Good morning and welcome to the AutoZone conference call. (Operator Instructions) This conference call will discuss AutoZone's first quarter 2009 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 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, reject, position, strategy and similar expressions. These are based on assumptions and assessments made by our management in light of experience, 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, credit markets, the ability to hire and retain qualified employees, consumer debt levels, inflation, weather, raw material costs, suppliers, energy prices, war and the prospect of war, including terrorist activity, availability of consumer transportation, construction delays, access to available 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 Factor section of AutoZone's Form 10-K for the fiscal year ended August 30, 2008 for more information related to those risks. In addition to financial statements presented in accordance with generally accepted accounting principals, AutoZone has provided metrics in this presentation that are not calculated in accordance in GAAP. For 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 and thank you for joining us today for AutoZone's fiscal 2009 first 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 first 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, is available on our website, www.AutoZoneInc.com. Please click on Quarterly Earnings Conference Calls to see them. To begin, I'd like to thank all our AutoZoners for their efforts that led to us achieving our ninth consecutive quarter of double digit EPS growth. We are very pleased to continue to deliver double-digit EPS growth in this challenging environment. At the beginning of this quarter, we held our annual national sales meeting here in Memphis. The meeting's purpose was to recognize our 2008 successes and highlight our challenges and opportunities, as well as review our key operating initiatives for 2009. This meeting again reinforced the passion and commitment of our AutoZoners, and clearly showed that our unique and powerful culture continues to flourish. With over 2,000 AutoZoners in attendance, we launched our operating plan theme for 2009 - Great People Providing Great Service. Each year we create an annual theme that becomes the foundation for many of our key initiatives. Establishing these tailored themes has proven to be successful in communicating many of our core strategies and bundling them into a message our entire organization can visualize and operationalize. This year's theme - Great People Providing Great Service - concisely captures the essence of our culture. Regardless of the challenges the macro environment presents to us, our customers, suppliers or other key constituents, we believe…

Thanks, Bill. Regarding the first quarter, for the 12 weeks ended November 22nd, we reported sales of $1.478 billion, an increase of 1.6% from last year's first quarter. Same-store sales or sales for stores open more than one year were down 1.5% for the quarter. While our retail sales showed a modest acceleration versus the previous year's quarter, our customer satisfaction surveys continue to confirm that we are improving the customer experience. Regarding our commercial business, our sales growth rate slowed but remained positive, and we are encouraged by the progress we are making. This marks our sixth consecutive quarter of positive sales growth. We continue to be encouraged with our new field organization, dedicated to growing our commercial business. In addition, we continue to enhance our training efforts for our commercial field leadership to grow sales. In the first quarter, gross profit as a percentage of sales was up 23 basis points versus last year's quarter, while operating expenses as a percentage of sales increased by 40 basis points. This resulted in an operating margin of 16.1%, down 17 basis points from last year's quarter. Operating profit increased 0.5% versus the prior year. Net income for the quarter was $131 million, a decrease of 0.9%. And diluted earnings per share increased 10.1% to $2.23 from $2.02 in the year ago quarter. Our continued disciplined capital management approach resulted in return on invested capital for the trailing four quarters of 23.9%. We're proud to report that this metric continues to improve over last year's already industry leading rate. Return on invested capital is a key measure of our success. We have and will continue to make investments that we believe will generate returns that significantly exceed our cost of capital. We will not deviate from our efforts to optimize shareholder…

Thank you, Bill. In summary, our business continued to perform generally consist to previous quarters. As we have often said, our business is primarily non-cyclical. We tend to not experience very high or very low growth patterns. We were pleased to have delivered another quarter of double-digit EPS growth in light of our performance early in the quarter, as noted previously. As we have often highlighted, we believe our culture is one of our key points of difference. I wish each of you could have attended our national sales meeting a couple of months ago. The passion our AutoZoners exhibit for both our customers and our company is absolutely inspiring. Their passion and dedication is what has built this company and made it what it is today. July 4, 2009 will make the 30th anniversary of the opening of our first store in Forrest City, Arkansas. That first manager, Doc Crain, set the pace for the passion for the customer that continues to be the cornerstone of our company today and for the future. We owe a great deal to those who came before us and built this incredible business and this inspiring culture. We are very excited about what we can accomplish in 2009 and beyond. We believe we can grow our business in 2009, no small feat in today's environment. While it's great to be predictable, we're striving for improved performance, and we have confidence in our plans and are optimistic about our future. We continue to have tremendous opportunities for improvement, as I started the call mentioning. 2009 will be about improving our brand of differentiated customer service. 2009 for AutoZone is about Great People Providing Great Service. Four main objectives for 2009 will be: One, a relentless focus on hiring, retaining and training our AutoZoners to…

Thank you. (Operator Instructions) Your first question comes from Colin McGranahan - Sanford C. Bernstein & Co. Colin McGranahan - Sanford C. Bernstein & Co.: Two questions. One, there's obviously been a lot of concern and focus on the credit environment, and I was hoping you might be able to talk just a little bit about your factoring program and discussions you've had with the banks that participate in that program and how they're looking at the credit environment and extending credit to some of your smaller vendors.

We obviously have had ongoing conversations with the banks that participate in the program, and I would tell you on an overall basis the capacity that we see in the program are fairly consistent today as they were probably about a quarter ago. Now, obviously under the covers there's some movement, with some banks pulling back and other banks increasing their position, but on an overall basis, we've seen the level be relatively consistent. Colin McGranahan - Sanford C. Bernstein & Co.: And so you feel pretty comfortable that a 90% or so payables coverage ratio is achievable through the year?

As we sit here today, knowing what we know today, I would say yes. We feel good about the program, we feel good about our ability to continue to keep the banks up to date. We think it's a good program for them. It's a profitable program for them, and currently they're spread at availability. Colin McGranahan - Sanford C. Bernstein & Co.: And then secondly, just on commercial sales, obviously the slowdown in growth there was a little disappointing. Was there anything you saw in terms of whether that came predominantly from larger customers, larger garages, smaller garages, more late model or more older cars, geographic dispersion? As you looked at that slower growth, was there anything that stood out in terms of what was contributing to it?

Colin, first of all, you said disappointed. Obviously, we're disappointed in the slowing of our sales growth in that business. However, I want to make this point real clear: We're not alarmed by it at all. We're very comfortable we're on the right track. We're going to have some ebbs and flows as we continue to grow this business, and we're very optimistic about what the long-term commercial program can be for us and have a great deal of confidence in our team in that program. There's a couple of things under the covers. We have one national account that we're not doing the same level of business with. They made a strategic decision to move in a different direction, and that's providing us some headwinds. There's also just some general things going on in that business, where there's some deferrable categories that are being deferred by our customers. I wouldn't say there's anything we see different in late model versus older vehicles or in the different types of garages. Colin McGranahan - Sanford C. Bernstein & Co.: And then just quickly, final follow up, it looks like gasoline unit sales or gallon sales in the U.S. might have been actually up in the last week or so. Do you think that will portend that you can see some positive miles driven maybe in late November, early December when we get that data?

Colin, I have not seen that data yet, although it doesn't terribly surprise me. I mean, think about it. We were paying $4 a gallon back in June, and driving in this morning I saw $1.49. Clearly, one of the things that's interesting about our customer base is there's a lot of carnage in the macroeconomic Wall Street environment, but let's be honest, what happens on Wall Street has no bearing on what happens to our customers. The change in gasoline prices is so much more significant to the vast majority of our customers. And so you would think that, if they're getting that kind of relief, it would not be usual to expect that they would get some benefit. And miles driven, as we said in the prepared remarks, miles driven can make a rebound and reduce that headwind that we've had for the last couple of years.

Your next question comes from Alan Rifkin - Merrill Lynch.

A couple of questions for Bill Rhodes. Bill, if you look at your proportion of stores having a commercial entity totaling about 54%, that's significantly lower than one of your main competitors is at, in the mid 80s. Are you of the belief that maybe through adding the commercial desks to additional stores that that could help build your program, or do you believe that adding those incremental stores actually lowers your ROIC?

Great question, Alan, and one that we ask ourselves, quite honestly, quite frequently. Over the long term, I think our expectation is that we could have a higher level of penetration of stores that are on the commercial program. Our current focus is to get the program right in the stores that we have. The fact that we would be servicing somebody else, other shops across town, is not going to have any bearing on our market position in the stores that we currently have open, we don't believe, so what we want to do is focus on the stores that we have today that are on the program. Yes, we'll have minor increases as we move along, but not drastic increases is our current expectation. We want to make sure we get the program right in the stores that we have. Over the long term, we certainly see opportunities to expand the percentage of stores that are on the program.

Another question, Bill, if you will. I don't expect you to show your hand and tell us specific strategies, but are you making special preparations in your California and the former Chief stores in preparation for O'Reilly coming in there full scale in 12 months?

Interesting question. I think the answer starts with obviously we know what they're doing. We also compete against O'Reilly in a tremendous amount of our store base today, so we know what they're like and how to compete against them. Are we making some special efforts out there? Absolutely. We're making sure that we're ready for them to come. We're also looking for opportunities as they go through this transition. Typically when transitions happen they have their challenges, and we want to make sure that we're prepared to take advantage of any challenges that do come about as a result of trying to convert a chain of stores like that. So we're very mindful of what's going on out there, and we'll continue to watch it. However, we're not making radical shifts in our strategy. We operate our stores generally with one operating philosophy and that same operating philosophy will continue out there.

And then, Mr. Giles, a question for you if you don't mind. Any impact at all from the calendar shift on your revenues? And of the 14 of 40 merchandise categories that have been updated, have you seen any material benefit to those category comps so far?

On the first part of that question, on the calendar shift, yes, there was an impact certainly because of the shift. You're in essence trading a week out of August for a week in November. But it's difficult to quantify exactly and we will get the benefit back over the course of the year. It's one of the reasons that we highlighted in both the press release and the script we thought a better comparison was really looking at our post-October business, as we indicated that that returned to more consistent with our previous quarter. On the category initiatives, yes, we do continue to see, as we work through these category initiatives and do category updates, we do see continued benefits, which is why we're very focused on making sure that we get through every category at a minimum once a year. And so for those categories that have been done, they continue to build some momentum.

Your next question comes from Gary Balter - Credit Suisse.

A couple of questions. One is, if we just take the 2.5 ratio you mentioned you'll be at the end of the second quarter and we applied it to what you reported for the first quarter, that would involve bordering about $360,000 more in debt. You're currently authorized for $337,000, so I'm assuming that we're going to see some increase in that authorization to get there, recognizing Q2 numbers may be different than Q1 numbers. But mathematically it works out to about $0.05 had you done it all in the beginning of Q1. Is that math right?

Pretty close, yes. Yes, I think your math's pretty good.

Okay, so we're going to do it. And as you get up to the 2.5, you don't have any concerns? You know, Colin had asked earlier about the bank program, which is obviously so important to the way you guys do business and your dealings with your vendors. That's all been run through the banks and everybody's comfortable with the higher leverage?

Well, I mean, certainly we've been fairly clear and public about the fact that we are moving towards a 2.5 metric with a target of getting there by the end of Q2, and so we've talked about that since June and we've talked about it with the rating agencies. You know, we're very big on transparency and I think we've been very clear as to where we're headed. As Bill mentioned earlier in his comments, we're going to continue to monitor closely the credit markets, the commercial paper markets, and ensure that we have adequate access to liquidity as we move through that process.

And then a couple of business-related questions. One is the one market that O'Reilly, I think, has started to do things based on their commentary has been Chicago. Can you discuss what you've seen in the Chicago market in terms of pricing or anything more aggressive in marketing, etc.? Is that looking different than other parts of the country right now?

Gary, if they're in the conversion process, obviously they're very early in that process, and to date we have not seen anything material one way or the other in their strategies or in our performance.

Back to the other Bill. Can you discuss the LIFO impact? There's been some people concerned that we'll start to see deflation and that will have an impact on comps. How do you think about that?

We take a look at it. Obviously, we've had a bit of inflation over some period of time and it's likely that we'll have some deflation as things cycle through. As you know, we don't run the LIFO through on the P&L; on the balance sheet, it's around $215 to $220 million. There was a little movement this quarter, but we'll continue to monitor it. But that obviously, as I said, doesn't run though the P&L. More importantly, we'll take a look and see what kind of impact deflation has on an ongoing basis, but I think it'll be slow and not radical.

And then the final question is we talk a lot about miles driven, we talk a lot about age of cars. Right now we're going through a new phenomena, which is huge unemployment growth. How do you factor that into the other two? Obviously, it's not a positive, but how much of a negative should we be thinking about?

Gary, obviously that's the one that we're very focused on today. Obviously, we've seen unemployment move up from 4.5% to 6.7% or so in the last 12 months or so and, let's look at it, our business has not changed drastically. However, if it move to 8.5% or 9%, clearly that's going to put more pressure on a select group of our customers. What we're going to do is we're going to make sure that we stay focused on providing them great value and being there for them when they need us. So much of what we do or what they rely on us to do is need-based demand and we want to make sure that we're ready for them. And then we also want to make sure that whenever we come out of this economic cycle that we're in a stronger position than we were when we came into it.

Your next question comes from Dan Wewer - Raymond James.

Bill, you'd noted the efforts to increase the utilization of your hub stores. In the hub stores where this test has taken place, how much have you been able to increase the shipping frequency to the smaller nearby locations?

In the test that we ran, Dan - and again, we started running it over a year ago - we tested, as we often do, we go in with a small set of stores and we go in with the kitchen sink methodology. We give them everything we could possibly dream of understanding that we are overresourcing those stores in a test to see and determine how high is high. So we overresourced those, and there were stores that had six deliveries a day. As we're rolling it out further, they're modified and slowed down some and many of them are in the three to four time per day deliveries.

And whereas a store that's not part of this program would be a frequency of once per week, is that correct?

That's correct.

And are you seeing favorable sales response after you increase that shipping frequency?

Yes. Obviously, we've been very pleased with the results and that's why we've expanded the program. As we've expanded it, we've tried to optimize it better and take some of the cost out and make sure we find the optimum point, and we'll be continuing to test it over the course of time.

And does the sales pick up, Bill? Is that primarily in the do it for me segment or is it do it yourself?

It's both. It's absolutely both.

And then also a question for Bill Giles. I believe that you've been changing the accounting for the vendor co-op dollars and instead of allocating all of those dollars into cost of goods sold you're now allocating some to SG&A. How would that have impacted those two components during the quarter?

That's a good question. We have in certain cases identified individual expenses that we incur on behalf of the vendors in order to promote their product, and so in those cases we'd prefer to match up the vendor dollars that we've received. So there's a little bit of shift between gross margin and SG&A, but it's not significant. It's probably 10 or so points, maybe 15 points or so. But I would not say it's overly significant.

And then the last question I have, on the drop in gasoline prices and how it may impact miles driven and eventually your sales performance - are you expecting to see a bigger lift on your do it yourself segment as opposed to commercial if that forecast is accurate?

Yes, I wouldn't necessarily think that it's going to skew to one place or the other, personally. We'll see over time what happens. But I also want to remind you what we said in our prepared remarks was historically we've seen a much swifter reaction to gas price changes when they've spiked up. Now, obviously, we haven't seen it spike down like it has over the last two or three months, in a long time, if ever, so we don't necessarily know how quickly it'll respond, but typically the response on the downside has been more muted.

Your next question comes from Kate McShane - Citigroup.

I was wondering if you could comment on the regional strength in your store base. Are you seeing any recovery in certain regions or any weakening in certain regions?

You know, we typically try not to call our regional discrepancies. We certainly see minor ones over time but, again, this quarter there's really nothing worth highlighting on a material basis.

And then I was wondering if you could comment on consumer credit. Are you seeing any deterioration of consumer credit with your commercial customers or in retail?

I would say not necessarily. We recognize that there's going to continue to be a little bit of a credit crunch, both on a consumer standpoint as well as on a commercial standpoint, and we've seen some businesses get a little bit more strapped on the commercial side of the business. But overall I would have to tell you that we haven't seen a material shift in the last quarter.

And are you still extending credit to those commercial businesses, then, or have the terms changed as a result of the environment?

Every customer stands on their own and we evaluate each individual customer, but certainly we continue to extend credit to commercial customers, yes.

Your next question comes from Allen Hatzimanolis - BB & T Capital Markets. Allen Hatzimanolis - BB & T Capital Markets: Just a follow up on a previous question. Did you notice a similar variance in sales volumes as the quarter progressed, with trends picking up towards the latter half outside of those areas that were significantly impacted from the hurricanes and related gasoline shortages?

Yes, I think our trends weren't drastically different in the back half based upon regional discrepancy. We saw strength kind of across the board. Allen Hatzimanolis - BB & T Capital Markets: You mentioned the feedback on the rollout of your new electronic team and system has been very favorable. Have you been able to quantify the impact that this may have had with some of your larger commercial customers, either in terms of average ticket or buying frequency?

The electronic payment processing is solely on our DIY customers, so it's only impacting the customers that are coming into our store and it just streamlines their transaction. And yes, we've measured it over time. We tested it starting about two years ago - a year and a half, two years ago - and saw favorable performance in our sales performance over time, but also saw favorable performance in our customer survey responses and those were the drivers that allowed us to go ahead and roll it out to the rest of the chain. Allen Hatzimanolis - BB & T Capital Markets: Looking to the remainder of the year, has your outlook changed as a result of the significant closures seen in the dealer channel and the resulting eliminations in dealership bay capacity and, if so, how?

I don't think our outlook from that perspective has changed. Obviously, we're monitoring that situation and it'll be interesting to see how it progresses over the next six months or so, but when you think about it, we have a 1% market share in commercial. The macro is not going to determine our success in commercial. Our execution in commercial is going to determine our success.

Your next question comes from Peter Benedict - Wachovia Capital Markets, LLC.

First, can you just talk to maybe the pace of closings you're seeing among the independent part shops and the repair shops over the last few months? Have you seen any uptick in that type of frequency given the tougher economic environment?

We have. We have certainly seen an uptick, certainly versus anything we've seen in the prior quarters. I couldn't quantify it for you specifically because I don't have those numbers handy, but I would certainly tell you that we have felt an increase in that activity this past quarter, certainly compared to the previous two or three quarters.

And then, Bill, just on the October/November comp comment, you said it was more consistent with the previous quarter. I don't mean to kind of split hairs here, but you guys did report a plus 0.6 in the fourth quarter. Now that had some benefit from rebates, so maybe on an adjusted basis it was down 0.4. Qualitatively, towards the upper end or lower end of that or just basically comps running flattish October/November?

You know, if you look back over the last three years or so, our comps have been relatively flat, and so I think you can take it from there.

Your next question comes from Scot Ciccarelli - RBC Capital Markets.

Bill, I was looking for clarification on something. I think you had said the commercial business had a similar pattern as the retail business. Did you mean in terms of softness in September, improving trends in October/November?

Exactly, Scot.

And then you'd said there were some things that could have impacted the commercial losing a big national account, maybe some other things under the covers, I think was your phrase do you think there was any kind of share shift? Obviously, what we're seeing certainly on the public side in terms of big competitors out there, you have one guy who's pushing very hard on commercial, you have another guy who just bought a chain and expanding commercial programs into that chain. Could that have impacted the business at all in your opinion?

Scot, I would tell you first of all, the fact that some of those other chains are growing their commercial business faster than we are at this point is not lost on us. However, if you add up all of the key players in the commercial industry of the aftermarket group, we have such a minor share of the market today that there's plenty of room for us all to be successful. And, although it's interesting to watch what's going on with them, it's much more important that we continue to build our base operating plan and that we are committed to our long-term strategy and we optimize this incredible opportunity.

And then the last question is obviously we've seen the big drop in energy prices. Can you talk a little bit about what you expect the impact of that to have on the cost side of the equation, obviously both from a store expenditure perspective but also on your distribution costs?

Yes, I would think that we obviously had a little bit of a negative impact on fuel costs this quarter but obviously, as commodity based prices associated with fuel continue to come down, we would anticipate that being a positive from an expense standpoint, both in CGS and maybe a little bit on SG&A as well. As far as product costs are considered, I think that tail will be a little bit longer just as you move through a weighted average cost system.

So you have to wait for the turns to come through?

Yes.

Your next question comes from Matt Nemer - Thomas Weisel Partners.

My first question - I may have missed this - but have you noticed any change in accounts receivable trends for commercial customers and do you have any plans to change their payable terms given the credit crunch?

We continue to monitor very closely the health of our individual commercial accounts. We have seen - as I think Pete Benedict had asked earlier whether we'd seen individual accounts, a higher rate of individual account failures - and we have seen people go out of business a little bit faster than we have in previous quarters. But at the same time, our terms are relatively short with commercial accounts in general, so our exposure is not significant. But look, we continue to monitor it. We continue to extend credit, and we're very cognizant of the fact that credit is tight out there and that these particular accounts' business may be a little bit softer.

And then secondly, can you provide an update of what you're doing in the alternative parts category and have you seen any increased interest in recycled or salvage parts among your customers?

First of all, that is such a minor, minor part of our business that, quite frankly, it's so minor I couldn't even comment on what the trends are. I certainly haven't heard anything of any significance.

Your last question comes from John Lawrence - Morgan Keegan.

Bill, would you comment? One of the initiatives, the 14 categories and working through those, can you go into that a little bit and talk about how much of that really has to do with getting late model parts up as you complete that process? Is it all those categories? Is some of that heavy lifting already done? Sort of walk through that, if you will.

It's a great question, John. Actually, we're in our third year of this new process to add parts. And also, as we continue to grow our commercial business, we're getting deeper and deeper in the commercial side and we're seeing more and more demand on the commercial side. So we are constantly finding more opportunities to be more aggressive on late model products, but we also have to update our coverage because the vehicle demographics in every store change over the course of every year. And so to the extent we're not keeping up with that change, we get in a weakened position. So really one of the things that we're seeing here is for the third year in a row we are unbelievably committed to making sure that we update every category in every store every year.

And that would include, obviously, whatever the private labels would fit in as you do those refinements?

No question about it.

Okay, before we conclude the call I'd just like to take a moment to reiterate that our business model remains very solid, our customers continue to tell us we're improving on our efforts to meet or exceed their needs, and market share data confirms their opinions. We have a solid plan for 2009 and a culture that is second to none, but I want to stress that 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. And finally, I'd like to wish our AutoZoners and everyone listening to this call this morning the best during the upcoming holiday season and a very prosperous and happy New Year. Thank you very much for participating in today's call.

That does conclude today's conference. Thank you for participating. You may disconnect at this time.