Bill Rhodes - President & CEO Bill Giles - CFO

John Lawrence - Morgan Keegan Robert Higginbotham - Goldman Sachs Dan Wewer - Raymond James Adam Timler - Deutsche Bank Irene for Danielle Fox - Merrill Lynch Peter Benedict - Wachovia Tony Cristello - BB&T Capital Markets Seth Basham - Credit Suisse

Welcome and thank you for standing by. 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. (Operator Instructions) Before Mr. Rhodes begins, the company has requested that you listen to the following statement regarding forward-looking statements. Certain 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 development says and other factors we believe appropriate. These forward-looking statements are subject to a number of risks and uncertainties including, without limitation, competition, product demand, the economy, credit markets, 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 and developments in our business 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 factor section of AutoZone's Form 10-K for the fiscal year ended August 26, 2006 for more information related to those risks. In addition to the financial statements presented in accordance with Generally Accepted Accounting Principles, AutoZone has provided metrics in this presentation that are not calculated in accordance of GAAP. For a reconciliation of these metrics please see AutoZone's press release in the Investor Relations section at www.autozoneinc.com. Mr. Rhodes, you may now begin.

Good morning. Thank you for joining us today for AutoZone's fiscal 2007 fourth quarter conference call. With me today are Bill Giles, Executive Vice President and Chief Financial Officer, Store Development and IT; and Brian Campbell, Vice President, Treasurer, Investor Relations and Tax. Regarding the fourth quarter, I hope you 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, is available on our website, www.AutoZoneInc.com. Please click on quarterly earnings conference calls to see them. To begin, I would like to thank our entire organization, all 54,000 AutoZoners for their incredible efforts in completing another year of record earnings. We accomplished more than simply earnings however, as we made significant progress on each of our initiatives, which has positioned us well as we begin fiscal 2008. We dissected and then rebuilt our merchandise assortment process. We reinvigorated our commercial organization with expanded parts coverage and enhanced our team sales processes in order to profitably grow sales; and most importantly, our customer service levels have continued to make steady improvement year over year. In fact, I would like to spend a moment talking about a little history. A little over two years ago, we were experiencing significant sales declines and had just completed extensive customer research that revealed our customers' level of satisfaction with their AutoZone experience was declining. Our leadership team soon afterward determined it was essential to make significant changes to our actions. We embarked on major initiatives, including resetting virtually our entire domestic store base -- over 3,200 stores at the time -- in order to allow our customers the ability to navigate our sales floor more effectively and find the merchandise they needed. We accomplished that feat on time and…

Thank you, Bill, and good morning, everyone. Let me begin with gross margin. Gross margin for the quarter was 50.1% of sales, up 50 basis points compared to last year's fourth quarter. In the fourth quarter, margins continued to benefit from our ongoing category management initiatives, import efforts, and leveraging supply chain efficiencies. Over the last several quarters, these efforts have been partially offset by an increase in product costs, specifically related to oil-based products. We continue to be successful in working to offer the right products at the right prices to our customers. This includes supply chain initiatives, tailoring merchandise mix, and the continued optimization of our good, better, best product lines, all allowing us to price our products appropriately while giving our customers great value. It is worth pointing out that we continue to see positive consumer response to our Duralast and Duralast Gold product lines. Our customers, both retail and commercial, continue to recognize the benefits from buying our better and best merchandise lines. Going forward, we believe there continues to be opportunity for gross margin expansion, albeit at reduced rates. Our direct import initiative is in its early stages, but we are pleased with the progress our merchandising organization has made with their abilities to improve margins while pressures procurement costs continue to exist. SG&A for the quarter was 31.3% of sales, up 85 basis points from last year. Our deleverage came primarily from our inability this past quarter to leverage our fixed costs based on slightly negative comp sales performance. Specifically, rents and depreciation were 56 basis points higher than last year's fourth quarter. At the same time, we continue to invest in additional marketing efforts and training programs for all AutoZoners in order to improve customer service. As I have mentioned before, the AutoZone…

Thank you, Bill. In summarizing AutoZone's fourth quarter results, I would first highlight our EPS growth of 11% over the prior year's fourth quarter. In an environment where we are seeing a more cautious consumer, the AutoZone model continues to prove itself capable of generating double-digit EPS growth. I think it is important to refer back to my opening comments. We've shown that we can generate double-digit EPS growth with relatively flat same-store sales results. While we are definitely not satisfied with this quarter's sales results, we believe the initiatives we've implemented in 2007 and those we plan for fiscal 2008 will lead to increased sales. With those sales, we're excited about what it can mean for EPS. We are confident our model remains strong. We're convinced we have the correct strategy to succeed for the long run. We continue to feel of confident in our plan. We understand our success is built on doing the little things right to satisfy our customers. We believe our stores do look great, and our AutoZoners have better tools at their disposal than ever before. However, I want to reiterate, our approach is about steady improvements over the long run. Our story continues to be one of steady, profitable sales improvement. We're about staying focused while making methodical improvements in the model so we will be well positioned for the future fiscal quarters and years. Our customer survey results tell us the AutoZone shopping experience continues to improve versus last year, and we're beginning to gain share in both our front of store and in the critically important hard parts area. While we do not provide financial guidance, the entire AutoZone team continues to be enthusiastic about our future. We continue to feel confident in our long-range plans. Our plan is a simple…

(Operator Instructions) Your first question comes from John Lawrence - Morgan Keegan. John Lawrence - Morgan Keegan: Good morning, guys. Bill, thanks for that detail on a lot of those initiatives. On the commercial side, would you dig just a little further there and talk a little bit about some of the tests, the transitioning with more profitability? How is that coming about? And, some examples of how the hard parts coverage is helping your business.

John, I would start with we rolled out our test programs about a year ago, and we continue to roll them out, although at a very prudent place. We are functioning, as I said on the last call, in a pay as we go model. We're going to make sure the investments we're making are proving themselves. That's one of one of the beauties of having 4,000 locations and almost 2,200 commercial programs. We don't having to full steam ahead at any point in time so we can prove the activities we're doing are paying off. We've been very encouraged, particularly on the commercial side with the product assortment improvements we've made over the last nine months, and we're now just beginning to really build a sales force, what we call a world-class sales culture, and that's something that's new to us. Historically we've been a retailer, and retailers don't have direct sales operations. We're continuing to learn in that area. Obviously we brought Larry Rozell in about six months ago, and he and his team are very focused on building a true world-class sales organization. John Lawrence - Morgan Keegan: Secondly, Bill, can you give us on the SG&A line going forward, will some of those other initiatives as far as training and advertising continue to add to the expense line?

I think overall that we wouldn't expect that kind of level of deleverage on an ongoing basis. We're very much committed to making sure we continue to invest in the initiatives to help drive and improve customer service on an ongoing basis, and I think that we have our expenses appropriately managed.

Our next question comes from Robert Higginbotham - Goldman Sachs. Robert Higginbotham - Goldman Sachs: Can you give us a sense of how sales progressed through the quarter and also give us some extra color on what the regional disparities were? I am particularly interested in what Florida and California looked like.

Robert, historically we do not break out sales trends throughout the quarter or even regionally. I can't say that we've necessarily seen anything that we would say that one particular region is carrying us or killing us necessarily. What we're doing is really focused on a lot of things across the organization. I think we have done a pretty good job throughout the year of improving and expanding our product assortment particularly on the hard parts side of the business. I think we've done a good job of continuing to improve our customer service levels. We get good feedback from our customers that our overall service levels and satisfaction levels have improved on a year-over-year basis. It is a lot of things throughout the quarter that actually helped us improve the momentum we have gained. Robert Higginbotham - Goldman Sachs: Fair enough. In that case, could you comment on why you think that the DIY environment is still as tough as it is? You yourself commented how gas prices have tapered off a bit in terms of year-over-year increases, and I know miles driven are up and down each and every month, but you pointed to the OKDs being at historically high levels. What do you feel is out there that's really kind of depressing that side of the business and when do you think that really starts to turn around? Bill Rhodes: I would start with, we haven't seen a radical material change in our DIY performance over the last 24 months, and certainly miles driven have flattened to slight declines over the last 18 months, but what we're focusing on is what can we do to make our business more productive? We have so many opportunities to continue to become more and more relevant to our customers. All these macro things we can't do anything about them, and so we're just very focused on, what can we do? We're very pleased with the progress we're making on our initiatives, but the bottom line is it hasn't generated the sales growth we want, need or expect. We're not significantly off from that, but we're not meeting our aspirations, and that's our commitment regardless of what's going on in the macro environment, we need to go meet our expectations.

Our next question comes from Dan Wewer - Raymond James. Dan Wewer - Raymond James: Bill, just to follow up on the sales discussion, same-store sales have essentially been flat for the last four years, and recognizing that the industry slump in the last six quarters as worked against the company, you sound a lot more upbeat for '08. I recognize you're not providing any guidance, but is there anything tangible that you could show us to get us more upbeat about your top line growth in '08? I guess one item you alluded to was the customer surveys, but is there anything else you can point to? Bill Rhodes: Dan, we continue to see progress in a lot of fronts. We've seen progress on the merchandise in specific categories where we've added merchandise, specific instances we've seen it work. Quite frankly we have seen that we have made mistakes with our new product assortment system well as well, and we're learning from those mistakes and will continue to learn from those mistakes. We continue to see nice improvements in our customer service metrics, and this is the first time I believe in eight quarters or so where we've actually had a positive total commercial sales number. We said for the last couple of years we're working on building a model that drives to profitable, commercial growth. We finally have a slight positive, 0.5%, but that was also with a little bit of a head wind due to the Midas supply chain agreement termination. So we continue to believe we're working on the right things and that we're seeing progress. When we make changes, we can see progress from those changes. That's what encourages us. Dan Wewer - Raymond James: If we do see a sales breakout in '08, it sounds like it will more than likely originate on the commercial side of the business, that's where you had the greatest opportunities. Is that accurate? Bill Rhodes: I think clearly we have the greatest opportunity on commercial. We have 13% market share on DIY, 1.3% on commercial. We have a tremendous long-term opportunity in commercial and a tremendous long-term opportunity in DIY, but we have a more mature model in DIY than we do in commercial. Dan Wewer - Raymond James: Finally, I believe you noted that you don't break out profitability between those two segments, but is it fair to say that we're seeing a better gross margin improvement in the commercial side of the business of late than we are in the do it yourself segment?

I would say not necessarily, Dan. I think overall we're pleased with the gross margin improvement we've made. I think the merchandising organization has done a very good job of lowering our product acquisition costs using several measures including imports, so overall I think that we're getting good lift from that. I wouldn't necessarily pin it on one particular area versus another.

Our next question is from Adam Timler - Deutsche Bank. Adam Timler - Deutsche Bank: First, I want to make sure I understood this correctly. Did you comment in your prepared remarks you will essentially able to offset the lost revenue from Midas with other initiatives in the quarter on the commercial side? Bill Rhodes: That's correct. Overall our sales performance was up 0.5%, which as I just mentioned was the first time in three quarters or so it went positive, and that was despite the termination of the Midas agreement which formally terminated on July the 1st, but there was a transition that began around April 1st.

Then just to go back to your comments really for the first time now you've had a very good, almost world-class sales force on the commercial side. I guess when you talked about this business previously, really the focus was trying to move up the call list from the garages and then having the parts coverage. Would you re-rank those priorities now on the commercial side? Would you say that perhaps having a better sales force is more important than one of those or how do you look at the commercial business now? Bill Rhodes: That's a great question, Adam. Let me clarify one thing. I didn't say we have a world-class sales force. We are working towards developing a world-class sales force. We have some great AutoZoners in those roles, but we have to help them with the processes and tools and training to become those great direct sales people. To answer the other part of your question, what we focused on over the last 12 months is making sure we have the foundational elements in place to be successful in that business; make sure we have the parts we need in that business; make sure we have the people answering the phones and driving the trucks that are the right people; and making sure that we're delivering on our promise of 30-minute deliveries. Once we do that and once we have that foundation in place, now it is to go out and tell that story, and back in around April we began a marketing campaign where once every couple of months we will go out with a sales flyer. We've done one on brakes. We've done one on air conditioning, one on rotating electric starters and alternators and one on engine management. These are great tools that help our sales people tell the AutoZone story. It talks about coverage. It talks about quality of parts, and those have really been some great tools that have added to it. I wouldn't say it is more important to have a world-class sales organization. You've got to have the foundation in place first, but once you have that, then you can have a sales force go out and tell that story.

Very good. Lastly, something a little bit different topic, have you seen any impact per se from the fact that perhaps cars are changing their oil a little less frequently just due to improvements in the quality of the oil and how the cars run from a traffic standpoint at all? Bill Rhodes: Clearly over an extended period of time the oil drain as we call it has been extended. Many of the car manufacturers today will tell you that you can change your oil every 7,500 miles or 10,000 miles, versus 3,000 miles which is the historical trend. However, you will read further in the owner's manual it says you can only do that if you're not considered a severe driver and severe driving is like driving around in Memphis, or driving in dust. The parameters on it are pretty light. We've seen some lengthening in that, and certainly that's been part of our traffic challenges, but you also have things like synthetic oils which also, although they don't change them at frequently, they cost much more, so there is a natural lift in several categories where the average price of the parts is going up, but the change interval is decreasing.

We have a question from Danielle Fox of Merrill Lynch. Irene for Danielle Fox - Merrill Lynch: I just have a quick question. Do you have an idea when inventory increases will be slower than sales increases? Is it fair to say by end of '08?

The way I would look at it is our inventory overall is flat with last year and actually slightly lower, so we feel pretty good about some of the improvements that we've made on inventory management perspective. We don't necessarily project out guidance on a go-forward basis. What I would tell you is that I think we've done a pretty good job as an organization in adding some additional parts coverage, particularly in the hard parts side of the business, and at the same time rationalizing SKUs for slower-turning businesses and maintaining our inventory levels. For us, we're very much focused on making sure that we've got the right parts in order to be able to say yes on a more frequent basis to our customers, and that's really been the primary emphasis. We've kept inventory relatively in check and on a net inventory basis we actually made progress there. If you're thinking about it from a capital perspective, we've actually utilized less capital in order to do that. Bill Rhodes: There may be a little bit of confusion on the way we talk about inventory per store, which on a year-over-year basis, our inventory per store was $500,000 this year, $501,000 last year. However, we have reduced pay on scan inventory over time, so we've taken on the inventory ownership and gotten increased terms from our vendors. On the top line if you just look at owned inventory, that number is increasing, but overall deployed inventory is not. Irene for Danielle Fox - Merrill Lynch: Just a follow up, can you talk a little bit more about why occupancy costs were up this quarter and if you expect that to continue going forward?

We would always expect to have a little bit of pressure on occupancy costs and as we said before, we probably need about a 1.5% to 2% same-store sales in order to leverage SG&A, and that's obviously particularly on our fixed costs. We do see a little bit more increase as we continue to open new stores that we probably have a slightly higher percentage of leased stores versus purchased stores which generates a little bit higher from a rent perspective, but overall, our new stores are opening well and our productivity continues to be good.

Your next question comes from Peter Benedict - Wachovia. Peter Benedict - Wachovia: Bill, the depreciation line has been growing mid-teens last several quarters. I think there was something with the lease accounting you're talking about maybe has been impacting that. Should we expect that growth rate to moderate as we look into next year?

I think I would expect that to moderate from the standpoint you have capital leases, those leases converted into capital leases, and therefore you had an incremental hit a little bit if you will on the depreciation side just from an accounting standpoint, so as we anniversary that, I wouldn't expect to see that increase again. Peter Benedict - Wachovia: On that AP ratio, 100%, any rough timeframe and where you think you might realistically be able to get there?

We don't necessarily have a timeframe specifically identified for that. I think we made good progress this year. We believe we've put some pretty good tactics in place for next year as well, so we will continue to move towards that 100%, but we don't have a steadfast time period in which to achieve that.

Your next question comes from Tony Cristello - BB&T. Tony Cristello - BB&T Capital Markets: Good morning, gentlemen. Bill, have you seen any change in buying patterns, or has there been any further deterioration in demand for the non-discretionary components either in the DIY or the commercial side of the business? Bill Rhodes: I wouldn't say there were significant changes that weren't done by our actions. We've gone through product changes and planogram changes, and we've changed a few planograms that when we go into those changes sometimes we see deceleration, but I think that is self-inflicted versus anything macro-oriented. Tony Cristello - BB&T Capital Markets: A follow-up on that question, over the past 12 to 18 months, the mindset there of the consumer has been one of deferral and gas prices and haven't really changed meaningfully this year to last year. If the macro were to tighten or get a little bit worse, do you think that would have a greater negative impact on the consumer or do you think your customers are already acting as if there was more of a recessionary environment with respect to automotive repair right now? Bill Rhodes: Tony, we've modeled over long periods of time the impacts of macro economic changes to our performance, and quite frankly, we can't draw a very good correlation with that. What we continue to draw the correlation to is miles driven and the number of vehicles on the road and specifically those that are seven years old and older. I don't think we sit here today and say there is going to be a radical shift in what happens no matter what happens in the macro environment. Granted, the one correlation that we have made over the last three years is that there seems to be a negative correlation with miles driven as gas prices go up. That's the one that we've seen directly correlated. Tony Cristello - BB&T Capital Markets: Well, the longevity of a vehicle typically results in more of the critical parts replacement and less concern about some of the more discretionary items and more difficult or challenging environment, wouldn't that bode well for the typical DIY business? Bill Rhodes: It certainly seems to be the intuition, and that's certainly our bread and butter is the nondiscretionary part but I can't tell you factually that we can draw a correlation to it, and we've been through this business for 28 years and been through several economic cycles, and so I don't want to mislead you and say that I think the intuition is right, but I can't support it with facts.

We have a question from Seth Basham - Credit Suisse. Seth Basham - Credit Suisse: I would like to dig a little bit deeper into the commercial efforts. Seems you made progress there but you are still sort short of your expectations this quarter in terms of the sales, if I am interpreting your comments correctly. Can you pinpoint where you're falling short? Is it on the lack of productivity from some of the investments you made in inventory, is it the sales culture not building as quickly as expected? Can you help us better understand that? Bill Rhodes: Seth, based upon the plan that is we had to reevaluate really over the course of the last year, we really reevaluated the core operations in that business, and we might have been a little bit bullish on what we expected to do in light of the way we were approaching that. So I am very pleased with where we are. I am not satisfied with where we are, can't certainly be satisfied with a 0.5% increase in commercial, but I am more focused now on are we building the foundational support levels and are we beginning to build this world class sales force? I think we're making progress in both areas. Now, we are not ones to go out there and do things radical or quick. We're going to make sure and test it, and as I mentioned before, we can go test something in 50 stores and make sure that it works so that we're not testing unproven ideas. That's the approach we've had and that's the approach we're going to continue to have. Seth Basham - Credit Suisse: Are there certain categories of hard parts you've added that have not met your expectations and are you going to be pulling anything out of the stores going forward? Bill Rhodes: Certainly. I would say that not on a category level, but as we go into the individual details, remember, we place products in our stores based upon a store to store basis, so each store behind the counter has a complete different set of parts, and so as we are getting into the first year of this new merchandise assortment tool, we're learning where we were dead on with our assumptions, and we're learning where we made some mistakes, so we'll continue to refine that. The changes will be less significant this year than they were last year, but they'll still be fairly significant. Seth Basham - Credit Suisse: Just moving on a couple other quick questions, Bill, are you seeing any evidence that customers are trading down in terms of the quality of merchandise they're buying?

Absolutely not. Seth Basham - Credit Suisse: That's great. Going forward in 2008, I appreciate your comments on 1.5% to 2% expectation for leverage. Are you suggesting that you expect to leverage comps in 2008? Bill Rhodes: That gets too close to guidance for us. We're just trying to make sure and ground everybody in what we think it takes and that hasn't changed significantly. Before we conclude the call, I would like to take a moment to reiterate that we're excited about our growth prospects for the upcoming year. We understand we have to earn those sales every day. We have a solid game plan heading into 2008 and the best team in the industry to accomplish it. While we have an incredible business model built on a strong foundation of disciplined processes focused on delivering great customer service, we understand we cannot take anything for granted. As we continue to focus on the basics and never take our eye off optimizing long-term shareholder value, we are confident we will continue to be incredibly successful. Thank you very much for participating in today's call. Have a great day.