |         | 80,000   |  
|                                                      | Borrowings under 12% senior notes                                         |                                                                                                        |                                                                 |                                                                    |   |             |         |         |   |        |         | 275,317  |  
|                                                      | Retirement of 12% senior notes                                            |                                                                                                        |                                                                 | (265,090                                                            | ) |             |         |         |   |        |         |         |  
|                                                      | Borrowings under 7% senior subordinated notes                             |                                                                                                        |                                                                 | 225,000                                                             |   |             |         |         |   |        |         |         |  
|                                                      | Partial retirement of 11% senior
    subordinated notes                   |                                                                                                        |                                                                 | (9,547                                                              | ) |             |         | (71,703  | ) |        |         |         |  
|                                                      | Payments on capital lease obligations                                     |                                                                                                        |                                                                 | (16,153                                                             | ) |             |         | (10,167  | ) |        |         | (10,149  | )
|                                                      | Issuance of common stock in public offering                               |                                                                                                        |                                                                 |                                                                    |   |             |         | 82,540   |   |        |         |         |  
|                                                      | Underwriters discount and other offering costs                            |                                                                                                        |                                                                 |                                                                    |   |             |         | (4,398   | ) |        |         |         |  
|                                                      | Proceeds from exercise of stock options                                   |                                                                                                        |                                                                 | 15,955                                                              |   |             |         | 168      |   |        |         | 4        |  
|                                                      | Loan to stockholders                                                      |                                                                                                        |                                                                 |                                                                    |   |             |         | (125     | ) |        |         |         |  
|                                                      | Proceeds from repayment of stockholder receivable                         |                                                                                                        |                                                                 | 269                                                                 |   |             |         | 334      |   |        |         | 29       |  
|                                                      | Other financing activities                                                |                                                                                                        |                                                                 | (224                                                                | ) |             |         | (98      | ) |        |         | (692     | )
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                        |                                                                 | Net cash provided by (used in) financing
    activities             |   |             | (9,695  | )        |   |        | (29,932 | )        |   |         | 23,010  |  
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      |                                                                           |                                                                                                        |                                                                 | Net increase (decrease) in cash and cash
    equivalents            |   |             | 21,702  |          |   |        | (565    | )        |   |         | 4,953   |  
|Cash and cash equivalents, beginning of period        |                                                                           |                                                                                                        | 15,519                                                          |                                                                     |   |             | 16,084  |          |   |        | 11,131  |         
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash and cash equivalents, end of period              |                                                                           | $                                                                                                      | 37,221                                                          |                                                                     |   | $           | 15,519  |          |   | $      | 16,084  |         
|                                                      |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Supplemental Disclosures of Cash Flow
    Information |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|Cash paid during the year for:                        |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Interest                                                                  |                                                                                                        |                                                                 | 51,581                                                              |   |             |         | 57,315   |   |        |         | 56,776   |  
|                                                      | Income taxes                                                              |                                                                                                        |                                                                 | 2,166                                                               |   |             |         | 383      |   |        |         |         |  
|Non-cash investing and financing activities:          |                                                                           |                                                                                                        |                                                                 |                                                                     |   |             |         |          |   |        |         |         
|                                                      | Fixed assets acquired under capital leases                                |                                                                                                        |                                                                 | 9,050                                                               |   |             |         | 4,450    |   |        |         | 8,075    |  
|                                                      | 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 1, 2004, CSK Auto Corporation had no business
activity other than its investment in CSK Auto, Inc.
(Auto), a wholly-owned subsidiary. On a consolidated
basis, CSK Auto Corporation and its subsidiaries are referred to
herein as the Company, we,
us or our.

Auto is a specialty retailer of automotive
aftermarket parts and accessories. At February 1, 2004, we
operated 1,114 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.

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



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

As more fully explained in Note 8, 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. CSK Auto Corporation 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.

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



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

Our fiscal year end is on the Sunday nearest to
January 31 of the following calendar year. The fiscal year
ended February 1, 2004 (fiscal 2003) and the fiscal year
ended February 2, 2003 (fiscal 2002) and the fiscal year
ended February 3, 2002 (fiscal 2001) each consisted of
52 weeks.



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

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

40



---



##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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



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

Cash equivalents consist 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 16.



| |                                     
| | ------------------------------------
| | 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. Changes in the fair value of the swap
and the hedged item are recognized in earnings. Our swap meets
the criteria to assume no hedge ineffectiveness. The fair value
of our derivative was determined from current market prices. See
Note 9.



| |            
| | -----------
| | 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 1,
2004, we had cash and cash equivalents on deposit with a major
financial institution that were in excess of FDIC insured
limits. Historically, we have not experienced any loss of our
cash and cash equivalents due to such concentration of credit
risk.

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



| |                  
| | -----------------
| | Vendor Allowances

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 generally as inventory is sold. Certain of
our agreements have several year terms, thus requiring
recognition over an extended period.

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
$28.1 million and $24.2 million as of February 1,
2004 and February 2, 2003, respectively.

In March 2003, the Emerging Issues Task Force
(EITF) of the Financial Accounting Standards Board
(FASB), reached consensus on certain matters
discussed in EITF 02-16, Accounting by a Customer
(including a Reseller) for Certain Consideration Received from a
Vendor. EITF 02-16 states that allowances
provided by our vendors are presumed to be a reduction in the
costs of purchasing inventories (to be recognized in inventory
and cost of sales),

41



---



##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

except for that portion that is a reimbursement
for costs incurred by us to sell the vendors products. In
order to qualify as a reimbursement, the costs must be specific,
identifiable and incremental, to be recognized as a reduction to
operating and administrative expenses. Under previous accounting
guidance, we accounted for all non-performance based vendor
allowances as a reduction of inventory cost and allocated
performance based vendor allowances as a reduction of
advertising expense or cost of goods sold, as appropriate, in
the period the expense was incurred. During the first quarter of
fiscal 2003, we adopted the provisions of EITF 02-16 and
implemented a policy of considering all cooperative advertising
arrangements and other vendor allowances to be a reduction of
product costs, unless we are specifically required to
substantiate costs incurred to the vendor and do so in the
normal course of business.

For fiscal 2002 and 2001, vendor allowances
totaling approximately $19.2 million and
$20.0 million, respectively, were classified as a reduction
to advertising expense (in operating and administrative expense)
rather than as a reduction to cost of sales as currently
required by EITF 02-16. The following table adjusts the
amounts reported for cost of sales, gross margin and operating
and administrative expenses from fiscal years 2002 and 2001 to
be comparable with current requirements of EITF 02-16:

|                                     |                                                            |                  |         |                  |   |             |         |              |   |  |         |      |   |  |         |      |  
|------------------------------------ | ---------------------------------------------------------- | ---------------- | ------- | ---------------- | - | ----------- | ------- | ------------ | - |  | ------- | ---- | - |  | ------- | ---- | -
|                                     |                                                            |                  |         |                 
|                                     |                                                            | Fiscal Year 2002 |         | Fiscal Year 2001
|                                     |                                                            |                  |         |                 
|                                     |                                                            |                  |         | Adjusted for     |   |             |         | Adjusted for
|                                     |                                                            | As Reported      |         | EITF 02-16       |   | As Reported |         | EITF 02-16  
|                                     |                                                            |                  |         |                  |   |             |         |             
|                                     |                                                            |                 
|                                     |                                                            | ($ in thousands)
|Cost of sales                        |                                                            |                  | 806,461 |                  |   |             | 787,277 |              |   |  | 790,585 |      |   |  | 770,583 |     
|                                     | Cost of sales, percent to sales                            |                  |         | 53.5             | % |             |         | 52.3         | % |  |         | 55.0 | % |  |         | 53.6 | %
|Gross profit                         |                                                            |                  | 700,185 |                  |   |             | 719,369 |              |   |  | 648,000 |      |   |  | 668,002 |     
|                                     | Gross profit, percent to sales                             |                  |         | 46.5             | % |             |         | 47.7         | % |  |         | 45.0 | % |  |         | 46.4 | %
|Operating and administrative expense |                                                            |                  | 597,656 |                  |   |             | 616,840 |              |   |  | 609,333 |      |   |  | 629,335 |     
|                                     | Operating and administrative expense, percent to
    sales |                  |         | 39.7             | % |             |         | 40.9         | % |  |         | 42.4 | % |  |         | 43.7 | %

The change in accounting principle had no impact
on cash flow.



| |                              
| | -----------------------------
| | 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,
cost 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 moderately decreasing, as
our increased size, financial performance and cash flows have
enabled us to take advantage of volume discounts and lower
product acquisition costs. Accordingly, it costs us less money
to replace inventory today than the LIFO balances carried for
similar inventory in our financial statements. 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 $17.3 million, $13.0 million
and $9.7 million for fiscal 2003, 2002 and 2001,
respectively.

As a result of the above, the replacement cost of
inventories including capitalization was $552.0 million and
$560.0 million at February 1, 2004 and
February 2, 2003, respectively, as compared to financial
statement carrying values of $666.3 million and
$650.8 million.

While financial statement 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 selling costs and a
normal profit margin to compute our NRV floor.

42



---



##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

We evaluate the difference between carrying
balances and the NRV of our inventories at each balance sheet
reporting date. At February 1, 2004, we estimated that the
NRV of our inventories exceeded carrying balances by
approximately $10.0 million.

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 1, 2004 and
February 2, 2003 were approximately $34.5 million and
$33.0 million, respectively.



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

Property and equipment, including purchased
software, are recorded at cost. Depreciation and amortization
are computed for financial reporting purposes utilizing the
straight-line method over the estimated useful lives of the
related assets, which range from 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 and equipment is retired or sold, the net book
value of the asset, reduced by any proceeds, is charged to gain
or loss.



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

Certain internal software development costs are
capitalized and amortized over the life of the related software.
Amounts capitalized during fiscal 2003, 2002 and 2001 were
$3.3 million, $2.8 million and $3.0 million,
respectively. Accumulated amortization as of February 1,
2004 and February 2, 2003 was $6.4 million and
$4.3 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 7 for the impact of this change on the statement of
operations.

Other intangible assets consist of 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 7 for the impact of this amortization on the statement
of operations.



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

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



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

We provide an allowance for estimated costs to be
incurred in connection with store closures and losses on the
disposal of store-related assets, which is net of anticipated
sublease income. Prior to January 1, 2003, such costs were
recognized when a store was specifically identified, costs could
be estimated and closure was planned to be completed within the
next twelve months. On January 1, 2003, we adopted the
provisions of SFAS No. 146, Accounting for Costs
Associated with Exit of Disposal Activities. See
Note 13.

43



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



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

Advertising costs are expensed as incurred.
Amounts due under vendor cooperative advertising agreements are
recorded as receivables. Advertising expense for fiscal 2003,
2002 and 2001 totaled $48.0 million, $25.6 million and
$20.4 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 project the future
development of incurred losses. Loss estimates are adjusted
based upon actual claims settlements and reported claims. Our
self-insurance reserves approximated $17.6 million and
$14.2 million at February 1, 2004 and February 2,
2003, respectively, and are included with current liabilities in
the accompanying Consolidated Balance Sheets.



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

Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax
basis of assets and liabilities and their financial reporting
amounts (temporary differences) at each year-end based on
enacted tax laws and statutory rates applicable to the period in
which the temporary differences are expected to affect taxable
income. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be
realized. Income tax expense includes both taxes payable for the
period and the change during the period in deferred tax assets
and liabilities. Income tax expense reflects our best estimates
and assumptions regarding, among other things, the level of
future taxable income, interpretation of the tax laws, and tax
planning. Future changes in tax laws, changes in projected
levels of taxable income, and tax planning could affect the
effective tax rate and tax balances recorded.



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

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

We have stock-based employee compensation plans,
which are described more fully in Note 11. We continue to
apply the recognition and measurement provisions of Accounting
Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees and related
interpretations in accounting for those plans. No material
stock-based employee compensation expense is reflected in net
income (loss) for fiscal 2003, 2002, or 2001 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

44



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                                                                                                                                   |             |             |        |      |  |      |        |      |  |   |         |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | ------ | ---- |  | ---- | ------ | ---- |  | - | ------- | ----- | -
|                                                                                                                                                   |             |            
|                                                                                                                                                   |             | Fiscal Year
|                                                                                                                                                   |             |            
|                                                                                                                                                   |             | 2003        |        | 2002 |  | 2001
|                                                                                                                                                   |             |             |        |      |  |     
|Net income (loss)  as reported                                                                                                                    |             | $           | 10,797 |      |  | $    | 21,812 |      |  | $ | (17,192 | )    
|Less: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related income taxes |             |             | (734   | )    |  |      | (3,438 | )    |  |   | (2,331  | )    
|                                                                                                                                                   |             |             |        |      |  |      |        |      |  |   |         |      
|Net income (loss)  pro forma                                                                                                                      |             | $           | 10,063 |      |  | $    | 18,374 |      |  | $ | (19,523 | )    
|                                                                                                                                                   |             |             |        |      |  |      |        |      |  |   |         |      
|Earnings (loss) per share  basic:                                                                                                                 |             |             |        |      |  |      |        |      |  |   |         |      
|                                                                                                                                                   | As reported |             | $      | 0.24 |  |      | $      | 0.54 |  |   | $       | (0.61 | )
|                                                                                                                                                   | Pro forma   |             |        | 0.22 |  |      |        | 0.45 |  |   |         | (0.69 | )
|Earnings (loss) per share  diluted:                                                                                                               |             |             |        |      |  |      |        |      |  |   |         |      
|                                                                                                                                                   | As reported |             | $      | 0.23 |  |      | $      | 0.54 |  |   | $       | (0.61 | )
|                                                                                                                                                   | Pro forma   |             |        | 0.22 |  |      |        | 0.45 |  |   |         | (0.69 | )

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
|                         |  |            
|                         |  | 2003        |              | 2002 |  | 2001
|                         |  |             |              |      |  |     
|Dividend yield           |  |             | 0%           |      |  |      | 0%           |  |  |  | 0%           | 
|Risk free interest rate  |  |             | 2.54 - 3.25% |      |  |      | 3.04 - 4.56% |  |  |  | 4.15 - 4.92% | 
|Expected life of options |  |             | 6 years      |      |  |      | 6 years      |  |  |  | 6 years      | 
|Expected volatility      |  |             | 22% - 32%    |      |  |      | 46%          |  |  |  | 55%          | 



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

SFAS No. 128 Earnings Per
Share, requires earnings per share (EPS) 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 1,           |        | February 2, |     | February 3,
|                                              |                          | 2004                  |        | 2003        |     | 2002       
|                                              |                          |                       |        |             |     |            
|                                              |                          |                      
|                                              |                          | (in thousands)       
|Weighted average shares outstanding (basic)   |                          |                       | 45,658 |             |     |             | 40,635 |       |       |  | 28,391 |      
|Effects of dilutive stock options             |                          |                       | 306    |             |     |             | 117    |       |       |  |       |      
|                                              |                          |                       |        |             |     |             |        |       |       |  |        |      
|Weighted average shares outstanding (diluted) |                          |                       | 45,964 |             |     |             | 40,752 |       |       |  | 28,391 |      
|                                              |                          |                       |        |             |     |             |        |       |       |  |        |      
|Shares excluded as a result of anti-dilution: |                          |                       |        |             |     |             |        |       |       |  |        |      
|                                              | Stock options            |                       |        | 512         |     |             |        | 2,086 |       |  |        | 2,440 |      
|                                              | Conversion of debentures |                       |        |            |     |             |        | 1,680 |       |  |        | 3,976 |      
|                                              |                          |                       |        |             |     |             |        |       |       |  |        |      
|                                              |                          | Total shares excluded |        |             | 512 |             |        |       | 3,766 |  |        |       | 6,416 | 
|                                              |                          |                       |        |             |     |             |        |       |       |  |        |      

45



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                 
| | ----------------
| | 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. We adopted
SFAS No. 143 on February 3, 2003. The adoption of
this standard did not have an impact on our consolidated
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 addresses, among other
things, the reporting of debt extinguishments. We adopted
SFAS No. 145 on February 3, 2003. Consistent with
SFAS No. 145, any gain or loss on extinguishment of
debt that previously would have been classified as an
extraordinary item and does not meet the criteria in APB Opinion
No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions for
classification as an extraordinary item shall be presented as an
ordinary item before the provision for income taxes. Under
SFAS No. 145, prior periods must be reclassified to be
comparable. Accordingly, we presented losses on debt retirement
of $49.5 million, $6.0 million and $5.1 million
in fiscal years 2003, 2002, and 2001, respectively, as a
separate line in our consolidated statements of operations as a
component of income before income taxes.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This
Statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for
hedging activities under FASB Statement No. 133,
Accounting for Derivative Instruments and Hedging
Activities. This statement was effective for contracts
entered into or modified after June 30, 2003. The adoption
of this statement did not have an impact on our financial
statements.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity. The standard improves the accounting for certain
financial instruments that, under previous guidance, companies
could account for as equity. The standard requires that those
instruments be classified as liabilities in statements of
financial position. This standard was effective for interim
periods beginning after June 15, 2003. The adoption of this
standard did not have an 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. FIN
No. 45 disclosure requirements were effective for our year
ended February 2, 2003 and the initial recognition and
measurement provisions were applicable on a prospective basis to
guarantees issued or modified after February 2, 2003. 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

46



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 17.

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). FIN
No. 46 must be applied to all the companys existing
relationships no later than the first quarter of fiscal 2004. We
are in process of completing our analysis; however, we do not
expect that FIN No. 46 will have a material impact on our
consolidated financial statements.



|         |                     
|-------- | --------------------
|Note 3  | Business Disposition

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



|         |                                                        
|-------- | -------------------------------------------------------
|Note 4  | Transactions and Relationships with Related
    Parties



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

During January 2004 and September 2003, entities
associated with or organized by Investcorp, S.A., formerly one
of the Companys principal stockholders, sold approximately
2.6 million and 3.0 million shares, respectively, of
CSK Auto Corporation common stock. We did not receive any
proceeds from the sale of such stock nor did this transaction
result in share dilution. As a result of previously established
agreements with the selling stockholders, we incurred expenses
related to these transactions of $0.2 million.

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



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

We have in the past entered into several lease
agreements with parties who 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 entities affiliated with
Carmel, previously one of our principal stockholders (see
above). The table

47



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

below describes our lease transactions with
former related parties and, for fiscal 2003, includes annual
amounts even though the related party relationship ended on
November 20, 2002 ($ in thousands):

|                          |  |                |              |             |  |                          |              |      |  |      |       |  |  |   |       |  |  |   |       | 
|------------------------- |  | -------------- | ------------ | ----------- |  | ------------------------ | ------------ | ---- |  | ---- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                          |  |                |              |             |  |                         
|                          |  |                |              |             |  | Fiscal Year Rent Expense
|                          |  |                |              |             |  |                         
|Description               |  | Beginning Date |              | Ending Date |  | 2003                     |              | 2002 |  | 2001
|                          |  |                |              |             |  |                          |              |      |  |     
|Corporate headquarters    |  |                | October 1989 |             |  |                          | October 2012 |      |  | $    | 1,673 |  |  | $ | 1,673 |  |  | $ | 1,536 | 
|Corporate office space    |  |                | April 1995   |             |  |                          | October 2012 |      |  |      | 792   |  |  |   | 792   |  |  |   | 725   | 
|Headquarters parking lot  |  |                | April 1995   |             |  |                          | October 2012 |      |  |      | 63    |  |  |   | 63    |  |  |   | 63    | 
|Fixture sale-leaseback(1) |  |                | July 1996    |             |  |                          | July 2001    |      |  |      |      |  |  |   |      |  |  |   | 192   | 
|                          |  |                |              |             |  |                          |              |      |  |      |       |  |  |   |       |  |  |   |       | 
|                          |  |                |              |             |  |                          |              |      |  | $    | 2,528 |  |  | $ | 2,528 |  |  | $ | 2,516 | 
|                          |  |                |              |             |  |                          |              |      |  |      |       |  |  |   |       |  |  |   |       | 



---



|    |                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------
|(1) | 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 was at that time 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.

Note 5  Receivables

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

|                                                                                      |                         |             |         |             |  |   |         |         | 
|------------------------------------------------------------------------------------- | ----------------------- | ----------- | ------- | ----------- |  | - | ------- | ------- | 
|                                                                                      |                         | February 1, |         | February 2,
|                                                                                      |                         | 2004        |         | 2003       
|                                                                                      |                         |             |         |            
|Trade receivables from commercial and other
    customers                             |                         | $           | 15,773  |             |  | $ | 19,801  |        
|Amounts due under vendor rebate programs and
    cooperative advertising arrangements |                         |             | 118,605 |             |  |   | 100,385 |        
|Landlord and subtenant receivables                                                    |                         |             | 2,564   |             |  |   | 1,918   |        
|Other                                                                                 |                         |             | 1,158   |             |  |   | 1,598   |        
|                                                                                      |                         |             |         |             |  |   |         |        
|                                                                                      | Gross receivables       |             |         | 138,100     |  |   |         | 123,702 | 
|Allowance for doubtful accounts                                                       |                         |             | (1,577  | )           |  |   | (2,736  | )      
|                                                                                      |                         |             |         |             |  |   |         |        
|                                                                                      | Net accounts receivable |             | $       | 136,523     |  |   | $       | 120,966 | 
|                                                                                      |                         |             |         |             |  |   |         |        

48



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

Note 6  Property and
Equipment

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

|                                                |  |             |          |             |  |                       |          |   |  |                              
|----------------------------------------------- |  | ----------- | -------- | ----------- |  | --------------------- | -------- | - |  | -----------------------------
|                                                |  | February 1, |          | February 2, |  |                      
|                                                |  | 2004        |          | 2003        |  | Estimated Useful Life
|                                                |  |             |          |             |  |                      
|Land                                            |  | $           | 348      |             |  | $                     | 348      |   |  |                              
|Buildings                                       |  |             | 413      |             |  |                       | 413      |   |  | 25 years                     
|Leasehold improvements                          |  |             | 99,496   |             |  |                       | 95,949   |   |  | 15 years or life of lease    
|Furniture, fixtures and equipment               |  |             | 125,900  |             |  |                       | 119,689  |   |  | 10 years                     
|Property under capital leases                   |  |             | 87,434   |             |  |                       | 93,193   |   |  | 5  15 years or life of lease
|Purchased software                              |  |             | 12,070   |             |  |                       | 11,347   |   |  | 5 years                      
|                                                |  |             |          |             |  |                       |          |   |  |                              
|                                                |  |             | 325,661  |             |  |                       | 320,939  |   |  |                              
|Less: accumulated depreciation and amortization |  |             | (200,848 | )           |  |                       | (190,194 | ) |  |                              
|                                                |  |             |          |             |  |                       |          |   |  |                              
|Property and equipment, net                     |  | $           | 124,813  |             |  | $                     | 130,745  |   |  |                              
|                                                |  |             |          |             |  |                       |          |   |  |                              

Accumulated amortization of property under
capital leases totaled $66.1 million and $66.0 million
at February 1, 2004 and February 2, 2003, respectively.

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

Note 7  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 second quarter of 2002 and determined
that there was no impairment of existing goodwill. We complete
our annual impairment test as of the last day 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

49



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

fiscal 2003, 2002 and 2001 to illustrate the
impact of goodwill amortization on the results of fiscal 2001 ($
in thousands except per share amounts):

|                                       |                                       |             |        |      |  |      |        |      |  |   |         |       |  
|-------------------------------------- | ------------------------------------- | ----------- | ------ | ---- |  | ---- | ------ | ---- |  | - | ------- | ----- | -
|                                       |                                       |            
|                                       |                                       | Fiscal Year
|                                       |                                       |            
|                                       |                                       | 2003        |        | 2002 |  | 2001
|                                       |                                       |             |        |      |  |     
|Reported net income (loss)             |                                       | $           | 10,797 |      |  | $    | 21,812 |      |  | $ | (17,192 | )    
|Add: goodwill amortization, net of tax |                                       |             |       |      |  |      |       |      |  |   | 2,947   |      
|                                       |                                       |             |        |      |  |      |        |      |  |   |         |      
|Pro forma net income (loss)            |                                       | $           | 10,797 |      |  | $    | 21,812 |      |  | $ | (14,245 | )    
|                                       |                                       |             |        |      |  |      |        |      |  |   |         |      
|Basic earnings per share:              |                                       |             |        |      |  |      |        |      |  |   |         |      
|Earnings (loss) per share as reported  |                                       | $           | 0.24   |      |  | $    | 0.54   |      |  | $ | (0.61   | )    
|                                       | Goodwill amortization, net of tax     |             |        |     |  |      |        |     |  |   |         | 0.10  |  
|                                       |                                       |             |        |      |  |      |        |      |  |   |         |      
|                                       | Pro forma earnings (loss) per share   |             | $      | 0.24 |  |      | $      | 0.54 |  |   | $       | (0.51 | )
|                                       |                                       |             |        |      |  |      |        |      |  |   |         |      
|Diluted earnings per share:            |                                       |             |        |      |  |      |        |      |  |   |         |      
|                                       | Earnings (loss) per share as reported |             | $      | 0.23 |  |      | $      | 0.54 |  |   | $       | (0.61 | )
|                                       | Goodwill amortization, net of tax     |             |        |     |  |      |        |     |  |   |         | 0.10  |  
|                                       |                                       |             |        |      |  |      |        |      |  |   |         |      
|                                       | Pro forma earnings (loss) per share   |             | $      | 0.23 |  |      | $      | 0.54 |  |   | $       | (0.51 | )
|                                       |                                       |             |        |      |  |      |        |      |  |   |         |      

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 2004 |       | $ | 1,588 |      
|Fiscal 2005 |       |   | 1,432 |      
|Fiscal 2006 |       |   | 1,357 |      
|Fiscal 2007 |       |   | 1,346 |      
|Fiscal 2008 |       |   | 1,174 |      
|            |       |   |       |      
|            | Total |   | $     | 6,897 | 
|            |       |   |       |      

The changes in intangible assets, including
goodwill, for the fiscal year 2003 are as follows ($ in
thousands):

|                               |                          |             |         |              |   |             |  |             |   |  |  |        |   |   |         |         |  
|------------------------------ | ------------------------ | ----------- | ------- | ------------ | - | ----------- |  | ----------- | - |  |  | ------ | - | - | ------- | ------- | -
|                               |                          | Carrying    |         |              |   |             |  | Carrying   
|                               |                          | Value as of |         |              |   |             |  | Value as of
|                               |                          | February 2, |         |              |   |             |  | February 1,
|                               |                          | 2003        |         | Amortization |   | Adjustments |  | 2004       
|                               |                          |             |         |              |   |             |  |            
|Amortized intangible assets:   |                          |             |         |              |   |             |  |             |   |  |  |        |   |   |         |        
|                               | Leasehold interests      |             | $       | 24,399       |   |             |  |            |   |  |  | (1,361 | ) |   | $       | 23,038  |  
|                               | Accumulated amortization |             |         | (10,382      | ) |             |  | (1,638      | ) |  |  | 1,260  |   |   |         | (10,760 | )
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |   |   |         |        
|                               | Leasehold interests, net |             |         | 14,017       |   |             |  | (1,638      | ) |  |  | (101   | ) |   |         | 12,278  |  
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |   |   |         |        
|Unamortized intangible assets: |                          |             |         |              |   |             |  |             |   |  |  |        |   |   |         |        
|                               | Goodwill                 |             |         | 127,069      |   |             |  |            |   |  |  |       |   |   |         | 127,069 |  
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |   |   |         |        
|Total intangible assets, net   |                          | $           | 141,086 |              |   |             |  |             |   |  |  |        |   | $ | 139,347 |        
|                               |                          |             |         |              |   |             |  |             |   |  |  |        |   |   |         |        

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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 8  Long Term
Debt



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

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

|                                                          |                                                                                                                  |                          |         |             |         |   |         |         |         | 
|--------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------------------ | ------- | ----------- | ------- | - | ------- | ------- | ------- | 
|                                                          |                                                                                                                  | February 1,              |         | February 2,
|                                                          |                                                                                                                  | 2004                     |         | 2003       
|                                                          |                                                                                                                  |                          |         |            
|Senior credit facility  term loan                        |                                                                                                                  | $                        | 255,000 |             |         | $ | 170,000 |        
|Senior credit facility  revolving
    credit commitment  |                                                                                                                  |                          |        |             |         |   | 32,000  |        
|12% senior notes                                          |                                                                                                                  |                          | 14,910  |             |         |   | 280,000 |        
|                                                          | Unamortized original issue discount on
    12% senior notes                                                      |                          |         | (149        | )       |   |         | (3,744  | )      
|7% senior subordinated notes                              |                                                                                                                  |                          | 225,000 |             |         |   |        |        
|11% senior subordinated notes                             |                                                                                                                  |                          |        |             |         |   | 9,547   |        
|                                                          |                                                                                                                  |                          |         |             |         |   |         |        
|                                                          | Notes and loans, including current maturities                                                                    |                          | $       | 494,761     |         |   | $       | 487,803 |        
|                                                          | Fair market value adjustment on 12% senior
    notes (SFAS No. 133 hedge accounting
    adjustment  see Note 9) |                          |         | 252         |         |   |         | 4,804   |        
|                                                          |                                                                                                                  |                          |         |             |         |   |         |        
|                                                          |                                                                                                                  | Total debt               |         | $           | 495,013 |   |         | $       | 492,607 | 
|Less: current maturities under senior credit
    facility |                                                                                                                  |                          | 2,550   |             |         |   |        |        
|                                                          |                                                                                                                  |                          |         |             |         |   |         |        
|                                                          |                                                                                                                  | Total debt (non-current) |         | $           | 492,463 |   |         | $       | 492,607 | 
|                                                          |                                                                                                                  |                          |         |             |         |   |         |        

At February 1, 2004, the estimated
maturities of long term debt, excluding capital leases, were as
follows:

|            |       |   |         |         | 
|----------- | ----- | - | ------- | ------- | 
|Fiscal 2004 |       | $ | 2,550   |        
|Fiscal 2005 |       |   | 2,550   |        
|Fiscal 2006 |       |   | 17,563  |        
|Fiscal 2007 |       |   | 2,550   |        
|Fiscal 2008 |       |   | 123,038 |        
|Thereafter  |       |   | 346,762 |        
|            |       |   |         |        
|            | Total |   | $       | 495,013 | 
|            |       |   |         |        

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 1, 2004.



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

In June 2003, we replaced our then existing
$300.0 million senior credit facility with a
$325.0 million senior collateralized, asset based credit
facility consisting of a $200.0 million term loan and a
$125.0 million revolving credit commitment. In January
2004, we completed a refinancing of our debt that included the
redemption of approximately 94% of our outstanding
$280.0 million 12% senior notes and the issuance of
$225.0 million 7% senior subordinated notes. We also
amended our senior credit facility, increasing the amount of our
facility by $75.0 million to $400.0 million,
consisting of a $255.0 million term loan and a
$145.0 million revolving credit facility. The senior credit
facility that we amended was established in June 2003 when we
replaced our $300.0 million senior credit facility with a
new $325.0 million senior collateralized, asset based
credit facility consisting of a $200.0 million term loan
and a

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$125.0 million revolving credit commitment.
We used proceeds from the June 2003 senior credit facility
increase to redeem the remaining $9.5 million in aggregate
principal amount of our 11% senior subordinated notes,
including accrued and unpaid interest associated therewith.

In conjunction with the above mentioned
transactions, we applied the provisions of EITF 98-14
Debtors Accounting for Changes in Line of Credit or
Revolving Debt Arrangements for the revolving credit
portion of the credit facilities and EITF 96-19
Debtors Accounting for a Modification or Exchange of
Debt Instruments for the term portion of the credit
facilities. In total in 2003, we incurred a loss on debt
retirement of $49.5 million that included early redemption
premiums, the write-off of certain financing fees and other
direct costs partially offset by a prorata adjustment
representing the unamortized gain on a terminated interest rate
swap. The carrying value of deferred debt issuance costs
totaling $10.3 million (as of the January 2004 transaction
date) is being amortized to interest expense over the
corresponding life of the respective portion of the senior
credit facility or the 7% senior subordinated notes.

During February 2002, we entered into an interest
rate swap agreement that effectively converted the interest rate
payment obligation on $100.0 million of our 12% senior
notes to a floating rate in order to hedge the fair value of
such notes against potential movements in market interest rates.
On June 5, 2003, we terminated the swap agreement and
received in consideration thereof the sum of $6.0 million,
which represented the fair market value of the swap agreement on
that date. Upon redemption of approximately 94% of the
12% senior notes to which the rate swap agreement was
associated, we wrote off approximately 94% of the unamortized
fair market value adjustment as an offset to the loss on debt
retirement. The remaining fair market value adjustment is
currently reflected on our consolidated balance sheet as part of
our long-term debt. This amount will be amortized as an offset
to interest expense through the maturity date of the
12% senior notes (June 15, 2006) or will be written
off upon their anticipated earlier redemption as described below.

On July 2, 2002, we sold shares of our
common stock in an underwritten public offering and used
proceeds from the sale of those shares to retire approximately
$71.7 million of our $81.25 million of outstanding
11% senior subordinated notes. The early extinguishment of
this debt resulted in a loss on debt retirement of
$6.0 million primarily as a result of the payment of an
early redemption premium and the write off of deferred debt
issuance costs. The balance of the 11% senior subordinated
notes were redeemed in June 2003 as described above.

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 this transaction, we
incurred a loss on debt retirement of $5.1 million, which
reflected the write off of unamortized deferred financing costs
associated with the prior senior credit facility.



| |                    
| | -------------------
| | 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 note. In December 2001, the
note was 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 $0.7 million of

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 Debentures |                            | $           | 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 January 2004, we amended our senior credit
facility, reducing our interest rate and increasing the credit
limit to $400.0 million. The amended senior credit facility
is comprised of a $255.0 million term loan and a
$145.0 million revolving credit facility . The amended term
loan is to be repaid in eleven installments consisting of nine
$1.275 million dollar payments made semiannually beginning
in June 2004. The last two payments are for approximately
$121.8 million each in December 2008 and at maturity, June
2009. The revolving credit facility matures in June 2008. At
February 1, 2004, there were no borrowings under the
revolving credit facility. The availability under the revolving
credit facility at February 1, 2004 was
$120.1 million. Although there were no outstanding
borrowings on the revolving facility, $24.9 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 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 senior credit facility
based on a variable rate, which is a function of the spread over
the Base rate (as defined in the agreement) or the Eurodollar
rate (as defined in the agreement) at our option. The average
interest rate on the term loan portion of the facility was 4.2%
and 5.4% for fiscal years 2003 and 2002, respectively. The
average interest rate on the revolver portion of the facility
was 5.1% and 5.8% for fiscal years 2003 and 2002, respectively.
Interest is payable upon borrowing maturity or quarterly,
depending on the type of loan.



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

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

The notes are unsecured general obligations of
CSK Auto, Inc. They rank junior in right of payment to all
of our existing and future senior debt, equal in right of
payment to all of our future senior subordinated indebtedness,
senior in

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

right of payment to all of our future
subordinated indebtedness and are unconditionally guaranteed by
CSK Auto Corporation and the Subsidiary Guarantors on a senior
subordinated basis.



| |                 
| | ----------------
| | 12% Senior Notes

Upon completion of the refinancing transactions
described above, we used proceeds from those transactions to
redeem approximately 94%, or $265.1 million, of our then
outstanding 12% senior notes. Following the refinancing, we
have $14.9 million of the 12% senior notes
outstanding, together with a proportionate amount of the
unamortized original issue discount and unamortized fair market
value adjustment of the related interest rate swap discussed
above. According to the indenture governing these notes, we can
purchase the remaining notes on December 15, 2004 at 106%
of the aggregate principal amount, plus accrued and unpaid
interest. Our intention is to redeem these outstanding notes at
that time. We anticipate our cost to redeem these notes to be
approximately $0.9 million for the redemption premium and
write offs associated with deferred fees and fair value
adjustment of the related interest rate swap.

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.



|         |                                
|-------- | -------------------------------
|Note 9  | 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. The interest rate swap
was intended to provide a better balance of fixed and variable
rate debt instruments and to hedge the fair value of these notes
against potential movements in market interest rates. On
June 5, 2003, we terminated the swap agreement and received
in consideration thereof the sum of $6.0 million, which
represented the fair market value of the swap agreement on that
date. When we redeemed approximately 94% of the 12% senior
notes to which the rate swap agreement was associated, we
included a corresponding percentage of the unamortized fair
market value adjustment in the loss on debt retirement. The
remaining fair market value adjustment, approximately
$0.3 million, is currently reflected on our consolidated
balance sheet as part of our long-term debt. This amount will be
amortized as an offset to interest expense through the maturity
date of the 12% senior notes (June 15, 2006) or will
be written off over their anticipated earlier redemption.

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 Sheets. The differential
to be paid or received under this agreement was accrued
consistent with the terms of the agreement and was recognized in
interest expense over the term of the related debt. 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 Statements of Cash Flows. We
reduced interest expense by $2.2 million and
$2.4 million in fiscal 2003 and 2002, respectively, as a
result of the interest rate swap. There was no interest rate
swap in place during fiscal 2001.

Subsequent to the end of fiscal 2003, we entered
into a new fixed to variable interest rate swap. See
Note 19.



|          |       
|--------- | ------
|Note 10  | 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.

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                                                                              |  |             |         |      |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ----------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                              |  |            
|                                                                                              |  | Fiscal Year
|                                                                                              |  |            
|                                                                                              |  | 2003        |         | 2002 |  | 2001
|                                                                                              |  |             |         |      |  |     
|Minimum rentals                                                                               |  | $           | 122,919 |      |  | $    | 123,971 |   |  | $ | 124,751 |  
|Contingent rentals                                                                            |  |             | 1,301   |      |  |      | 1,150   |   |  |   | 1,261   |  
|Sublease rentals                                                                              |  |             | (9,838  | )    |  |      | (10,121 | ) |  |   | (9,059  | )
|                                                                                              |  |             |         |      |  |      |         |   |  |   |         |  
|                                                                                              |  | $           | 114,382 |      |  | $    | 115,000 |   |  | $ | 116,953 |  
|                                                                                              |  |             |         |      |  |      |         |   |  |   |         |  
|The above amounts include rental expense under
    leases with former affiliates (See Note 4) |  | $           | 2,528   |      |  | $    | 2,528   |   |  | $ | 2,516   |  
|                                                                                              |  |             |         |      |  |      |         |   |  |   |         |  

Future minimum lease obligations (income) under
non-cancelable leases at February 1, 2004 are as follows ($
in thousands):

|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|----------------------------------- |  | ------- | ------- | --------- |  | -------- | ------- |  |  | - | ------- | -
|                                    |  | Capital |         | Operating |  | Sublease
|For Fiscal Years                    |  | Leases  |         | Leases    |  | Rentals 
|                                    |  |         |         |           |  |         
|2004                                |  | $       | 13,287  |           |  | $        | 119,034 |  |  | $ | (8,728  | )
|2005                                |  |         | 8,393   |           |  |          | 107,963 |  |  |   | (7,270  | )
|2006                                |  |         | 4,632   |           |  |          | 97,928  |  |  |   | (6,011  | )
|2007                                |  |         | 2,278   |           |  |          | 85,972  |  |  |   | (4,022  | )
|2008                                |  |         | 538     |           |  |          | 67,816  |  |  |   | (1,471  | )
|Thereafter                          |  |         | 1,866   |           |  |          | 268,084 |  |  |   | (1,399  | )
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|                                    |  |         | 30,994  |           |  | $        | 746,797 |  |  | $ | (28,901 | )
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|Less: amounts representing interest |  |         | (5,737  | )         |  |          |         |  |  |   |         |  
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|Present value of obligations        |  |         | 25,257  |           |  |          |         |  |  |   |         |  
|Less: current portion               |  |         | (10,240 | )         |  |          |         |  |  |   |         |  
|                                    |  |         |         |           |  |          |         |  |  |   |         |  
|Long term obligation                |  | $       | 15,017  |           |  |          |         |  |  |   |         |  
|                                    |  |         |         |           |  |          |         |  |  |   |         |  



|          |                       
|--------- | ----------------------
|Note 11  | 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 participants base salary.
Participant contributions are subject to certain restrictions as
set forth in

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the Internal Revenue Code. Our matching
contributions totaled $1.2 million, $1.3 million, and
$1.2 million for fiscal years 2003, 2002, and 2001,
respectively.



| |                     
| | --------------------
| | Directors Stock Plan

As part of an effort to attract, retain and
motivate qualified individuals to serve on our Board of
Directors, our Board of Directors adopted the CSK Auto
Corporation Directors Stock Plan (the Directors
Plan) in June 1998, and our stockholders approved it at
our fiscal 1999 annual meeting of stockholders. The Directors
Plan permits the Board of Directors to issue stock options,
restricted stock or stock appreciation rights to directors who
are not our employees. Pursuant to our outside director
compensation policy and the Directors Plan, our non-employee
directors were granted a total of 3,054, 3,212 and
3,764 shares of restricted stock during fiscal 2003, 2002
and 2001, respectively. Grants under the Directors Plan
generally vest in two equal installments over a one year period.



| |                   
| | ------------------
| | 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
(Associate Plan); (2) the 1996 Executive Stock
Option Plan (Executive Plan); and (3) the 1999
Executive Stock Option Plan (1999 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 granted stock options to our Chief Executive
Officer and former President under their employment agreements.
Except for the stock options granted under these employment
agreements, our shareholders have approved all of our stock
option plans.

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. The Compensation Committee of our Board of
Directors, which has broad authority in administering and
interpreting the plans, administers all plans.

The following table summarizes options by plan
(net of cancellations and exercises) as of February 1, 2004:

|                               |                           |           |           |           |  |           |           |            |  |       |         |        |  |  |           |   |  |  |           |         | 
|------------------------------ | ------------------------- | --------- | --------- | --------- |  | --------- | --------- | ---------- |  | ----- | ------- | ------ |  |  | --------- | - |  |  | --------- | ------- | 
|                               |                           | 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         |                           |           | 588,795   |           |  |           | 428,102   |            |  |       | 595,837 |        |  |  | 256,575   |   |  |  | 1,869,309 |        
|Exercised since plan inception |                           |           | 396,809   |           |  |           | 296,173   |            |  |       | 71,328  |        |  |  | 701,304   |   |  |  | 1,465,614 |        
|                               |                           |           |           |           |  |           |           |            |  |       |         |        |  |  |           |   |  |  |           |        
|                               | Total available for grant |           |           | 40,696    |  |           |           | 19,925     |  |       |         | 82,835 |  |  |           |  |  |  |           | 143,456 | 
|                               |                           |           |           |           |  |           |           |            |  |       |         |        |  |  |           |   |  |  |           |        
|Vesting term                   |                           |           | 3 years   |           |  |           | 3-4 years |            |  |       | 3 years |        |  |  | 3-4 years |   |  |  |           |        
|Maximum term                   |                           |           | 7 years   |           |  |           | 7 years   |            |  |       | 7 years |        |  |  | 7 years   |   |  |  |           |        



| |                    
| | -------------------
| | Performance Vesting

Approximately 84% of the options granted in 1996
under the Executive Plan were subject to four year vesting with
approximately 16% of such options subject to performance vesting
(over the same four years). The performance vesting criteria was
based upon achieving specified operating results. Partial
vesting of options subject to performance vesting occurred if we
achieved less than 95% of the specified operating results. Any
options granted under the Executive Plan that were subject to
performance vesting and which did not vest during the four years
automatically vested 90 days prior to the end of the
options term. If the specified operating results were
exceeded for any year by at least 10%, the executive received
additional options (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, approximately 15,000 additional options
were granted in April 2001. Specified results were not met in
fiscal 2001 and, accordingly, no additional performance options
were granted in fiscal 2002. No additional performance-based
options were available to be granted for operating results after
fiscal 2001.

56



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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Option
Cancellations

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

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 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 | 
|                            | Granted at market price    |           |           | 190,746        |   |            |       | 13.54       |  |  | $ | 4.39 |  |  |           |  | 
|                            | Exercised                  |           |           | (1,344,514     | ) |            |       | 11.83       |  |  |   |      |  |  |           |  | 
|                            | Cancelled                  |           |           | (192,740       | ) |            |       | 13.54       |  |  |   |      |  |  |           |  | 
|                            |                            |           |           |                |   |            |       |             |  |  |   |      |  |  |           | 
|Balance at February 1, 2004 |                            |           | 1,869,309 |                |   | $          | 13.91 |             |  |  |   |      |  |  | 1,058,713 | 
|                            |                            |           |           |                |   |            |       |             |  |  |   |      |  |  |           | 

The following table summarizes information about
our stock options at February 1, 2004:

|                         |                 |                     |  |                     |           |                  |  |             |      |                   |  |   |       |  |  |  |           |  |  |   |       | 
|------------------------ | --------------- | ------------------- |  | ------------------- | --------- | ---------------- |  | ----------- | ---- | ----------------- |  | - | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |                 |                     |  |                    
|                         |                 | 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 |                     |  |                     | 495,723   |                  |  |             | 4.98 |                   |  | $ | 8.81  |  |  |  | 99,549    |  |  | $ | 8.86  | 
|                         | $ 9.90  $11.00 |                     |  |                     | 485,741   |                  |  |             | 4.72 |                   |  |   | 10.97 |  |  |  | 455,900   |  |  |   | 11.00 | 
|                         | $11.02  $13.08 |                     |  |                     | 193,296   |                  |  |             | 2.77 |                   |  |   | 12.05 |  |  |  | 133,096   |  |  |   | 12.04 | 
|                         | $13.09  $14.00 |                     |  |                     | 218,168   |                  |  |             | 3.10 |                   |  |   | 13.97 |  |  |  | 156,423   |  |  |   | 14.00 | 
|                         | $14.06  $20.00 |                     |  |                     | 238,631   |                  |  |             | 4.25 |                   |  |   | 17.36 |  |  |  | 66,260    |  |  |   | 19.06 | 
|                         | $20.22  $36.53 |                     |  |                     | 237,750   |                  |  |             | 2.00 |                   |  |   | 28.57 |  |  |  | 147,485   |  |  |   | 28.20 | 
|                         |                 |                     |  |                     |           |                  |  |             |      |                   |  |   |       |  |  |  |           |  |  |   |       | 
|                         | $ 2.72  $36.53 |                     |  |                     | 1,869,309 |                  |  |             | 3.99 |                   |  | $ | 13.91 |  |  |  | 1,058,713 |  |  | $ | 14.27 | 
|                         |                 |                     |  |                     |           |                  |  |             |      |                   |  |   |       |  |  |  |           |  |  |   |       | 

57



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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|          |             
|--------- | ------------
|Note 12  | Income Taxes

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

|          |         |             |       |       |       |      |        |        |        |  |         |        |         |  
|--------- | ------- | ----------- | ----- | ----- | ----- | ---- | ------ | ------ | ------ |  | ------- | ------ | ------- | -
|          |         |            
|          |         | Fiscal Year
|          |         |            
|          |         | 2003        |       | 2002  |       | 2001
|          |         |             |       |       |       |     
|Current:  |         |             |       |       |       |      |        |        |        |  |         |       
|          | Federal |             | $     | 23    |       |      | $      | (529   | )      |  | $       |       |        
|          | State   |             |       | 106   |       |      |        | 50     |        |  |         |       |        
|          |         |             |       |       |       |      |        |        |        |  |         |       
|          |         |             | 129   |       |       |      | (479   | )      |        |  |        |       
|Deferred: |         |             |       |       |       |      |        |        |        |  |         |       
|          | Federal |             |       | 4,315 |       |      |        | 10,464 |        |  |         | (8,834 | )      
|          | State   |             |       | 882   |       |      |        | 2,463  |        |  |         | (2,016 | )      
|          |         |             |       |       |       |      |        |        |        |  |         |       
|          |         |             | 5,197 |       |       |      | 12,927 |        |        |  | (10,850 | )     
|          |         |             |       |       |       |      |        |        |        |  |         |       
|          |         | Total       |       | $     | 5,326 |      |        | $      | 12,448 |  |         | $      | (10,850 | )
|          |         |             |       |       |       |      |        |        |        |  |         |       

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

|                                                |  |             |        |      |  |      |        |   |  |   |         |  
|----------------------------------------------- |  | ----------- | ------ | ---- |  | ---- | ------ | - |  | - | ------- | -
|                                                |  |            
|                                                |  | Fiscal Year
|                                                |  |            
|                                                |  | 2003        |        | 2002 |  | 2001
|                                                |  |             |        |      |  |     
|Income (loss) before income taxes               |  | $           | 16,123 |      |  | $    | 34,260 |   |  | $ | (28,042 | )
|Federal income tax rate                         |  |             | 35%    |      |  |      | 35%    |   |  |   | 35%     |  
|                                                |  |             |        |      |  |      |        |   |  |   |         |  
|Expected provision (benefit) for income taxes   |  |             | 5,643  |      |  |      | 11,991 |   |  |   | (9,815  | )
|Permanent wage add-back for federal tax credits |  |             | 151    |      |  |      |       |   |  |   |        |  
|Non-deductible goodwill                         |  |             |       |      |  |      |       |   |  |   | 357     |  
|Non-deductible interest expense                 |  |             |       |      |  |      | 473    |   |  |   | 199     |  
|Non-deductible offering costs                   |  |             | 94     |      |  |      | 190    |   |  |   |        |  
|Other permanent differences                     |  |             | 77     |      |  |      | 111    |   |  |   | 146     |  
|State taxes, net of federal benefit             |  |             | 695    |      |  |      | 1,637  |   |  |   | (912    | )
|Reversal of reserves no longer required         |  |             | (800   | )    |  |      | (312   | ) |  |   |        |  
|Tax credits and other                           |  |             | (534   | )    |  |      | (1,642 | ) |  |   | (825    | )
|                                                |  |             |        |      |  |      |        |   |  |   |         |  
|Actual provision (benefit) for income taxes     |  | $           | 5,326  |      |  | $    | 12,448 |   |  | $ | (10,850 | )
|                                                |  |             |        |      |  |      |        |   |  |   |         |  

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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 1,                             |         | February 2,
|                                   |                                 | 2004                                    |         | 2003       
|                                   |                                 |                                         |         |            
|Current deferred income taxes:     |                                 |                                         |         |             |         |   |        |        
|                                   | Store closing costs             |                                         | $       | 1,591       |         |   | $      | 1,517   |       
|                                   | Accrued employee benefits       |                                         |         | 11,959      |         |   |        | 8,636   |       
|                                   | Credits and other benefits      |                                         |         | 1,532       |         |   |        | 1,000   |       
|                                   | Property taxes                  |                                         |         | (2,476      | )       |   |        | (2,781  | )     
|                                   | Provision for bad debts         |                                         |         | 197         |         |   |        | 1,066   |       
|                                   | Tax loss carryforwards          |                                         |         | 25,210      |         |   |        | 15,868  |       
|                                   | Inventory valuation differences |                                         |         | (36,617     | )       |   |        | (31,560 | )     
|                                   | Other                           |                                         |         | (609        | )       |   |        | 248     |       
|                                   |                                 |                                         |         |             |         |   |        |        
|                                   |                                 | Total current deferred income taxes     |         |             | 787     |   |        |         | (6,006 | )
|                                   |                                 |                                         |         |             |         |   |        |        
|Non-current deferred income taxes: |                                 |                                         |         |             |         |   |        |        
|                                   | Store closing costs             |                                         |         | 3,227       |         |   |        | 237     |       
|                                   | Capital lease expenditures      |                                         |         | 1,562       |         |   |        | 2,039   |       
|                                   | Tax loss carryforwards          |                                         |         |            |         |   |        | 7,669   |       
|                                   | Credits and other benefits      |                                         |         | 4,996       |         |   |        | 5,392   |       
|                                   | Depreciation and amortization   |                                         |         | (19,998     | )       |   |        | (15,960 | )     
|                                   | Other                           |                                         |         | (2,908      | )       |   |        | (2,841  | )     
|                                   |                                 |                                         |         |             |         |   |        |        
|                                   |                                 | Total non-current deferred income taxes |         |             | (13,121 | ) |        |         | (3,464 | )
|                                   |                                 |                                         |         |             |         |   |        |        
|Net deferred tax liability         |                                 | $                                       | (12,334 | )           |         | $ | (9,470 | )      
|                                   |                                 |                                         |         |             |         |   |        |        

We have recorded deferred tax assets of
$25.2 million as of February 1, 2004 reflecting the
benefit of federal and state tax loss carryforwards
approximating $65.6 million and $34.8 million, which
begin to expire in 2015 and 2008, respectively. Realization is
dependent on generating sufficient taxable income prior to
expiration of the loss carryforwards. Utilization of certain of
the net operating loss carryforwards may be limited under
Section 382 of the Internal Revenue Code. Although
realization is not assured, management believes it is more
likely than not that all the deferred tax assets will be
realized. Accordingly, we believe that no valuation allowance is
required for deferred tax assets.

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



|          |                                                                               
|--------- | ------------------------------------------------------------------------------
|Note 13  | Store Closing, Restructuring and 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 PEP, we recorded total

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 to be
incurred in connection with store closures. On an on-going
basis, store locations are reviewed and analyzed based on
several factors including market saturation, store
profitability, and store size and format. In addition, we
analyze sales trends and geographical and competitive factors to
determine the viability and future profitability of our store
locations. If a store location does not meet our required
projections, it is considered for closure. 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 in accordance with EITF 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). No provision was made for
employee termination costs. For stores to be relocated, such
costs were recognized when an agreement for the new location had
been reached with a landlord and site plans met preliminary
municipal approvals. During the period that they remained open
for business, the rent and other operating expenses for the
stores to be closed continued to be reflected in normal
operating expenses.

In July 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146
requires companies to recognize the fair value of costs
associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by SFAS No. 146
include lease rental and termination costs and certain employee
severance costs that are associated with a restructuring,
discontinued operation, store closing, or other exit or disposal
activity. We have applied SFAS No. 146 prospectively
to exit or disposal activities initiated or exit plans
substantially modified after December 31, 2002 as required.

The refinancing completed in the fourth quarter
of fiscal 2003 and the ongoing improvement in our operating
results have increased our cash flow and financial flexibility,
enabling us to pursue an alternate strategy to reduce our
current portfolio of closed stores, which includes lease buyouts
and foregoing lease extensions on locations that we currently
sublease at a marginal profit. This change in strategy requires
us to establish a new closed store reserve based upon the
guidance in SFAS No. 146 and reverse the existing
closed store reserve that was previously established under
EITF 94-3. SFAS No. 146 requires that costs under a
lease contract for a closed store be recognized at fair value
and that the amount

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CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

of remaining lease payments owed be reduced by
estimated sublease income (but not to an amount less than zero).
This change in methodology has resulted in a non-cash charge of
$12.2 million in the fourth quarter of fiscal 2003. The
charge reflects the elimination from the reserve of net sublease
income previously recorded for leases with incremental estimated
sublease income in excess of the costs of the original lease
partially offset by the discounting of net cash outflow.
Sublease income in excess of costs associated with the lease
will be recognized in future periods as it is earned.

As of February 1, 2004, we had a total of
169 store locations included in the allowance for store closing
costs. Of this total, 19 locations were vacant and 150 locations
were subleased. In addition to these stores, we had 58 service
centers of which 5 were vacant and 53 were subleased. Future
rent expense will be incurred through the expiration of the
non-cancelable leases, the longest of which runs through January
2018.

Activity in the allowance for store closings and
the related payments for the three fiscal years ended
February 1, 2004, including the PEP, is as follows ($ in
thousands):

|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |        |        |  
|-------------------------- | --------------------------------------------------------------------------------- | ------------------------ | ------ | ------ | ------ | ---- | ----- | ------ | ------ | - | ----- | ------ | ------ | -
|                           |                                                                                   |                         
|                           |                                                                                   | Fiscal Year             
|                           |                                                                                   |                         
|                           |                                                                                   | 2003                     |        | 2002   |        | 2001
|                           |                                                                                   |                          |        |        |        |     
|Balance, beginning of year |                                                                                   | $                        | 4,422  |        |        | $    | 6,771 |        |        | $ | 1,552 |       
|Store closing costs:       |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           | Adjustment of allowance to reflect change in exit
    strategy under SFAS No. 146 |                          |        | 12,203 |        |      |       |       |        |   |       |       |       
|                           | Provision for store closing costs                                                 |                          |        | 152    |        |      |       | 1,314  |        |   |       | 7,530  |       
|                           | Adjustments to prior plans                                                        |                          |        |       |        |      |       | (1,196 | )      |   |       | (1,536 | )     
|                           | Other revisions in estimates                                                      |                          |        | 314    |        |      |       | 4,908  |        |   |       | 8,638  |       
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           |                                                                                   | Store closing costs, net |        |        | 12,669 |      |       |        | 5,026  |   |       |        | 14,632 |  
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|Payments:                  |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           | Rent expense, net of sublease recoveries                                          |                          |        | (3,303 | )      |      |       | (5,030 | )      |   |       | (6,051 | )     
|                           | Occupancy and other expenses                                                      |                          |        | (859   | )      |      |       | (1,837 | )      |   |       | (2,839 | )     
|                           | Sublease commissions and buyouts                                                  |                          |        | (781   | )      |      |       | (508   | )      |   |       | (523   | )     
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|                           |                                                                                   | Total payments           |        |        | (4,943 | )    |       |        | (7,375 | ) |       |        | (9,413 | )
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       
|Balance, end of year       |                                                                                   | $                        | 12,148 |        |        | $    | 4,422 |        |        | $ | 6,771 |       
|                           |                                                                                   |                          |        |        |        |      |       |        |        |   |       |       

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

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

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

61



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 had longer than
anticipated vacancy periods as a result of the economic slowdown.

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 
|                           |  |                               |   |        |  |            |    |        |  |           
|2001                       |  |                               | 9 |        |  |            | 46 |        |  |            | (2 | ) |  |  | (46 | ) |  |  | 7 | 
|2002                       |  |                               | 7 |        |  |            | 25 |        |  |            |   |   |  |  | (25 | ) |  |  | 7 | 
|2003                       |  |                               | 7 |        |  |            | 13 |        |  |            |   |   |  |  | (20 | ) |  |  |  | 

We expect cash outflows for vacant stores,
sublease losses and lease buy-outs of approximately
$4.3 million during fiscal 2004 with the remainder of cash
outflows relating to these items to occur during fiscal 2005,
2006 and 2007. 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 2004. We anticipate that
the majority of these closures will occur at the end of the
lease term, resulting in minimal closed store costs. We
anticipate total cash outflows relating to these stores of
$0.3 million, which includes estimated incremental costs to
be measured at fair value when incurred.

Workforce
Reduction

As a result of an internal review of general and
administrative functions, we terminated 36 employees in
conjunction with our PEP during fiscal 2001. 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 PEP 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 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 14  Stockholders
Equity

Issuance of
Common Stock

On July 2, 2002, we sold 6,878,300 primary
shares of common stock in an underwritten public offering at
$12 per share. In addition, a selling stockholder sold an
additional 2.6 million shares in the offering. On
November 20, 2002, the same stockholder together with
affiliated stockholders sold their remaining approximately
3.0 million shares. We received no proceeds from the shares
sold by the selling stockholders. Issuance costs related to the
stock offerings approximated

62



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$0.9 million. These costs included
approximately $0.4 million of legal, accounting and
printing fees charged to additional paid in capital for the
primary offering and approximately $0.5 million of costs
charged to operating expense for the secondary offerings.
Proceeds from the primary offering were used to retire
approximately $71.7 million of our outstanding
11% senior subordinated notes due 2006. The early
extinguishment of this debt resulted in a loss on debt
retirement of $6.0 million, primarily as a result of the
payment of an early redemption premium and the write off of
deferred debt issuance costs. The components of this transaction
are as follows (in thousands except per share amounts):

|                                                                  |                    |   |         |         |  
|----------------------------------------------------------------- | ------------------ | - | ------- | ------- | -
|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 loss on
    debt retirement |                    |   | (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 had maturity dates of 2003 and 2005, respectively. All loans
that matured in 2003 have been repaid. Only three loans that
mature in 2005 and totaling approximately $73,000 were still
outstanding as of the end of fiscal 2003. One of these three
loans in the amount of approximately $8,000 was fully paid after
the end of fiscal 2003. These loans are reflected as stockholder
receivables in the accompanying Consolidated Statements of
Stockholders Equity.

Retirement of
Common Stock

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

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

63



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 15  Legal
Matters

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

We believe that we have a strong basis under
California law for disputing the payment of this assessment and
have filed a Petition for Redetermination with the Board. Our
practices through December 2002 relative to the handling of
taxes on battery cores had been consistent for over a decade,
and it is our position that our consistent treatment of battery
core charges, together with prior tax audits and tax
auditors written commentary concerning our handling of
such charges, permits us to rely upon precedent set in prior
audits. Reliance on prior audits is a position that is
supportable under California law. We also have other defenses,
and intend to vigorously defend our position with regard to this
matter. A liability for the potential sales tax and related
interest payments has not been recorded in our consolidated
financial statements.

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



|          |                                    
|--------- | -----------------------------------
|Note 16  | Fair Value of Financial Instruments

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

|                                                    |  |                  |         |                  |  |          |         |            |  |  |         |  |  |  |         | 
|--------------------------------------------------- |  | ---------------- | ------- | ---------------- |  | -------- | ------- | ---------- |  |  | ------- |  |  |  | ------- | 
|                                                    |  |                  |         |                 
|                                                    |  | February 1, 2004 |         | February 2, 2003
|                                                    |  |                  |         |                 
|                                                    |  | Carrying         |         | Estimated        |  | Carrying |         | Estimated 
|                                                    |  | Amount           |         | Fair Value       |  | Amount   |         | Fair Value
|                                                    |  |                  |         |                  |  |          |         |           
|Receivables                                         |  |                  | 136,523 |                  |  |          | 136,523 |            |  |  | 120,966 |  |  |  | 120,966 | 
|Amounts due under senior credit facility            |  |                  | 255,000 |                  |  |          | 255,000 |            |  |  | 202,000 |  |  |  | 202,000 | 
|Obligations under 12% senior notes                  |  |                  | 15,013  |                  |  |          | 16,345  |            |  |  | 281,060 |  |  |  | 305,804 | 
|Obligations under 11% senior subordinated
    notes |  |                  |        |                  |  |          |        |            |  |  | 9,547   |  |  |  | 9,642   | 
|Obligations under 7% senior subordinated
    notes  |  |                  | 225,000 |                  |  |          | 226,125 |            |  |  |        |  |  |  |        | 



|          |           
|--------- | ----------
|Note 17  | Guarantees

In November 2002, the FASB issued FIN
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others. FIN No. 45 requires that
upon issuance of certain guarantees, a guarantor must recognize
a liability for the fair value of an obligation assumed under
the guarantee. FIN No. 45 also requires significant new
disclosures by guarantors, in both interim and annual financial
statements, about obligations associated with guarantees issued.
FIN No. 45 disclosure requirements were effective for our
year ended February 2, 2003 and the initial recognition and
measurement provisions were applicable on a prospective basis to
guarantees issued or modified after February 2, 2003.

64



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following is a summary of items that we
believe are within the scope of FIN No. 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 those arising out of indemnity
obligations, when a loss is probable and the amounts can be
reasonably estimated. We are not aware of the occurrence of any
triggering event or condition that would have a material adverse
impact on our financial statements as a result of an indemnity
obligation relating to such triggering event or condition.

We have issued standby letters of credit related
to insurance coverages, lease obligations and other matters that
expire during fiscal 2004. As of February 1, 2004, total
amounts committed under these letters of credit were
$24.9 million.



|          |                              
|--------- | -----------------------------
|Note 18  | 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.

65



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##### Table of Contents



CSK AUTO CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth certain quarterly
unaudited operating data for fiscal 2003 and 2002. The unaudited
quarterly information includes all adjustments which management
considers necessary for a fair presentation of the information
shown.

|                                      |  |                                            |         |         |  |         |         |         |  |   |         |  |  |   |         |  
|------------------------------------- |  | ------------------------------------------ | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- |  |  | - | ------- | -
|                                      |  |                                           
|                                      |  | Fiscal 2003                               
|                                      |  |                                           
|                                      |  | First                                      |         | Second  |  | Third   |         | Fourth 
|                                      |  | Quarter                                    |         | Quarter |  | Quarter |         | Quarter
|                                      |  |                                            |         |         |  |         |         |        
|                                      |  |                                           
|                                      |  | ($ in thousands, except per share amounts)
|Net sales                             |  | $                                          | 377,449 |         |  | $       | 418,514 |         |  | $ | 409,750 |  |  | $ | 372,343 |  
|Gross profit                          |  |                                            | 175,024 |         |  |         | 193,702 |         |  |   | 192,185 |  |  |   | 187,245 |  
|Store closing and restructuring costs |  |                                            | 93      |         |  |         | 43      |         |  |   | 203     |  |  |   | 12,330  |  
|Loss on debt retirement               |  |                                            |        |         |  |         | 4,315   |         |  |   |        |  |  |   | 45,179  |  
|Income (loss) before income taxes     |  |                                            | 12,272  |         |  |         | 17,618  |         |  |   | 24,518  |  |  |   | (38,285 | )
|Net income (loss)                     |  | $                                          | 7,523   |         |  | $       | 10,814  |         |  | $ | 15,042  |  |  | $ | (22,582 | )
|Basic earnings (loss) per share(1)    |  | $                                          | 0.17    |         |  | $       | 0.24    |         |  | $ | 0.33    |  |  | $ | (0.49   | )
|Diluted earnings (loss) per share(1)  |  | $                                          | 0.17    |         |  | $       | 0.24    |         |  | $ | 0.33    |  |  | $ | (0.49   | )

|                                      |  |                                            |         |         |  |         |         |         |  |   |         |  |  |   |         | 
|------------------------------------- |  | ------------------------------------------ | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- |  |  | - | ------- | 
|                                      |  |                                           
|                                      |  | 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   | 
|Loss on debt retirement               |  |                                            |        |         |  |         | 6,008   |         |  |   |        |  |  |   |        | 
|Income before income tax              |  |                                            | 5,474   |         |  |         | 5,904   |         |  |   | 17,157  |  |  |   | 5,725   | 
|Net income                            |  | $                                          | 3,380   |         |  | $       | 4,087   |         |  | $ | 10,686  |  |  | $ | 3,659   | 
|Basic earnings per share(1)           |  | $                                          | 0.10    |         |  | $       | 0.10    |         |  | $ | 0.24    |  |  | $ | 0.08    | 
|Diluted earnings per share(1)         |  | $                                          | 0.10    |         |  | $       | 0.10    |         |  | $ | 0.24    |  |  | $ | 0.08    | 



---



|    |                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 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.

Note 19  Subsequent
Events

On April 5, 2004, we entered into an
interest rate swap agreement to effectively convert
$100.0 million of our 7% senior subordinated notes due
2014 to a floating rate, set quarterly in arrears, equal to the
6 month LIBOR + 283 basis points. The agreement is for
the term of the notes. The hedge will be accounted for as a
fair value hedge; accordingly, the fair value of the
derivative and changes in the fair value of the underlying debt
will be reported on our consolidated balance sheet and
recognized in the results of operations. Based upon our
assessment of effectiveness of the hedge, changes in the fair
value of this derivative and the underlying debt are not
expected to result in a material impact on net income.

66



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##### Table of Contents








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

None






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

Under the supervision and with the participation
of our management, including the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO),
we evaluated the effectiveness of our disclosure controls and
procedures, as such term is defined under rule 13a-15(e)
and rule 15d-15(e) promulgated under the Securities and
Exchange Act of 1934, as amended, as of February 1, 2004.
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. There were no 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 during the
fourth quarter of fiscal 2003.




PART III





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

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






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

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






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

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






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

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






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

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




PART IV





|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | 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 Auditors

Consolidated Statements of Operations 
Fiscal Years Ended February 1, 2004, February 2, 2003,
and February 3, 2002

Consolidated Balance Sheets 
February 1, 2004 and February 2, 2003

67



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##### Table of Contents



Consolidated Statements of Stockholders
Equity  Fiscal Years Ended February 1, 2004,
February 2, 2003, and February 3, 2002

Consolidated Statements of Cash Flows 
Fiscal Years Ended February 1, 2004, February 2, 2003,
and February 3, 2002

Notes to Consolidated Financial Statements

(a)(2) The following financial statement
schedules of CSK Auto Corporation for the three years ended
February 1, 2004 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
Auditors 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).                                                                                                                                                                                                                                                                 
|        | 4.01    |                         |  | Amended And Restated Credit Agreement dated as of
    January 16, 2004, by and among CSK Auto, Inc.,
    JPMorgan Chase Bank, as Administrative Agent, Credit Suisse
    First Boston, acting through its Cayman Islands branch, as
    Syndication Agent, and Bank of America, N.A., incorporated
    herein by reference to Exhibit 99.2 of our Current Report
    on Form 8-K, filed January 20, 2004.                                                                    
|        | 4.02    |                         |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                                                                                                                   
|        | 4.03    |                         |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation,
    Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First
    Boston Corporation, J.P. Morgan Securities Inc. and UBS
    Warburg LLC as Purchasers, incorporated herein by reference to
    Exhibit 99.4 of our Current Report on Form 8-K, filed
    January 18, 2002.                                                  
|        | 4.04    |                         |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as subsidiary guarantors; and the Bank
    of New York, as Trustee, incorporated herein by reference
    to Exhibit 99.3 of our Current Report on Form 8-K,
    filed January 18, 2002.                                                                                                         
|        | 4.05    |                         |  | Purchase Agreement, dated January 9, 2004,
    by and among CSK Auto, Inc. as Issuer; CSK Auto
    Corporation, Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First
    Boston LLC, Lehman Brothers Inc., J.P. Morgan Securities
    Inc., Piper Jaffray & Co. and Banc of America
    Securities LLC, incorporated herein by reference to
    Exhibit 99.5 of our Current Report on Form 8-K, filed
    January 20, 2004.
|        | 4.06    |                         |  | Indenture dated as of January 16, 2004 by
    and among CSK Auto, Inc.(as Issuer), CSK Auto Corporation,
    Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc. (each a Guarantor) and The Bank of
    New York (as Trustee), incorporated herein by reference to
    Exhibit 99.3 of our Current Report on Form 8-K, filed
    January 20, 2004.                                                                                                                
|        | 10.01.1 |                         |  | 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).                                                                                                                                                                                                                   

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|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                 
|------- | ------- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 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).                                                     
|        | 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).                                                                                                                                                      

69



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|        |         |                         |  |                                                                                                                                                                                                                                                            
|------- | ------- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 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).                    
|        | 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, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on May 5, 2003 (File
    No. 001-13927).       
|        | 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).

70



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|        |         |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ------- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |                        
|Number  |         | Description of Exhibits
|        |         |                        
|        | 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   |                         |  | Amended Employment Agreement between CSK
    Auto, Inc. and Jim Bazlen, dated June 9, 2003,
    incorporated herein by reference to Exhibit 10.01 of our
    Quarterly Report on Form 10-Q, filed on September 17,
    2003.                                                                                                                                                                                                                                                                          
|        | 10.39   |                         |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Hal Smith, dated February 14, 2002,
    incorporated herein by reference to our Annual Report on
    Form 10-K, filed on May 5, 2003 (File
    No. 001-13927).                                                                                                                                                                                                                                                                       
|        | 10.40   |                         |  | Indemnity Agreement between CSK Auto Corporation
    and certain directors, incorporated herein by reference to
    Exhibit 10.03 to our Quarterly Report on Form 10-Q,
    filed on December 18, 2002.                                                                                                                                                                                                                                                                                               
|        | 10.41   |                         |  | 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.                                                                                                                                                                                                                       
|        | 10.42   |                         |  | 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).                                                                                                                                                                                                                                                                                                                 
|        | 10.43   |                         |  | Credit Agreement dated as of June 20, 2003
    by and among CSK Auto, Inc., JPMorgan Chase Bank, as
    Administrative Agent, Credit Suisse First Boston, acting through
    its Cayman Islands branch, as Syndication Agent, and Bank of
    America, N.A., incorporated herein by reference to
    Exhibit 99.2 of our Current Report on Form 8-K, filed
    on June 25, 2003.                                                                                                                      
|        | 10.44   |                         |  | Guarantee and Collateral Agreement dated as of
    June 20, 2003 made by CSK Auto Corporation, CSK
    Auto, Inc. and certain of its Subsidiaries in favor of
    JPMorgan Chase Bank, as Administrative Agent, incorporated
    herein by reference to Exhibit 99.3 of our Current Report
    on Form 8-K, filed on June 25, 2003.                                                                                                                                                                   
|        | 10.45   |                         |  | Amendment No. 1, dated as of June 5,
    2002 to the Credit Agreement dated as December 21, 2001
    among CSK Auto, Inc., the several lenders from time to time
    parties to the Credit Agreement, JPMorgan Chase Bank, as
    administrative agent, Credit Suisse First Boston, as syndication
    agent and UBS AG, Stamford Branch, as documentation agent,
    incorporated herein by reference to
    Exhibit Exhibit 99.2 of our Current Report on
    Form 8-K, filed June 7, 2002.         
|        | 10.46   |                         |  | Amendment No. 2, dated as of
    December 3, 2002 to the Credit Agreement dated as
    December 21, 2001 among CSK Auto, Inc., the several
    lenders from time to time parties to the Credit Agreement,
    JPMorgan Chase Bank, as administrative agent, Credit Suisse
    First Boston, as syndication agent and UBS AG, Stamford Branch,
    as documentation agent, incorporated herein by reference to
    Exhibit Exhibit 99.1 of our Current Report on
    Form 8-K, filed December 19, 2002.
|        | 10.47   |                         |  | 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.                                                                                                                                                           
|        | 10.47.1 |                         |  | 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).                                                                                                                                                                     
|        | 10.48   |                         |  | Purchase Agreement dated June 27, 2002 by
    and among CSK Auto Corporation, Glenellen Investment Co.,
    Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS
    Warburg LLC, Credit Suisse First Boston Corporation, Goldman,
    Sachs and Co., and Advest, Inc., incorporated herein by
    reference to Exhibit 10.03 of our Quarterly Report on
    Form 10-Q, filed on September 18, 2002                                                                                                

71



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|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ----- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Exhibits
|        |       |                        
|        | 10.49 |                         |  | Purchase Agreement dated November 15, 2002,
    by and among CSK Auto Corporation, Merrill Lynch & Co.,
    Merrill Lynch, Pierce, Fenner & Smith Incorporated,
    Chiltern Trustees Limited, as Trustee of Carmel Trust, Glenellen
    Investment Co., and Transatlantic Investments, LLC, incorporated
    herein by reference to Exhibit 1.1 of our Current Report on
    Form 8-K, filed on November 19, 2002                                                                                                                                                                                                       
|        | 10.50 |                         |  | Purchase Agreement dated September 8, 2003
    by and among CSK Auto Corporation, Credit Suisse First Boston
    LLC, Investcorp CSK Holdings L.P., Equity CSKA Limited,
    Equity CSKB Limited, Equity CSKC Limited, South Bay
    Limited, Investcorp Investment Equity Limited, Ballet
    Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble
    Limited, Outrigger Limited, Quill Limited, Radial Limited,
    Shoreline Limited, Zinnia Limited, and J.P. Morgan (Suisse)
    SA, incorporated herein by reference to Exhibit 99.2 of our
    Current Report on Form 8-K, filed on September 9, 2003
|        | 10.51 |                         |  | Purchase Agreement dated January 14, 2004 by
    and among CSK Auto Corporation, Investcorp CSK Holdings
    L.P., and Goldman, Sachs & Co., incorporated herein by
    reference to Exhibit 1.1 of our Current Report on
    Form 8-K, filed on January 15, 2004                                                                                                                                                                                                                                                                                                                                                        
|        | 10.52 |                         |  | Registration Rights Agreement, dated
    August 14, 2001, by and between CSK Auto Corporation and
    Oppenheimer Capital Income Fund, incorporated herein by
    reference to Exhibit 4.2.2 of our Quarterly Report on
    Form 10-Q, filed on December 19, 2001                                                                                                                                                                                                                                                                                                                                                        
|        | 10.53 |                         |  | 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.                                                                                                                                                                                  
|        | 10.54 |                         |  | 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).                                                                                                                                                                                                                                                                                                 
|        | 10.55 |                         |  | Registration Rights Agreement, dated
    January 16, 2004 by and among CSK Auto, Inc., Credit
    Suisse First Boston LLC, Lehman Brothers Inc., J.P. Morgan
    Securities Inc., Piper Jaffray & Co. and Banc of
    America Securities LLC, incorporated herein by reference to
    Exhibit 99.4 of our Current Report on Form 8-K, filed
    on January 20, 2004.                                                                                                                                                                                                                                                     
|        | 10.56 |                         |  | Termination Agreement executed as of June 5,
    2003 between Lehman Brothers Special Financing Inc. and CSK
    Auto, Inc., which terminates the ISDA master agreement
    executed as of February 2002 between Lehman Brothers Special
    Financing Inc. and CSK Auto, Inc., incorporated herein by
    reference to our Quarterly Report on Form 10-Q, filed on
    September 17, 2003 (File No. 001-13927).                                                                                                                                                                                                         
|        | 10.57 |                         |  | Indicative Callable Swap Term Sheet dated
    April 5, 2004 between Lehman Brothers and CSK Auto, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 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 14, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 31.1  |                         |  | Certification by the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 31.2  |                         |  | Certification by the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 32.0  |                         |  | Certification by the Chief Executive Officer and
    Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                           

(b) Reports on Form 8-K:

On December 4, 2003, CSK Auto Corporation
filed a current report on Form 8-K, to report under
items 9 and 12 thereof, the issuance of a press release
reporting CSK Auto Corporations operating results for our
third quarter and thirty-nine weeks ended November 2, 2003.

On December 15, 2003, CSK Auto Corporation
filed a current report on Form 8-K, to report under
items 5, 7 and 9 thereof, the issuance of a press release
announcing our intention to refinance our existing debt.

On December 16, 2003, CSK Auto Corporation
filed a current report on Form 8-K to report under
items 5, 7 and 9 thereof, the issuance of a press release
announcing our commencement of a tender offer and consent
solicitation for our 12% senior notes.

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On January 5, 2004, CSK Auto Corporation
filed a current report on Form 8-K to report under
items 5, 7 and 9 thereof, the issuance of two press
releases, one announcing the occurrence of the consent date in
connection with CSK Auto, Inc.s tender offer and
consent solicitation for CSK Auto, Inc.s
senior notes and the tenders of notes and deliveries of
related consents from holders of the senior notes to date,
and the second announcing the consideration to be paid in
connection with CSK Auto, Inc.s tender offer and
consent solicitation for CSK Auto, Inc.s
senior notes.

On January 12, 2004, CSK Auto Corporation
filed a current report on Form 8-K to report under
items 5, 7 and 9 thereof, the issuance of a press release
announcing the pricing of CSK Auto, Inc.s
$225.0 million senior subordinated note offering.

On January 15, 2004, CSK Auto Corporation
filed a current report on Form 8-K to report under
items 5 and 7 thereof, that entities associated with
Investcorp, S.A. were selling 2,634,819 shares of CSK Auto
Corporation stock.

On January 20, 2004, CSK Auto Corporation
filed a current report on Form 8-K to report under
items 5, 7 and 9 thereof, the completion of its refinancing.

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Report of Independent Auditors on

Financial Statement Schedules


To the Board of Directors and Stockholders

of CSK Auto
Corporation:


Our audits of the consolidated financial
statements referred to in our report dated March 18, 2004,
except as to Note 19, for which the date is April 5,
2004, 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 15(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.

/s/ PRICEWATERHOUSECOOPERS LLP

Phoenix, Arizona

March 18, 2004, except as to Note 19,


for which the date is April 5, 2004


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Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


BALANCE SHEETS

|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |          |         | 
|---------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------- | - | ------- | -------- | ------- | 
|                                         |                                                                                                                                                                                         | February 1,                                |         | February 2,
|                                         |                                                                                                                                                                                         | 2004                                       |         | 2003       
|                                         |                                                                                                                                                                                         |                                            |         |            
|                                         |                                                                                                                                                                                         |                                           
|                                         |                                                                                                                                                                                         | (in thousands,                            
|                                         |                                                                                                                                                                                         | except share data)                        
|ASSETS                                  
|Investment in subsidiaries               |                                                                                                                                                                                         | $                                          | 331,558 |             |         | $ | 302,182 |         
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total assets                               |         | $           | 331,558 |   |         | $        | 302,182 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Stockholders equity:                    |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         | Common stock, $0.01 par value,
    58,000,000 shares authorized, 46,497,936 and
    45,148,230 shares issued and outstanding at
    February 1, 2004 and February 2, 2003, respectively |                                            | $       | 465         |         |   | $       | 452      |        
|                                         | Additional paid-in capital                                                                                                                                                              |                                            |         | 466,576     |         |   |         | 448,279  |        
|                                         | Stockholder receivable                                                                                                                                                                  |                                            |         | (73         | )       |   |         | (342     | )      
|                                         | Accumulated deficit                                                                                                                                                                     |                                            |         | (135,410    | )       |   |         | (146,207 | )      
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total stockholders equity                 |         |             | 331,558 |   |         |          | 302,182 | 
|                                         |                                                                                                                                                                                         |                                            |         |             |         |   |         |         
|                                         |                                                                                                                                                                                         | Total liabilities and stockholders equity |         | $           | 331,558 |   |         | $        | 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 OPERATIONS

|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |            |  
|-------------------------------------------------- | ------------------------------------------ | ------------------------------------------------- | ------ | ----------- |  | ----------- | ------ | ---------- |  | - | ------- | ---------- | -
|                                                   |                                            |                                                  
|                                                   |                                            | Fiscal Year Ended                                
|                                                   |                                            |                                                  
|                                                   |                                            | February 1,                                       |        | February 2, |  | February 3,
|                                                   |                                            | 2004                                              |        | 2003        |  | 2002       
|                                                   |                                            |                                                   |        |             |  |            
|                                                   |                                            |                                                  
|                                                   |                                            | ($ in thousands, except share and per share data)
|Equity interest in income (loss) from subsidiaries |                                            | $                                                 | 10,797 |             |  | $           | 21,812 |            |  | $ | (17,192 | )         
|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|Income (loss) before income taxes                  |                                            |                                                   | 16,123 |             |  |             | 34,260 |            |  |   | (28,042 | )         
|Income tax expense (benefit)                       |                                            |                                                   | 5,326  |             |  |             | 12,448 |            |  |   | (10,850 | )         
|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|Net income (loss)                                  |                                            | $                                                 | 10,797 |             |  | $           | 21,812 |            |  | $ | (17,192 | )         
|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|Basic earnings (loss) per share:                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|                                                   | Net income (loss) per share                |                                                   | $      | 0.24        |  |             | $      | 0.54       |  |   | $       | (0.61      | )
|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|                                                   | Shares used in computing per share amounts |                                                   |        | 45,657,710  |  |             |        | 40,634,522 |  |   |         | 28,390,582 |  
|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|Diluted earnings (loss) per share:                 |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|                                                   | Net income (loss) per share                |                                                   | $      | 0.23        |  |             | $      | 0.54       |  |   | $       | (0.61      | )
|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           
|                                                   | Shares used in computing per share amounts |                                                   |        | 45,963,555  |  |             |        | 40,751,802 |  |   |         | 28,390,582 |  
|                                                   |                                            |                                                   |        |             |  |             |        |            |  |   |         |           

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 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 |  
|Tax benefit relating to stock option exercises    |  |                                     |           |            |  |             |    |            |  |              | 2,333   |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 2,333   |  
|Recovery of stockholder receivable                |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        | 269  |   |  |   |     |   |  |   |         |   |  |   | 269     |  
|Retirement of common stock                        |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   |        |  
|Exercise of options                               |  |                                     | 1,348,279  |            |  |             | 13  |            |  |              | 15,942  |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 15,955  |  
|Issuances of restricted stock                     |  |                                     | 1,427      |            |  |             |    |            |  |              | 22      |         |  |        |     |   |  |   |     |   |  |   |         |   |  |   | 22      |  
|Net income                                        |  |                                     |           |            |  |             |    |            |  |              |        |         |  |        |     |   |  |   |     |   |  |   | 10,797   |   |  |   | 10,797  |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  
|Balances at February 1, 2004                      |  |                                     | 46,497,936 |            |  | $           | 465 |            |  | $            | 466,576 |         |  | $      | (73  | ) |  | $ |     |   |  | $ | (135,410 | ) |  | $ | 331,558 |  
|                                                  |  |                                     |            |            |  |             |     |            |  |              |         |         |  |        |      |   |  |   |      |   |  |   |          |   |  |   |         |  

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 1,                                                                                     |                                                 | February 2,                                              |  | February 3,
|                                                           |                   | 2004                                                                                            |                                                 | 2003                                                     |  | 2002       
|                                                           |                   |                                                                                                 |                                                 |                                                          |  |            
|                                                           |                   |                                                                                                
|                                                           |                   | ($ in thousands)                                                                               
|Cash flows provided by (used in) operating
    activities: |                   |                                                                                                 |                                                 |                                                          |  |             |   |        |  |         |   |        
|                                                           | Net income (loss) |                                                                                                 | $                                               | 10,797                                                   |  |             | $ | 21,812 |  |         | $ | (17,192 | )
|                                                           |                   | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                 |                                                          |  |             |   |        |  |         |   |         |   |       
|                                                           |                   |                                                                                                 | Equity interest in net income from subsidiaries |                                                          |  | (10,797     | ) |        |  | (21,812 | ) |         |   | 17,192 |  
|                                                           |                   |                                                                                                 |                                                 |                                                          |  |             |   |        |  |         |   |        
|                                                           |                   |                                                                                                 |                                                 | 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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##### Table of Contents



Schedule I

CSK AUTO CORPORATION

(Parent Company Only)


NOTE TO FINANCIAL STATEMENT SCHEDULE

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

This financial statement schedule should be read
in conjunction with the consolidated financial statements of CSK
Auto Corporation and Subsidiaries for descriptions of
significant accounting policies and other matters, including
guarantees by Corporate.

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CSK AUTO CORPORATION AND
SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING
ACCOUNTS

For the Fiscal Years 2003, 2002, and
2001


|                                          |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |        | 
|----------------------------------------- | --------------------------- | ------------ | - | ---------- |  | ---------- |  | ---------- |  |  |  | ------- | - |  | - | ------ | 
|                                          |                             | Balance at   |   | Charged to |  |            |  | Balance at
|                                          |                             | Beginning of |   | Costs and  |  |            |  | End of    
|Description                               |                             | Period       |   | Expenses   |  | Deductions |  | Period    
|                                          |                             |              |   |            |  |            |  |           
|Allowance for Bad Debts:                  |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                          | 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  | 
|                                          | Year Ended February 1, 2004 |              | $ | 2,736      |  |            |  | 5,083      |  |  |  | (6,242  | ) |  | $ | 1,577  | 
|Allowance for Closed Stores:              |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                          | 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  | 
|                                          | Year Ended February 1, 2004 |              | $ | 4,422      |  |            |  | 12,669     |  |  |  | (4,943  | ) |  | $ | 12,148 | 
|Allowance for Inventory Shrink:           |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                          | 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 | 
|                                          | Year Ended February 1, 2004 |              | $ | 16,199     |  |            |  | 29,823     |  |  |  | (32,635 | ) |  | $ | 13,387 | 
|Allowance for Inventory
    Obsolescence: |                             |              |   |            |  |            |  |            |  |  |  |         |   |  |   |       
|                                          | Year Ended February 3, 2002 |              | $ |           |  |            |  | 17,292     |  |  |  | (16,390 | ) |  | $ | 902    | 
|                                          | Year Ended February 2, 2003 |              | $ | 902        |  |            |  |           |  |  |  | (902    | ) |  | $ |       | 
|                                          | Year Ended February 1, 2004 |              | $ |           |  |            |  |           |  |  |  |        |   |  | $ |       | 

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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
14th day of April 2004.



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



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

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

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf
of the registrant, and in the capacities indicated, on this
14th day of April 2004.

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

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##### 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  | .01                     |  | Amended And Restated Credit Agreement dated as of
    January 16, 2004, by and among CSK Auto, Inc.,
    JPMorgan Chase Bank, as Administrative Agent, Credit Suisse
    First Boston, acting through its Cayman Islands branch, as
    Syndication Agent, and Bank of America, N.A., incorporated
    herein by reference to Exhibit 99.2 of our Current Report
    on Form 8-K, filed January 20, 2004.                                                                    
|        | 4  | .02                     |  | Form of Common Stock certificate, incorporated
    herein by reference to our Registration Statement on
    Form S-1 (File No. 333-43211).                                                                                                                                                                                                                                                                                                                                   
|        | 4  | .03                     |  | Purchase Agreement, dated December 7, 2001,
    by and among CSK Auto, Inc; CSK Auto Corporation,
    Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First
    Boston Corporation, J.P. Morgan Securities Inc. and UBS
    Warburg LLC as Purchasers, incorporated herein by reference to
    Exhibit 99.4 of our Current Report on Form 8-K, filed
    January 18, 2002.                                                  
|        | 4  | .04                     |  | Indenture, dated December 21, 2001, by and
    among CSK Auto, Inc.; CSK Auto Corporation, as guarantor;
    Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as subsidiary guarantors; and the Bank
    of New York, as Trustee, incorporated herein by reference
    to Exhibit 99.3 of our Current Report on Form 8-K,
    filed January 18, 2002.                                                                                                         
|        | 4  | .05                     |  | Purchase Agreement, dated January 9, 2004,
    by and among CSK Auto, Inc. as Issuer; CSK Auto
    Corporation, Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc., as Guarantors; and Credit Suisse First
    Boston LLC, Lehman Brothers Inc., J.P. Morgan Securities
    Inc., Piper Jaffray & Co. and Banc of America
    Securities LLC, incorporated herein by reference to
    Exhibit 99.5 of our Current Report on Form 8-K, filed
    January 20, 2004.
|        | 4  | .06                     |  | Indenture dated as of January 16, 2004 by
    and among CSK Auto, Inc.(as Issuer), CSK Auto Corporation,
    Automotive Information Systems, Inc. and
    CSKAUTO.COM, Inc. (each a Guarantor) and The Bank of
    New York (as Trustee), incorporated herein by reference to
    Exhibit 99.3 of our Current Report on Form 8-K, filed
    January 20, 2004.                                                                                                                
|        | 10 | .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).                                                                                                                                                                                                                                                                                                                          

82



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|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 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).                                                                                                                                                      
|        | 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).                                                                                                                                                            

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##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                            
|------- | -- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 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, incorporated herein by reference to our
    Annual Report on Form 10-K, filed on May 5, 2003 (File
    No. 001-13927).       
|        | 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).   

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|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | -- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 10 | .38                     |  | Amended Employment Agreement between CSK
    Auto, Inc. and Jim Bazlen, dated June 9, 2003,
    incorporated herein by reference to Exhibit 10.01 of our
    Quarterly Report on Form 10-Q, filed on September 17,
    2003.                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .39                     |  | Severance and Retention Agreement between CSK
    Auto, Inc. and Hal Smith, dated February 14, 2002,
    incorporated herein by reference to our Annual Report on
    Form 10-K, filed on May 5, 2003 (File
    No. 001-13927).                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10 | .40                     |  | Indemnity Agreement between CSK Auto Corporation
    and certain directors, incorporated herein by reference to
    Exhibit 10.03 to our Quarterly Report on Form 10-Q,
    filed on December 18, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .41                     |  | 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 | .42                     |  | 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 | .43                     |  | Credit Agreement dated as of June 20, 2003
    by and among CSK Auto, Inc., JPMorgan Chase Bank, as
    Administrative Agent, Credit Suisse First Boston, acting through
    its Cayman Islands branch, as Syndication Agent, and Bank of
    America, N.A., incorporated herein by reference to
    Exhibit 99.2 of our Current Report on Form 8-K, filed
    on June 25, 2003.                                                                                                                                                                                                                                         
|        | 10 | .44                     |  | Guarantee and Collateral Agreement dated as of
    June 20, 2003 made by CSK Auto Corporation, CSK
    Auto, Inc. and certain of its Subsidiaries in favor of
    JPMorgan Chase Bank, as Administrative Agent, incorporated
    herein by reference to Exhibit 99.3 of our Current Report
    on Form 8-K, filed on June 25, 2003.                                                                                                                                                                                                                                                                                      
|        | 10 | .45                     |  | Amendment No. 1, dated as of June 5,
    2002 to the Credit Agreement dated as December 21, 2001
    among CSK Auto, Inc., the several lenders from time to time
    parties to the Credit Agreement, JPMorgan Chase Bank, as
    administrative agent, Credit Suisse First Boston, as syndication
    agent and UBS AG, Stamford Branch, as documentation agent,
    incorporated herein by reference to
    Exhibit Exhibit 99.2 of our Current Report on
    Form 8-K, filed June 7, 2002.                                                                                                                            
|        | 10 | .46                     |  | Amendment No. 2, dated as of
    December 3, 2002 to the Credit Agreement dated as
    December 21, 2001 among CSK Auto, Inc., the several
    lenders from time to time parties to the Credit Agreement,
    JPMorgan Chase Bank, as administrative agent, Credit Suisse
    First Boston, as syndication agent and UBS AG, Stamford Branch,
    as documentation agent, incorporated herein by reference to
    Exhibit Exhibit 99.1 of our Current Report on
    Form 8-K, filed December 19, 2002.                                                                                                                   
|        | 10 | .47                     |  | 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 | .47.1                   |  | 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 | .48                     |  | Purchase Agreement dated June 27, 2002 by
    and among CSK Auto Corporation, Glenellen Investment Co.,
    Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS
    Warburg LLC, Credit Suisse First Boston Corporation, Goldman,
    Sachs and Co., and Advest, Inc., incorporated herein by
    reference to Exhibit 10.03 of our Quarterly Report on
    Form 10-Q, filed on September 18, 2002                                                                                                                                                                                                                   
|        | 10 | .49                     |  | Purchase Agreement dated November 15, 2002,
    by and among CSK Auto Corporation, Merrill Lynch & Co.,
    Merrill Lynch, Pierce, Fenner & Smith Incorporated,
    Chiltern Trustees Limited, as Trustee of Carmel Trust, Glenellen
    Investment Co., and Transatlantic Investments, LLC, incorporated
    herein by reference to Exhibit 1.1 of our Current Report on
    Form 8-K, filed on November 19, 2002                                                                                                                                                                                                       
|        | 10 | .50                     |  | Purchase Agreement dated September 8, 2003
    by and among CSK Auto Corporation, Credit Suisse First Boston
    LLC, Investcorp CSK Holdings L.P., Equity CSKA Limited,
    Equity CSKB Limited, Equity CSKC Limited, South Bay
    Limited, Investcorp Investment Equity Limited, Ballet
    Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble
    Limited, Outrigger Limited, Quill Limited, Radial Limited,
    Shoreline Limited, Zinnia Limited, and J.P. Morgan (Suisse)
    SA, incorporated herein by reference to Exhibit 99.2 of our
    Current Report on Form 8-K, filed on September 9, 2003

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|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Exhibits
|        |    |                        
|        | 10 | .51                     |  | Purchase Agreement dated January 14, 2004 by
    and among CSK Auto Corporation, Investcorp CSK Holdings
    L.P., and Goldman, Sachs & Co., incorporated herein by
    reference to Exhibit 1.1 of our Current Report on
    Form 8-K, filed on January 15, 2004                                                                                                                                                                      
|        | 10 | .52                     |  | Registration Rights Agreement, dated
    August 14, 2001, by and between CSK Auto Corporation and
    Oppenheimer Capital Income Fund, incorporated herein by
    reference to Exhibit 4.2.2 of our Quarterly Report on
    Form 10-Q, filed on December 19, 2001                                                                                                                                                                      
|        | 10 | .53                     |  | 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 | .54                     |  | 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 | .55                     |  | Registration Rights Agreement, dated
    January 16, 2004 by and among CSK Auto, Inc., Credit
    Suisse First Boston LLC, Lehman Brothers Inc., J.P. Morgan
    Securities Inc., Piper Jaffray & Co. and Banc of
    America Securities LLC, incorporated herein by reference to
    Exhibit 99.4 of our Current Report on Form 8-K, filed
    on January 20, 2004.                                                                   
|        | 10 | .56                     |  | Termination Agreement executed as of June 5,
    2003 between Lehman Brothers Special Financing Inc. and CSK
    Auto, Inc., which terminates the ISDA master agreement
    executed as of February 2002 between Lehman Brothers Special
    Financing Inc. and CSK Auto, Inc., incorporated herein by
    reference to our Quarterly Report on Form 10-Q, filed on
    September 17, 2003 (File No. 001-13927).                       
|        | 10 | .57                     |  | Indicative Callable Swap Term Sheet dated
    effective April 5, 2004 between Lehman Brothers and CSK
    Auto, Inc.                                                                                                                                                                                                                                                                                                                   
|        | 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 14, 2004.                                                                                                                                                                                                                                                                                                                                                                           
|        | 31 | .1                      |  | Certification by the Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                            
|        | 31 | .2                      |  | Certification by the Chief Financial Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                            
|        | 32 | .0                      |  | Certification by the Chief Executive Officer and
    Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                         

86