Welcome to the AutoZone conference call. (Operator Instructions) This conference call will discuss AutoZone's third quarter financial results. Bill Rhodes, the company's Chairman, President and CEO, will be making a short presentation on the highlights of the quarter. The conference call will end promptly at 10:00 AM Central Time or 11:00 AM Eastern Time. Before Mr. Rhodes begins, the company has requested that you listen to the following statement regarding forward-looking statements. Certain statements contained in this press release are forward-looking statements. Forward-looking statements typically use words such as believe, anticipate, should, intend, plan, will, expect, estimate, project, positioned, 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 credit market conditions; the impact of recessionary conditions; competition; product demand; 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. Certain of these risks are discussed in more detail in the Risk Factors section contained in Item 1A under Part 1 of our Annual Report on Form 10-K for the year ended August 29, 2009 and these risk factors should be read carefully. Mr. Rhodes, you may now begin.

Good morning, and thank you for joining us today for AutoZone’s fiscal 2010 third quarter conference call. With me today are Bill Giles, Executive Vice President, Chief Financial Officer, Store Development and IT; and Brian Campbell, Vice President, Treasurer, Investor Relations, and Tax. Regarding the third quarter, I hope you have had an opportunity to read our press release and learn about the quarter’s results. If not, the press release along with slides complimenting our comments today is available on our website, www.autozoneinc.com. Please click on Quarterly Earnings Conference Calls to see them. We are very pleased to announce for the quarter an EPS increase of 31.5% and a domestic same store sales increase of 7.1%. Our same store sales performance accelerated from the second quarter considerably growing from 1% to 7% and it increased on both a 2-year and 3-year stacked comp basis as well. While our average ticket continued to grow year-over-year the improvement primarily was the result of improvement in customer count. We believe our strong same store sales increase was attributable to both the macro economy and market share gains across both our retail and commercial businesses. In reviewing our performance to better understand the causes of our acceleration, our analysis has led us to believe some of the acceleration can be attributed to macro factors. Specifically we believe: One, customers are doing more DIY work due to continued economic pressure. Two, a decrease in new car sales has benefited our industry and this is good for our business in the near-term. Finally, higher tax refunds this year have helped our customers and therefore our business. The first point, customers continue to shop our stores in some cases out of economic necessity or simply to save money. This represents an opportunity for our industry overall. We…

Thanks Bill. Regarding the third quarter for the 12 weeks ended May 8th we reported sales of $1.822 billion, an increase of 9.9% from last year’s third quarter. Same store sales for stores open more than one year were up 7.1% for the quarter. We experienced strong sales growth from both our retail and commercial customers. Net income for the quarter was $203 million, an increase of 16.7% versus last year’s third quarter and diluted earnings per share increased 31.5% to $4.12 from $3.13 in the year-ago quarter. Our continued disciplined capital management approach resulted in return on invested capital for the trailing 4-quarters of 26.5%. We have and will continue to make investments that we believe will generate returns that significantly exceed our cost of capital. Gross margin for the quarter was 50.7% of sales, up 43 basis points compared to last year’s third quarter. The improvement in gross margin benefited from higher merchandise margin and leveraging distribution costs due to higher sales. The merchandise margin improvement of 23 basis points was attributable to both a shift in mix to higher margin products and lower product acquisition costs. Our Duralast, Duralast Gold and Valucraft product lines continued to show sales increases in both our retail and commercial businesses. Our customers continue to recognize the value proposition these high quality brands offer. We continue to spend marketing dollars to promote our brands as we feel they can create real competitive advantages for us on an ongoing basis. Looking forward we believe there continues to be opportunity for gross margin expansion. We do not manage to a targeted gross profit margin percentage, however, as our key focus is on increasing absolute gross profit dollars. SG&A for the quarter was 31.1% of sales, down 59 basis points from last year’s third quarter.…

Thank you Bill. We managed our business very well this past quarter. I would like to take this opportunity to again commend and congratulate our AutoZoners on a job very well done. We executed our plan and had very few surprises. While we do not and will not manage our business to a 7% comp, we are encouraged by our level of execution and our results and we look forward to our busiest selling season; our fourth quarter. Our stores look great heading into this quarter. The morale across our organization and specifically in our stores is high and our AutoZoners are excited about the investments we have made in their stores and in them personally. We remain focused on our key priorities stated at the beginning of our fiscal year; one, relentlessly hiring, retaining and training our AutoZoners to make sure we are delivering on our stated corporate goal of providing the best in trustworthy advice. Second, continually refining our product assortment in order to meet all of our customer needs. Third, deploying inventory effectively across our network with specific emphasis on utilizing our hub and satellite network of stores. Fourth, commercial sales growth with a pay-as-you-go mentality albeit impatiently, improving our business with up and down the street, national accounts and public sector customers is our objective. We will continue to develop our sales team in order to make this happen. Lastly, we will work to expand the rollout of our blended store concept, our One Team initiative. We believe there can be real power in managing our stores as one cohesive unit. This will only strengthen our service levels to all customers. As we remain on track with all of these initiatives we promise to continue our focus on innovation and improving every aspect of our business. We remain focused on steady, profitable sales and earnings improvement. We had a very good quarter which is again worthy of congratulating our entire organization for their commitment of living the pledge. However, we will not rest on our past performance. Our approach remains consistent. We are focused on going the extra mile in 2010 and we remain very well positioned to do just that. Now we would like to open up the call for questions.

(Operator Instructions) The first question comes from the line of Analyst for Gary Balter – Credit Suisse. Analyst for Gary Balter – Credit Suisse: With the sector going through this top line resurgence we have heard pent up demand. You mentioned tax refunds and some secular factors. We are still trying to gauge how sustainable these sales gains are. Do you see anything your mix even within your buckets that tells you this may be more permanent and I guess broadly in general how sustainable do you think this momentum is?

I mentioned in my closing comments we are not going to manage our business to a 7% comp. It is not our expectation that it will run at that rate. The beauty of this business is we don’t have to be able to forecast what the sales are going to be in the upcoming quarter. We can manage our business week to week certainly and in a lot of cases day to day. We don’t spent a tremendous amount of time trying to see what the future is going to be. What we want to do is optimize the environment we are in. We believe we have had some industry tailwinds now for 18 months or so. We have probably had some industry headwinds for a long period of time. I will just point you back to the 15th consecutive quarter of double-digit EPS growth. I believe we have the right strategy regardless of what happens in the macro environment. We don’t have a crystal ball to see what is going to happen either. Analyst for Gary Balter – Credit Suisse: Within your buckets, failure that presumably gets replaced immediately but I guess maintenance could be a little bit more put off. Are you seeing anything that is changing in there just to say more of this maintenance now is getting fulfilled and right now we see that continuing?

What we have actually experienced is maintenance really accelerated last year. So this quarter we actually talked about it being down slightly but that was really as result of the significant ramp we experienced this time last year. The only thing trend wise we have really seen is a little bit of resurgence in the discretionary categories. I think some of that had to do with coming into spring. There is pent up demand coming out of winter regardless of which year it is as people are cleaning their cars, enhancing and accessorizing their cars a little bit and we saw a little bit of a bump in discretionary this time. Analyst for Gary Balter – Credit Suisse: As we think through the expense line obviously you have done a great job in the quarters where comps have been a little bit lower controlling the expenses. How do we think about what is controllable and what is an underlying growth rate?

That is a great question and I will get Bill Giles to add on to it a little bit. What we are trying to do is make sure we manage our business effectively to whatever business environment we are in. I will point you back to last quarter where we had a 1% comp. We were able again to manage our expenses very well. This quarter we did see significant sales acceleration at the beginning of the quarter and we did some things like accelerating our hub store enhancements.

Just to add on to that, I think we are trying to be relatively clear on those initiatives where we have added some incremental investments and tried to help quantify those for you. We believe those are going to continue to drive our business for the long-term. The one thing I would drive you back to is the organizations incredible ability to respond to the sales environment in which we are operating in and being able to manage the expenses appropriately in order to continue to deliver strong earnings growth.

The next question comes from the line of Alan Rifkin – Bank of America. Alan Rifkin – Bank of America: Concerning the hub strategy, now that you are 75% the way through the program and now you have said you will complete the program by the end of the calendar year whereas I believe in the past it was the end of the fiscal year, obviously this is yielding tremendous results on the commercial side of your business. If we look at the hubs that were reinforced in the latter part of the program, collectively what are the same store sales for the stores supported by the 180 hubs? How are they doing relative to the ones you haven’t completed yet?

I think there is a myriad of factors. We really haven’t looked at it particularly that way. What we have looked at is how are the parts selling that we are adding to those hubs and how are those parts we are replenishing to the satellite stores selling. We have been, as we mentioned previously, very encouraged and the sales are exceeding our plans but we are a little hesitant to quantify it because there is so many other factors going on at the same time. What I will say and reiterate is the hubs we opened in 2008 continue to grow quite nicely. We are continually refining the model and refining the inventory assortment. We are encouraged we are getting a significant bump when we open them but we think there is still a long way to go to optimize them. Alan Rifkin – Bank of America: On the One Team concept you said you will be expanding this test in the fourth quarter. What are the associated expenses with that and are you at liberty to shed a little bit more color as to what exactly you are seeing on the revenue line that is a result of the implementation of this concept in the early stores?

I am hesitant to talk about the sales performance because it has literally been just a handful of stores. So, I am pretty cautious about doing that. There are two things I would like to add. Number one, the whole notion of One Team, we have specific packets we put in these test stores but the whole notion of One Team is beginning to go across the organization whether they have the assets required or not they are really working much more closely together and that has been beneficial. On the expense front we are not sure there will be significant expenses. There might be some CapEx expenses in providing more hardware on the parts counter for commercial sales organization but I don’t think you will ever hear us call that out as an expense drag or a CapEx major hit. We did, as I mentioned in the prepared remarks, we did develop a version of Z-net for commercial which is very exciting because it has been an old green screen platform. Therefore it has been very hard to get people who don’t work with it every day to fill in on vacations or when somebody has to go out and make a sales call or anything like that. So we are very excited about the commercial Z-net and its ability to help facilitate One Team as well. Alan Rifkin – Bank of America: You mentioned as part of the driver for the success in the commercial side was an increase in sales managers. What is your prognosis for the number of incremental sales managers that will be added over the next 12 months?

We really haven’t laid out specifically how we are going to do that. What we are doing, and I mentioned pay-as-you-go. That is our mentality. Put some in. Get them to the point they are productive and providing incremental EBIT and then take that incremental EBIT and invest it in the next group. We are now over 200 and we look to be significantly higher than that and we really frankly don’t even know how high is high at this point in time.

The next question comes from the line of John Lawrence – Morgan Keegan. John Lawrence – Morgan Keegan : Would you comment a little bit on the strength of commercial? When you break down that customer set between up and down the street customers and the chain accounts, can you sort of delve into that a little bit and talk about the strength in both subs?

The way we are really looking at it is we want to do things that benefit all of our customers. When we focus on the things that are important to the up and down the street customer they translate terrific to the national accounts customers as well. We have seen more growth in the up and down the street in recent quarters. Some of that has been because of some of the businesses we are not doing business with but we are having really nice results with a tremendous amount of our national account customers as well.

The next question comes from the line of Colin McGranahan – Bernstein. Colin McGranahan – Bernstein: My first question is on gross margin. Unless something changes dramatically in the fourth quarter it looks like you are on track for at least 10 consecutive years of gross margin expansion. You said and commented and I think you have said this before that you continue to see opportunities for gross margin. I am just wondering as the commercial business does accelerate here and obviously that provides a little bit of negative mix pressure, how much more gross margin opportunity do you think there is? If you can comment at all on the industry overall, your primary competitors have seen nice gross margin trends as well. Does this just continue from here?

I think we certainly have a positive outlook on gross margin as we look forward. We believe there are various attributes of gross margin that continue to have opportunity for us to expand. I think we have done a good job this quarter. We talked a little bit about the shift in mix. That is going to be somewhat timing within a quarter. At the same time we have got lower acquisition costs. I think our merchandising organization has done a very good job of continuing the work and reduce our acquisition costs. Some of that comes from direct sourcing as well and we always continue to have some opportunities on the supply chain. We feel terrific about the improvements and enhancements we have made to improving gross margin and at the same time we have experienced an acceleration in our commercial business. Going forward we continue to see opportunities on each of those fronts. Colin McGranahan – Bernstein: No change or any pressure from pricing that could offset that?

There is always things that can happen in the future but at the moment I think we have done a very good job between price optimization as well as lower acquisition costs as well as expanding our ability to increase our direct sourcing to reduce acquisition costs. Then also our supply chain organization has done a terrific job with managing their infrastructure. Colin McGranahan – Bernstein: A second question coming back to the One Team concept, can you provide any help in understanding how labor hours or labor productivity has changed or improved in the concept or in the test?

Really we haven’t focused on labor hours that much. We have basically focused on, if you take a typical store it may have two people in it at a point in time for DIY and two people working on commercial If you get a rush either in DIY or commercial and you are focused on leveraging those two folks you don’t have the resources you have when you manage the whole business. So we have really seen we haven’t significantly changed labor hours up or down but what we have seen is we have been better able to service customers on both sides of the business and that has benefited us on the sales [department]. Colin McGranahan – Bernstein: So it is really a sales per labor hour productivity enhancement?

It is. Will it give us opportunities in the future to look at leveraging payroll differently? Maybe. It also may give us an opportunity to add payroll and be more productive. So we really don’t know at this point.

The next question comes from the line of Tony Cristello – BB&T Capital. Tony Cristello – BB&T Capital: One of the questions I wanted to ask a little bit about are the hub conversions obviously are working and you are seeing the results. Is it also related to, because it sounded like in some of your commentary you talked about the ability to force product back into the hub and carry fresher product or product that will turn quicker at the local store. How much of that has been reset throughout your network today? If you think about 76% of the hubs have been converted, maybe is it because of the maturation of that is it maybe 50% of your stores are getting that benefit or that lift right now?

You are talking about the benefit of lower inventory because of removing the slow inventory? Tony Cristello – BB&T Capital: Removing the slow moving inventory and then also having probably a better assortment of parts to sell at the store level.

First I would say we are so focused right now on making sure we have the right parts coverage in our stores that we have been pretty cautious on removing that slow moving inventory in the satellite stores. Candidly we will remain pretty cautious on it. We will do it methodically over time because the last thing we want to do is start saying no to customers in the marketplace. As you can tell from our overall inventory results we were down 2% on a per store basis. That is a significant contributor to that decrease and there is probably more upside to that over the long-term but at the same time, as you mentioned, we are going back in and putting in newer, late model coverage to make sure we can fulfill the needs of primarily the commercial business but one thing we keep learning is every time we put inventory in that is newer and fresher the DIY business uses it as well. Tony Cristello – BB&T Capital: One thing I wanted to also ask about is when you look at the spending related to the conversion of the hubs is it fair for us to assume with the success of commercial as a result as well as you pointed out DIY there will remain some embedded level of spend to help drive further commercial growth down the road or could that level of spend even perhaps be accelerated somewhat?

I think it is fair to say there will be some embedded expense in there. Some of the commercial [picks] continue to improve the commercial business overall particularly as we are talking about converting some of the hubs there is an element of some of those expenses that are ongoing in order to operate it. Obviously we believe as we continue to and as Bill talks about all the time on the pay-as-you-go mentality we continue to get the appropriate returns for the investment we are making and on a long-term basis expect to leverage those expenses. Tony Cristello – BB&T Capital: Do you think the level of success you have seen to date is better than you would have anticipated at this point?

I would say I was quite pleased with 15.5% growth in commercial business in Q3. Like I said with the 7% I wouldn’t straight line that. If we come down slightly I am not worried about it. I am very satisfied with the strategies we have put in place and really commend both the operating team on improving the service levels of the stores and also the sales teams which remember is only three years old. While we will continue to add numbers to that sales team the maturation of that sales force is still very early and candidly I am very pleased with how they are progressing.

The next question comes from the line of Matthew Fassler – Goldman Sachs. Matthew Fassler – Goldman Sachs: First of all, you talked about having gained market share this quarter. Given the acceleration in your sales and the similar acceleration we saw across the sector how did your share increases this quarter compare to the share increases you saw in recent quarters?

What we have stated is we continue to have share increases in DIY and commercial. I think they might have been slightly lower this quarter than they have been in the last few quarters. We started annualizing some very significant gains last year. Matthew Fassler – Goldman Sachs: A couple of people have speculated about a perspective change in seasonality to the business to the extent that the fourth quarter has kind of been a [pump] quarter for the last couple of years for whatever reason. Perhaps consumers are focused on other things and they are buying closer to need with the first calendar quarter that is, the spring quarter accelerating to a greater degree than we have previously seen. Do you think there is any relevance or truth to that assertion?

I do. I don’t have empirical evidence to say it. We have looked at a lot of different factors. The one that we called out was we believe there was a benefit from tax refunds. If you think about a very challenged macro environment and particularly some of the customers we deal with who were hit the hardest by it, them getting a refund check is like a monetary stimulus to them and I think that helps bring it in. Also I think there is some factor coming out of winter there is more demand pent up and people are doing that when the weather breaks. Matthew Fassler – Goldman Sachs: Finally, in our store checks and online checks we have noticed a little bit of price creep in some of the commodity driven front-end items, really across the sector. No one more than anyone else and items that would be typically I think be considered inelastic as most of your store really is. Can you talk to us about what you are seeing in pricing and what you think price points in commodities in particular might be contributing to some of the acceleration we are seeing across the space?

I wouldn’t say we have seen a significant change in commodity price points over the last 12 months. Before that there was a very significant change. Just talk about oil for instance. We used to sell it for $1.99 a quart. It is now on the shelf at $4.29 but there is also continuing good promotions certainly by us. We are selling a 5+ quart jug and an oil filter at a very attractive price. All in, I don’t think there has been a significant increase in commodity pricing that is driving any of the sales performance.

The next question comes from the line of Kate McShane – Citi Investment Research. Kate McShane – Citi Investment Research: You had mentioned you were seeing strong execution from your competition and I wonder if anything changed in the competitive environment during the quarter in terms of discounts, promotion or advertising from your competitors that was different from the quarter before?

No. I wouldn’t call out anything material by any stretch of the imagination. Our competitors have always been strong. We have a great deal of respect for them and what they are able to do. Our objective is to do it better. That is what we are going to continue to be focused on. Kate McShane – Citi Investment Research: How much of your growth do you think in [DIFM] is a result of the dealership conversions? Do you have a sense of how many more quarters you are going to possibly benefit from this?

I wouldn’t attribute our performance in the commercial business to many significant external factors. I think the external factors certainly come into play more in the DIY business because we have a more mature business. But in commercial I think our destination is generally solely up to us. We are so new in this business that I really wouldn’t put it to dealerships. If you look at the acceleration from just last quarter we were at 8.5% and we went to 15.5%, clearly dealership closings didn’t happen at that rate during the quarter.

The next question comes from the line of Dan Wewer – Raymond James. Dan Wewer – Raymond James : Last year you noted that you were going to reduce the return on investment hurdle for new stores from 15% down to 14%. I presume that was healthy unit growth in the state of Florida. In hindsight looking at the performance of your new stores, looking at the 200 basis point increase in overall return on capital, have you in fact seen the returns in your newer stores drop as you were speculating a year ago?

It is still fairly early because those stores are still relatively immature. But I believe that strategy was helpful for us and it allowed us to penetrate faster into markets we were under-penetrated in. Overall, our returns continue to perform well. I think some of the strategic decisions that we made on those stores individually have turned out very well and the returns have remained very healthy. Dan Wewer – Raymond James : So when you look at both the capital costs of opening the stores and the initial profit run during the first year have they not changed from what you were seeing in other markets?

They have all opened strong. So they have opened a little bit better. Our new store productivity overall has been a little bit stronger than it has been historically. So I would say we have been very pleased with that. Dan Wewer – Raymond James : You noted on your commercial sales effort the first initiative is to increase share with your existing customers and second add new customers. When you look at the 15% revenue growth in commercial, a bit acceleration from the previous quarter, can you give us a sense as to how those two priorities are playing out? Are you in fact seeing the faster growth with your existing customers?

I would say it is pretty much across the board. I would say both of them, our penetration and the new customers, generally grew at about the same rate proportionately to when they were growing at 8.5. So nothing material there.

The next question comes from the line of William Truelove – UBS. William Truelove – UBS: Getting back to commercial a little bit talking about how you set your own kind of results, could you talk about the inventory or out-of-stock issues with the hub stores that have been converted versus the hub stores that haven’t been converted? How much of the sales gain is just having the parts versus other kind of factors?

I think a big part of it is having the parts. We have expanded the coverage significantly in those new model rollouts and so we are able to say yes quite a bit more frequently than we were before. I also think there is a halo effect. When you continue to say yes to special order needs or special order requests from customers regardless of whether they are commercial or DIY, you build more confidence with them and the next time they have something be it a special item or a regular item they are more likely to call you. We have seen a little bit of a rising tide [on all boats]. William Truelove – UBS: Is there any way to compare that? Or some additional details between where that is now in converted hub stores versus where it was in terms of that? Or could you say a majority of the 15% is from that?

The majority of the 15% of the commercial growth? I wouldn’t say that at all. I would attribute it more to our operating execution and our sales force development and maturation than I would to the hub stores. Don’t forget the hub stores are benefiting significantly on the DIY side. In fact, more of the benefit as a percentage of the total comes from DIY because we have 85% of our business in DIY.

The next question comes from the line of Chris Horvers – JP Morgan. Chris Horvers – JP Morgan : First on the discretionary sales mix. Can you talk a little bit more in detail on the category beneath that? I am curious to see if this is products like car wax that is driving that or is it something where you consider it deferred maintenance items that eventually the consumers put it off and they have to do it? I don’t know, something like car mats. Any detail there would be great.

I would say it is more on the personalization and performance related areas. I would like to call out our merchandising team. I think that group in particular has focused very hard on finding ways to fulfill customer needs and they have changed their product mix as a result of the economic situation that exists today. So things like car mats and radios and all towing and travel, all those kinds of items are where we have seen some of the pickup. Chris Horvers – JP Morgan : So basically the consumer ends up with some more money in their pockets and that confronts better merchandising and that drove the improvement?

Again, I don’t want to over-state that. We said it went up to 20% of the mix but we also said that generally happens this time of the year. I think there is…spring is coming and I want to get my car looking good again. Chris Horvers – JP Morgan : Overall on a monthly basis could you talk about how your sales mix peaks here in the next month or two? Is May the biggest month of the year or June?

Our business comes out strong starting around Valentine’s Day. It really comes on pretty hard and it has ups and downs over the next 6 months but remains pretty strong throughout the summertime. Chris Horvers – JP Morgan : On the gross margin, it seems like there is a step up in tone there. Previously you had talked about gross margin continuing to look good but maybe not at the same pace as what you saw in that quarter. What is driving that? Is that acceptance of the private label brands on the commercial side? Is it sourcing efforts? What exactly is driving that step up?

I think we have talked before about it being as much of mix in products. I think that is a lot of the offering and the work the merchandise organization has done I think there has been a piece of that in lower acquisition costs which I think is our merchant’s ability to source product in a more effective basis in order to help lower costs. I think we have also experienced some improvements in our supply chain organization and their ability to continue to squeeze costs out of their organization and leverage it. We run a very healthy gross margin. We have generated some slight improvements over the quarters and we continue to remain positive.

At this time I will turn the call back over to Bill Rhodes.

Thank you. Before we conclude the call I would like to take a moment to reiterate our business model remains very solid. Our customers continue to tell us we are improving on our efforts to meet or exceed their needs. Market share data confirms their opinion. We have a solid and consistent plan and a great team. I want to stress this is a marathon and not a sprint. Our focus is on our critical success factors. As we continue to focus on the basics and never, ever take our eye off of optimizing long-term shareholder value we are confident AutoZone will continue to be incredibly successful. With this Memorial Day extended weekend upcoming I hope we all take time to remember those heroes who died servicing our country. Thank you very much for participating in today’s call.

Thank you. This does conclude today’s conference. We thank you for your participation. At this time you may disconnect your lines.