Welcome. This is the conference call to discuss AutoZone's fourth quarter financial results. Bill Rhodes, the Company's President and CEO, will be making a short presentation on the highlights of the quarter. The conference call will end promptly at 10:00 a.m. Central Time, 11:00 a.m. Eastern Time. Before Mr. Rhodes begins, the Company has requested that you listen to the following statement regarding forward-looking statements. Statements contained in this presentation are forward-looking statements. Forward-looking statements typically use words such as believe, anticipate, should, intend, plan, will, expect, estimate, project, position, strategy, and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including without limitation: competition, product demand, the economy, the ability to hire and retain qualified employees, consumer debt levels, inflation, weather, raw material costs of our suppliers, energy prices, war and the prospect of war including terrorist activity, availability of consumer transportation, construction delays, access to available and feasible financing, and changes in laws or regulations. Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may differ from those contemplated by such forward-looking statements, and such events could materially and adversely affect our business. Forward-looking statements speak only as of the date made. Except as required by applicable law we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results may materially differ from anticipated results. Please refer to the Risk Factors section of AutoZone's Form 10-K for the fiscal year ended August 27, 2005 for more information related to those risks. In addition to the financial statements presented in accordance with Generally Accepted Accounted Principles, AutoZone has provided metrics in this presentation that are not calculated in accordance with GAAP. For a reconciliation of these metrics, please see AutoZone's press release in the Investor Relations section at www.autozoneinc.com.

Good morning and thank you for joining us today for AutoZone's fiscal 2006 fourth quarter conference call. With me is today is Bill Giles, Executive Vice President and Chief Financial Officer; and Brian Campbell, Vice President of Investor Relations and Tax. Regarding the fourth quarter, I hope you've had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, are available on our web site, www.autozoneinc.com. Please click on Quarterly Earnings Conference Calls to see them. To begin, I'd like to start by thanking our entire organization for their efforts in continuing to live the AutoZone pledge. I am extremely proud of our AutoZoners and their efforts. The primary initiatives for this fiscal year have been focused on improving the customer shopping experience. A significant point of emphasis has been placed on AutoZoner training. My personal travels to our stores continued to encourage me, from the improvements in the layout of our store interiors to the high level of engagement and commitment to our AutoZoners. I firmly believe we are on the right track to continue to build this incredible company and deliver strong financial performance. I'd also like to take a moment and congratulate the team on completing a very challenging and exciting step in AutoZone's history. We challenged every AutoZoner to improve their customer service efforts this past year and I feel we succeeded. While we will never be satisfied, we accomplished significant successes. For 2007, I'm proud to announce that we're absolutely committed to building on our successes and our AutoZoners have embraced this new year with the same excitement as the last. You won't hear from me today about new visions and paths to success. Simply put, our focus will continue…

Thank you, Bill. Gross margin for the quarter was 49.7% of sales, up from 48.7% of sales in the previous year's quarter. We continue to be successful in working with our vendors to offer the right products at the right prices to our customers. This includes supply chain initiatives, tailoring the merchandise mix, continued optimization of good, better, best product lines, all allowing us to price our products appropriately and give our customers great value. Going forward, we believe there continues to be some margin expansion opportunity, albeit at much reduced rates. We continue to work with our vendors to lower our cost and provide the best selection of merchandise for our customers at the right prices. Our initiative to do more direct importing of merchandise from foreign suppliers is well underway. Prior to the start of this fiscal year, we bought virtually all our goods from U.S. vendors who may or may not have been buying from foreign sources. While we are increasing our efforts to reduce our costs by going straight to the manufacturer where appropriate, we are not immune from the overall cost pressures in the macro environment. We are extremely proud of our buying organization for their abilities to improve on margins while pressures on procurement cost continue to exist. Again, our success in managing cost efficiently is something to be proud of, but we cannot let up. We have to keep focusing on cost containment for success in the long run. SG&A for the quarter was 30.4% of sales, up 39 basis points from last year. However, this year included a non-comparable charge for the new expensing of stock options under FAS 123 R. On a comparable basis SG&A went up 12 basis points. The increase was due primarily to occupancy cost increasing. This has…

Thank you, Bill. In retrospect, this has been a solid year for AutoZone. I believe we exit 2006 a much stronger, more engaged organization than we were just 12 short months ago. We accomplished the single largest coordinated store effort in our history: The resetting of over 3,200 store sales floors. We've retrained and repositioned our training efforts to maintain our leadership position in this fast-paced industry. I believe our AutoZoners are proud of what they've accomplished and I am absolutely proud. Later this afternoon, I have the distinct honor of speaking to approximately 2,000 AutoZoners at our annual sales meeting hosted here in Memphis, and I cannot tell you how excited I am about this opportunity. I will share with them the many accomplishments we had in 2006 and I will highlight those critical areas for continued improvement. Most importantly, I won't be talking with them about any radical shifts in our strategy or plans. You see, last year's operating plan theme was, Live the Pledge. This year's theme is, Living the Pledge. This minor change in theme subtly highlights and recognizes the improvements we have made while at the same time reinforcing to all of us the tremendous importance of getting the basics right. As with everything at AutoZone, it starts with the customer. Additionally, while I'm extremely proud of this past quarter's bottom line results, we know we can do better on the top line. I could sit here and say the macro environment was the culprit, but it was not just that for us this past quarter. We have identified areas of opportunity and believe we can take advantage of those throughout 2007. With that said, I know many are wondering with the recent decline in gas prices, should we expect tremendous sales growth from this…

Our first question comes from Armando Lopez – Morgan Stanley.

Thanks. Good morning, everyone. Just a couple of quick questions. First, I was wondering if you could just maybe talk a little bit more about the inventory in the quarter? Looking at inventory, it looks like inventory per square foot was up somewhat and sales per square foot was down. Now it sounds like there's a number of new inventory-type systems implemented. Can you talk a little bit about how you're thinking about inventory going forward and what you need to meet the sales that you're looking for?

Inventory, you're right. On a per square foot basis, or on a per store basis was up about 1.4%, so it wasn't a significant increase overall. We have initiatives underway to improve what we call superior parts coverage and so there will be some continuing movements in that. Part of that is really just adding SKUs where we need to and also deleting it, so you'll have some ups and downs in the meantime. But we think overall, probably the best way to look at it is our overall inventory at about $501,000 a store is a pretty good level for us. So there may be some little increases or decreases, but that's a pretty comfortable level for us.

How are you thinking about the pay on scan inventory in terms of the strategy of managing capital here? I mean it looks like that was down somewhat in the quarter.

I would say the pay on scan really is, not to use a cliche, it's a tool in the toolbox. It's an opportunity for our vendors to have different terms with us. At the end of the day we're going to negotiate and have the optimal terms with our vendors in order to maximize our capital and we want to make sure that it works for them at the same time as well. Again, it's one of the tools for us as we continue to drive towards an ultimate goal of 100% of AP to inventory, but it's not the only tool.

Thank you.

Our next question comes from Seth Basham - Credit Suisse Securities.

Hi. It's Seth Basham for Gary Balter from Credit Suisse. Congratulations on a nice quarter. Would you guys care to comment on monthly sales trends? I think it'd be helpful, if possible.

Historically, we haven't and so therefore, we're not going to break that trend at the moment. So I appreciate the question, but unfortunately, I can't give you much color on that, Seth.

More specifically, can you comment on how the rollout of the assortment planning tool impacted your sales in the quarter?

We rolled this out on a few select categories and we started rolling those categories into the stores in March, April and May, but we didn't roll a tremendous amount of the categories. We saw that we made some big improvements and we also saw that we made a few mistakes so we stopped the rollout for a period of time; went back and made refinements to both the systems as well as the complementary processes around those systems. And, also had to train our AutoZoners on how to use that new tool. We're just now beginning to roll categories into the store again and we're going to do it the same way. We're going to roll some select categories, monitor them. As they prove their success then we'll expand that. But again, it certainly had some negative impact on our sales in the quarter, but not significant.

On the commercial side, was the impact greater on the commercial side or the DIY side?

Not necessarily significantly different one place or the other. We are focusing very much on expanding our late model coverage and so that's an improvement when we roll the new categories with improved late model coverage for the commercial side of the business, in particular.

Lastly, you commented on gas prices declining and not to read too much into that in terms of improved sales trends, but given the fact that you see consumers responding to spikes in gas prices, do you see similar responses to quick declines in gas prices? Why wouldn't that correlation hold?

What we've said over the last couple of times that we've seen it, is we didn't see a drastic response as they quickly dropped. It seems to be much more impactful when it runs up than it does when it runs down. Now over time, I think everybody's going to get their disposable income set and they're going to take care of their cars, their cars are too important to them. But short-term when we see significant spikes -- and we saw it again this time -- as soon as it spiked, we saw a negative impact on our business.

Thank you.

Our next question comes from Bill Sims- Smith Barney Citigroup.

Thank you. Good morning. Congratulations on an impressive quarter. I have three questions. The first question, can you give us a little more color on the drivers of the gross margin improvement? How much of it was driven by working with vendors to improve your cost of goods versus mix during the quarter?

It's really a combination of both. I wouldn't want to give a percentage of each one per se, but I'm going to repeat your question because in essence those are really the two drivers. The fact of the matter is, our organization has done a pretty good job of continuing to reduce their acquisitions costs from a cost perspective. Direct importing is helpful in that process as well, but negotiating with the vendors and utilizing our leverage is also important. Candidly, as Bill talked about before, we've invested a lot in training our AutoZoners and as part of, that that has helped us overall in our mix of business. So we've been able to educate the AutoZoners to, in essence, explain to the customers the value proposition as they move up from good, better to best and that's also helped to move gross margin as well.

I know you had an opportunity in the third fiscal quarter to renegotiate many of your supply agreements. Can you give us an idea of, was it minority supply agreements, majority, or where do you stand from that perspective?

You know, that's an ongoing thing. I mean we negotiate contracts with vendors all the time and so there may have been a significant part of them come due over the last quarter or so. But look: at the end of the day, we're going to continue to negotiate our contracts in order to reduce our acquisition costs, optimize our overall inventory assortment. Again, it's all about delivering great customer service at the end of the day and that's going to start with parts coverage and getting the right product at the right price.

My second question is surrounding your commercial business model rollout. Assuming you achieve a similar performance to what you saw at the end of the third fiscal quarter in your TAC, how long should we expect that it will take to rollout the new business model to all your commercial programs?

I think we're going to have to continue to test that before we can determine. We need to make sure that we see it in a bunch of different operating environments. We said on this call, we've got it in a few hundred stores. We're continuing to put that in different parts of the country, different-sized volume stores and we're going to continue to watch that. I certainly wouldn't expect a big ramp-up of the program in a bunch of stores as we go into the wintertime. Obviously, it's a seasonal business and that's not the time to be expanding a new program.

The last and final question regarding your ZNet system. Can you share with us any data from the implementation of ZNet? Have you seen any pickup in average ticket driven from the ZNet system or is it too early to tell?

It's really too early at this point in time, but what we're testing right now is customer transaction times. We are testing related sales, but it's a very small group of stores. The biggest thing we're doing is seeing how usable it is for our AutoZoners and how well it's embraced by our customers and we're very excited about both.

Very good. Congratulations and good luck.

Thank you, Bill.

Our next question comes from Matthew Fassler – Goldman Sachs.

Thanks a lot. Good morning and congratulations on a good first year. A couple of questions. First of all, your operating expenses per store when you eliminate the impact of options came down for the first time this year, obviously, against an easier compare as you did start to spend in the year-ago quarter. As you think about some of the expense initiatives, or the initiatives that cost you a bit of money earlier this year, would you say, as you look out to 2007, that you should be cycling those with minimal incremental investment or that you might still have a little bit to go?

I would say that's a fair way to look at it. I think as we cycle through those and we get into the first half of 2007 and so, we'll probably have some continued minimal incremental investment overall. As you would imagine we're tweaking and fine-tuning our model all the time in order to try to optimize our customer service levels. But I would suspect we'll probably have some minimal incremental investment.

Secondly, you've made some comments about consumer's response to gas prices in the general sense. If you think about the products that you would typically see suffer through deferred maintenance to the extent that people have deferrable initiatives, how did you see, if you could talk to what those categories really are and how you saw those tracking?

I'm not going to get into the specific categories, Matt, because we don't get into specific category or geographical discussions. But can you think through what you can defer versus what you can't. I mean if your car won't start, you have to do something about it. If you're going to extend your oil drain from 3,000 miles to 3,500 miles, we can clearly see it in the specific categories where there is deferrable maintenance.

Fair enough. And those were obviously, I guess you're saying softer through the quarter?

Yes.

Thank you.

Our next question comes from Dan Wewer – Raymond James.

Bill, you had noted that customer satisfaction rates were increasing following the initiatives you launched during the last year, yet it doesn't seem to be generating the kind of same-store sales growth that we would expect. Have you been able to determine what is the missing link in leveraging that higher satisfaction rate into better sales productivity?

I'm not drastically disappointed in our sales performance. We've come a long way over the last 18 months. If you look at our quarter versus quarter sales trends, they've continued to improve. I believe, and we continue to believe, number one, that customer satisfaction is the most critical thing that we can do in this Company. It's the heritage of this Company. Customer satisfaction was here long before Bill Rhodes or anybody else was here. It's what made us special. It's what allowed us to deliver 19.2% operating margins in this quarter. So we know customer service works. We're committed to it, and quite frankly, I've been very surprised and amazed at how significantly we've moved customer satisfaction scores over the year. I certainly hope it's a leading indicator of what the future's going to hold.

Do you find that maybe the infrequent nature of customer visits leads to your customers not yet recognizing the changes that have been made in the last year, and that's the reason we're seeing a lag between same-store sales growth and the higher satisfaction rates?

You know, we kind of have a couple of different sets of customers. As you've seen in the stores, we have a loyalty card that requires five visits of purchases greater than $20 per visit to earn an award over a six-month period of time. So we have a group of customers that are coming in quite frequently, but our average customer comes in three to four times a year. Really, I think customer satisfaction, it's as much about eliminating the catastrophic failures as it is about having the good experiences. So by eliminating those catastrophic failures, I think we'll gain benefits over the long-term.

Could you just provide an example or two on the assortment planning tool and the kind of mistakes that you had alluded to? I'm just trying to get a better sense of what this is about.

We're just using a tremendous amount of different data than we used before. This business is very different when it comes to assortment planning than others. I mean we're making individual decisions, a specific category may have 1,600 SKUs in that category and our core offering may be 100 SKUs. So we're making individual decisions on where to put the balance of those SKUs in the individual stores. We're using a lot of different data to help forecast the most appropriate way to deploy those SKUs and dollars. Some of the things that we did were working quite well and I'm very pleased with what this is going to do for us for the future, but we did make some mistakes along the way.

How quickly did you recognize that the mistakes were made from this change?

I would say a couple of months. The first thing is, you've got to get all the inventory moved around in the system and then we started watching it. We weren't getting some of the benefits that we thought we were going to get. We were getting some, but some of the other ones, we weren't. So we slowed it down and stopped it for a period of time. Went in and did real extensive, deep dives into what was working and what wasn't and had some all-day sessions, all-night sessions trying to make sure that we got this thing right. I think we're generally there. We still have a few refinements to make and we'll continue to learn some more things.

Great. Well, thanks and good luck with it.

Thank you.

Our next question comes from John Lawrence – Morgan Keegan.

Congratulations, Bill.

Thank you, John.

Would you just take one more step there on Dan's question and go to the next part of that? The good, better, best opportunity, obviously, you've done a great job with that and your comments about not necessarily going down to opening price point. Can you just dig into that a little further and how much more opportunity do you see to get that value proposition across categories?

I think there's going to continue to be tweaks to it. Over the last couple of years, probably three years, we've significantly increased our abilities to offer choices, good, better, best across a wide variety of categories. We continue to tweak them, but really where we've seen big advantages is in places where we've introduced new coverage. Obviously, we've been out advertising the Duralast and Duralast Gold brands. Those brands, as I mentioned, it's over $1 billion, well over a $1 billion family of brands in the automotive aftermarket. As that continues to gain traction, we continue to think we'll benefit.

Great. Thanks. Good luck.

Thank you, John.

Our next question comes from Scott Ciccarelli - RBC Capital Markets.

Two quick questions. The first is, you saw some pretty nice gross margin expansion in the quarter. How much of that is coming from taking out the non-core products? I mean are we still seeing the effects of that on the gross margin line or have we cycled through that at this stage?

We've generally cycled through that. The majority of those non-core products were out by March of the preceding fiscal year. So it might be just a little bit of it as we continue to sell through some of the things, but the majority of it was gone.

So the margin expansion that we did see during the quarter, that was a function of just working on the good, better, best for the most part, more direct importing? I'm just trying to understand where the margin expansion came from.

I think it's a combination of lower acquisition costs. Some of that's coming from direct imports, some of that's just coming from working with our vendors and then also probably some improvement on good, better, best as we've focused on that over the last several months.

Just one more clarification. It just feels like we've had some cross currents here. It sounds like you do expect positive comps in the commercial business, if I heard you right, but you've also made a lot of investments on the retail side, which should start to bear fruit, but you're also cautious on the environment. Is there anything else you could potentially add to that to kind of help flush it out, Bill?

I don't think there's too much more to add to that. I mean that's really the focus. Again, we're not in the business of giving guidance so we won’t get much more specific than that. Bill talked about same store sales for the commercial business for the full year. Look, at the end of the day, we're going to try to focus everything on improving customer service and that starts with knowledgeable associates. ZNet's going to be a great opportunity for us. We want to have the right parts in the right stores and have good quality parts; Duralast is a big part of that.

Perfect. All right. Thanks a lot, guys.

Our next question comes from Alan Rifkin – Lehman Brothers.

As you look at the 3,200 stores that you've reset, can you maybe quantify what types of returns you've been seeing overall and should we assume that returns are actually best at the stores that were reset earliest in the program?

No, Alan. First of all, there was only 3,200 of them, because the other ones were already at that set. We've said over time that this was as much about offering a consistent presentation to our customers, getting our stores back to the way that we had them for years, where there’s a centralized planning process which will allow us to make incremental moves in the improvement of the store presentations as we go forward. If we had a four-foot section on a different part of the store and we wanted to combine it with an eight-foot section, we couldn't do that before. This was about getting them all back to one presentation and we can move forward from there. You've got to remember, they also happened over about a 10-week period of time, so you don't see a radical difference between any of them over that short period of time.

Okay. But can we assume, Bill, that the required returns at least met the 15% hurdle rate?

Yeah. I think you can determine that. Also, it has to do with we couldn't do some of the things we were going to want to do before. We will have savings in our planogram efforts as we go forward because we don't have to reset some things that we would have otherwise.

So with that being said, any contemplation on your part to maybe a more continuous program on the reset stage, or do you think that this really gets you to exactly where you want to be?

I think we're exactly where we want to be. I am very, very pleased with the presentation in our stores. I am very pleased with our operations team's ability to significantly improve our store standards in our stores. Now we're continuing to work on maintenance to make sure our stores look great. We'll continue to make minor modifications as we always have in our planograms, but I do not see any major shifts or any major capital initiatives on resetting the stores. Remember these resets that we did cost us about 20 basis points in the first two quarters.

Right. One last question, if I may, Bill. With respect to the direct importing program, would it be correct on our part to assume that maybe the contribution to gross margin for this initiative alone should increase in the next couple of years as this initiative takes even greater hold?

I think you can assume that we're at the very early stages of a program that we think will build over time. Yes.

Great gentleman, thank you very much.

Thank you, Alan.

Before we conclude the call, I'd like to take a moment to reiterate that we know we still have much to accomplish. We know the opportunity for future growth is great and we certainly believe we can gain market share. However, I want to stress this has to be about setting the appropriate pace for the future and I believe we're well-situated to have a successful fiscal 2007 and beyond. I thank you very much for participating in today's call.

Thank you. This concludes today's presentation. Thank you for your participation. You may disconnect at this time.