Good morning and welcome to the AutoZone conference call. [Operator instructions.] This conference call will discuss AutoZone's fourth quarter financial results. Mr. 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.

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 begin.

Good morning, and thank you for joining us today for AutoZone's fiscal 2010 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, investment relations, and tax. Regarding the fourth quarter, I hope you've had an opportunity to read our press release and learn about the quarter's result. If not, the press release, along with slides complementing our comments today, is available on our Web site, 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 27.7% and a domestic same-store sales increase of 6.7%. This marks the seventh consecutive quarter of EPS growth in excess of 20% and the 16th consecutive quarter of double-digit EPS growth. Back in May, on our third quarter conference call, we spoke cautiously about our sales potential heading into the new quarter. We were concerned about difficult comparisons and unsure of our customers' buying inclinations. What transpired, and how we executed, provides us encouragement heading into our new fiscal year. While our industry remains strong, we were encouraged by our results for three reasons. According to NPD data, we gained both dollar and unit share across both of our customer segments, retail and commercial. Our commercial business has demonstrated strong momentum by achieving accelerated growth each quarter during our fiscal year, ending with a 20% increase in sales for the fourth quarter, our highest increase in several years. And lastly, we completed the remainder of our hub store conversions well ahead of schedule. Additionally, we did all of this while delivering exceptional customer service as evidenced by the continued improvement in customer satisfaction survey scores. While average ticket improved more than transactions, both…

Thanks Bill. Regarding the fourth quarter, for the 16 weeks ended August 28, we reported sales of $2.445 billion, an increase of 9.5% from last year's fourth quarter. In domestic same-store sales, or sales for stores open more than one year, we're up 6.7% for the quarter. We experienced strong sales growth from both our retail and commercial customers. Net income for the quarter was $269 million, an increase of 13.9% versus last year's fourth quarter, and diluted earnings per share increased 27.7% to $5.66 from $4.43 in the year-ago quarter. Our continued disciplined capital management approach resulted in return on invested capital for the trailing four quarters of 27.6%. 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 50.5% of sales, up 20 basis points compared to last year's fourth quarter. The improvement in gross margin benefitted primarily from leveraging distribution costs due to higher sales. This generated 26 basis points of favorability. Looking forward, although we believe there continues to be opportunity for gross margin expansion, it is important to highlight that we do not manage to a targeted gross profit margin percentage but rather on absolute gross profit dollars. SG&A for the quarter was 31.2% of sales, down 43 basis points from last year's fourth quarter. The reduction in operating expenses as a percentage of sales reflected leverage of store operating expenses due to higher sales, partially offset by increased legal costs and continued investment in our hub store initiative. In addition, as discussed in the last three quarters' results, this quarter also included an increase in pension expense of approximately $3.8 million or approximately 16 basis points, which reflected the decline in value of the underlying assets of…

Thank you Bill. Before we conclude, I wanted to take the opportunity to reflect on fiscal 2010. Our organization performed extremely well for the year, both operationally and financially. I'm extremely pleased with our accomplishments, and I'd like to recap a few of those key accomplishments in recognition of the dedication, passion, and commitment of our AutoZoners. We built on last year's strong same-store sales results, growing at 5.4% versus last year's 4.4%, our best two-year comp performance since 2002-2003. We continued our focus on developing the commercial business and grew commercial sales by nearly 14% for the year with accelerating sales performance in each quarter of fiscal 2010. We grew market share in both our retail and commercial businesses. We opened a total of 213 stores, including 50 stores in Mexico. We grew EBIT dollars by 12% and EPS by 27.6%, on top of 20% last year. This EBIT margin of 17.9% represents a new all-time high. Our return on invested capital reached a record 27.6% for the year. We exceeded $1.1 billion in operating cash flow for the first time. We achieved our previously stated goal of 100% AP to inventory, ending at 106%. We repurchased stock representing over 10% of the current market capitalization of the company for the second year in a row. And, probably the most important of all, our AutoZoners continued to dedicate themselves to providing the industry's best customer service. Their dedication is what makes our organization great. Our major objectives for 2011 will sound remarkably familiar. They are: "great people, providing great service," continual improvement in our hub strategy, leveraging the Internet, profitably growing commercial, ever-improving inventory management, and improving our product assortment. Clearly, in 2010 we had macro factors that positively contributed to our success. However, our organization was well-positioned and prepared to capitalize on these favorable trends. How long will these factors positively influence our performance? We simply don't know the answer. But we do know that we have been able to very effectively manage our business regardless of the economic cycle, as evidenced by our string of 16 straight quarters with double-digit EPS growth. Again, our business has performed well for many years now, but we cannot rest, and we will not rest, and you have our commitment that we will never do that. Finally, before we move to Q&A, I want to again thank and congratulate our entire organization for their dedication to our customers, their fellow AutoZoners, stock holders, and our communities. It remains a distinct honor to work alongside this fabulous team. Now we'd like to open up the call for questions.

[Operator instructions.] Our first question comes from Alan Rifkin, Bank of America. Your line is open. Alan Rifkin – Bank of America: Congratulations on a great quarter and year. Question for Bill Rhodes. Bill, your gains on the commercial side clearly are accelerating, yet at fiscal year-end, as you pointed out, the commercial program is only in 55% of your stores, which is a similar proportion as last year. I know you said that you continue to view greater opportunities in growing sales in existing programs. Can you just elaborate a little bit on why you don't see more opportunities to add commercial programs to already existing stores?

I might articulate it differently, Alan. Personally, I do see opportunities to add it to additional stores and as we mentioned, we've added it to I think 84 in the quarter, primarily in the back half. Everything we do we test it, and that's our initial test into taking it to the next level of expansion. But our primary focus remains on making the programs that we have in place - we have over 2,400 of them - how do we make them as productive as they can be? And so I want to be very careful not to distract from the progress we're making in those existing programs by getting the organization so focused on expansion of these programs. I do believe they will come in time. I do believe we'll do it the AutoZone way, which will be prudent, and it will be profitable. But we're beginning that expansion, because I think the organization is in a place now where we can begin to accelerate that a little bit.

Okay, and one follow up if I may. With respect to the hub rollout, obviously the acceleration and completing the program at fiscal year-end suggests that you're obviously very satisfied with the results. How are the stores that were supported by the original 60 hubs added in fiscal 2009 performing relative to the 80-plus hubs that were added this past fiscal year?

First of all, all of the hubs continue to grow and continue to grow at a very healthy rate, even the five test stores that we opened I believe in fiscal 2008 continue - them and their satellite stores - continue to perform very well and frankly all of them continue to exceed our expectations. So we couldn't be really more pleased with the progress that we're making in the hub stores, and the beauty of it is we talked a little bit in the prepared remarks, about we're going to be relocating some of those over time. We're doing as well as we are and we still have significant amounts of those stores that are constrained. They don't have the size to have the parts assortment in them that we want. So over time we'll be expanding those. And that will give us additional benefit in the future.

Our next question comes from Gary Balter, Credit Suisse. Your line is open.

Hi this is Simeon Gutman for Gary. The company has done a fairly good job and a fairly consistent job flexing expense dollar growth with sales growth, actually, throughout last year. As fiscal 2011 starts, in light of the continued strength in demand, are there thoughts to accelerate investments in the business to take advantage of some of that growth?

I think actually I think we've done a good job over the last year or two of continuing to make investments that we believe will continue to improve customer service and continue to capture market share. The hubs are, as Bill articulated, are great example of some of the investments along with training and a handful of other things that we continue to do. Now we'll begin the anniversary of some of those investments as we get into 2011. We believe that there's more opportunity for us to continue to make investments - again just to highlight the hubs as Bill mentioned as an example. There's a real opportunity for us to be able to expand the size of many of the hubs that exist today. There's an opportunity for us to actually relocate some of the hubs to more optimum locations. So there's continued investment to be making from that standpoint. Our "one team" strategy, the investments that we made both in the commercial Z-Net, will continue through 2011. So there are investments to be made, but we'll continue to moderate those investments in light of our overall sales performance. But what we feel really good about is the position that we are in heading into 2011. We've made some great investments in both fiscal year 2009-2010 and we think we're very well-positioned as we head into 2011.

Okay, and then can you provide any additional color on the Z-Net commercial? I mean we've seen the system in place and I realize there's a lot of things happening in commercial now and it's hard to separate out one sales benefit from the other, but besides ease-of-use benefits, have there been any noticeable trend differences in stores that have had the software -

It's very new. We've launched this in the fourth quarter and so it's really in very early stages, but it will provide a lot of efficiencies from the store and from the store's perspective, and it will be able to really be able to leverage the benefits of everybody in the store being able to service, not just commercial customers, but all of our customers. And so the real theme is being able to have one unit within a store being able to service both our retail and our commercial customers on an ongoing basis.

If I may add something there, our old commercial order management system was very much designed for commercial but it was very cumbersome. In fact it took 21 specific steps at one point in time to order a part. We've refined it over the years, but now with commercial Z-Net, there's four steps to order a part and three of them are the exact same steps that you take when you are working with the DIY customer. So it makes it significantly easier for anybody in the store to work in the commercial program, which means we'll give better service to our customers.

Our next question comes from John Lawrence, Morgan Keegan. Your line is open.

Just quickly, Bill can you – going back to the examples on the commercial program, can you go back and look at those early stores and talk a little bit - what you've learned from the system side of handling the inventory in those hub stores over the course of time, and knowing what to put in those hub stores and how is that inventory creep if you will? What have you learned from a leverage standpoint there?

You know, it's really interesting, John. We've been very pleased with the performance of the incremental inventory that we have added. We've added hundreds of millions of dollars of inventory over the last three years and primarily focused on late model coverage. And it has benefited our commercial programs significantly, but to our very much surprise, it has benefited DIY very well as well. Approximately two-thirds of the sales that go out from that incremental inventory go out through DIY. So it's great for both parts of the business, and not only do we add all that inventory, but our inventory per store is actually down. So we've been able to take unproductive inventory out of the system in totality, and we have been able to move slower-moving inventories back to the hub stores themselves. We think there's still a lot of work to be done there, both on adding new parts and also refining the placement of which part should be in the satellite stores versus the hub stores.

And Bill, would you comment - just your comments regarding new store performance, would you go to next layer there and give us a sense of - obviously, your entry cost is coming down as far as in this environment finding those locations? Then number two, with the success of the macro-environment, what kind of differences are we seeing in that first-year performance versus say, two or three years ago?

I would say that we are definitely finding opportunities to get in the markets in a little bit more aggressive way than we have previously. And clearly some of that is the macro-environment being in our favor. So we've been successful on that front. I would say from an overall performance standpoint, you know, that the company overall has had a very strong performance, and that somewhat is getting reflected in the new store opening performance as well. And so I think the new stores are benefiting from some of the investments and some of the changes that we've made, as well as some of the tailwind that we're getting from an industry perspective as well. So I think you can think about it that way as the new stores are being more productive certainly than they were a couple of year ago. Some of that is industry-related and some of that is probably real estate-related as well.

And that would exceed the normal sort of comp rate that we're seeing?

We're certainly doing better than we'd planned from a new store perspective.

Our next question comes from Matt Fassler, Goldman Sachs. Your line is open

This is Ryan Brinkman for Matt Fassler. First question, how much is front-end pricing, perhaps driving some of the comp sales we're seeing? For example, what sort of trends are you seeing in the area of motor oil and related products?

I would say very little. I'd say that from a commodity-based pricing, we certainly haven't seen any ups on that one. If anything is probably a little bit of a headwind for us from that perspective. But if you look at the front end overall, I'd say that retail pricing is certainly not of a storyline relative to our overall comp performance.

Yes, if you look at the on-shelf price of the standard, conventional motor oils, they've actually gone up some. But the vast majority of what we sell is through promotions, and those promotional prices really haven't changed.

And can you talk a little in terms of the impact that the rising mix of commercial sales might be having on total margins?

Yeah, I think that obviously the commercial business, as we've articulated in the past, has a slightly lower margin, obviously from the return on invested capital. It's very accretive. There's very little investment relative to launching a commercial program. But it does have a little bit of impact on our overall margins, and having said that, our margins are up 63 basis points for the quarter.

Then just the last question, I know you've targeted a 100% payables ratio. How sustainable in your view is a payables ratio above 100%?

I don't think the goal is 100% anymore. I think the goal goes up from here. Certainly our plan for fiscal 2011 is higher than it is today. So I don't think it's not only sustainable, I anticipate it'll grow over time.

Our next question comes from Dan Wewer, Raymond James. Your line is open.

So Bill, AutoZone leads the industry in virtually every performance metric. The one area that you have a lot of headroom is commercial. You've talked a lot today about the investments that you've made. When you look at your commercial sales per store, it looks like there's probably $200,000, maybe a bit more than that, before you would begin to reach the level of your competitors. With the investments that you've made, do you now have the resources to take your commercial sales per store up to around $600,000? If not, what else needs to happen?

I think it's an excellent question and I think the general answer is yes. The more specific answer is we have a great sales force that's in place now. We've been growing it over the last year and we continue to expect to grow it over time. Candidly, I don't think we know yet what the right ratio is for a territory sales manager on a per-store basis and that will change as we continue to refine it. But generally the vast majority of the investments are in place, unless we find additional investments that drive accelerated performance. I think we have a very bright future for a long period of time. We certainly understand that we are fifth in this business, and we don't like being fifth, but at the same time I am very pleased with the progress that our commercial team has made over the last couple of years.

When you look at the 20% commercial growth, was this primarily moving from number six to number five on the call list from your commercial accounts? Or was there success in adding new accounts for those stores that already had commercial programs?

I'd first start with I think we are number one on a lot of customers' call list, and we're not on a lot of customers' call list. I think the vast majority of what we have done is grow with our existing customers. We have grown with new customers and frankly we've lost some customers and we got to go back and regain those customers, but our trends in both new customers and in retention are both increasing and that's encouraging.

Our next question comes from Greg Melich, ISI. Your line is open.

I wanted to move on to follow up on the cash flow and the AP-to-inventory and think about how that actually impacts the business? CapEx - it sounds like it could come down a little bit this year, just given the changes you made in the hubs are behind us, just want to confirm that or get a number. And then two, if we keep taking AP-to-inventory to 110% or 120%, does that change your view in terms of building stores, just given the building stores becomes at least a working capital positive cash flow event?

I would take the CapEx first. I would not necessarily see CapEx expenditures coming down. In fact, many of the things that we did from a hub perspective over the last year or so are mostly operational in nature and being able to deliver to stores three times a day. And some of the things that we're talking about in the future will probably have some CapEx associated with them relative to expanding the size of the hubs, as well as relocating the hubs. So there will be some incremental CapEx expense associated with that. And we don't anticipate our overall CapEx program, between number of stores, and maintenance, and those kinds of things, and regular investments into the business, changing. So our expectation is CapEx would be consistent and probably increase as we move forward. Relative to working capital on new stores versus AP-to-inventory, I think we kind of separate those two things. I mean, we believe that we're getting great productivity out of our new stores. Currently we hold ourselves to an IRR hurdle rate for all our new stores, and so as long as they achieve those hurdle rates we'll continue to expand stores. We don't feel as though that new stores are constrained by capital necessarily. We believe that we're growing them at an appropriate pace for the organization, [unintelligible] to digest and for us to be able to find locations in the marketplace. So we will continue to do that, and we'll continue to manage and optimize working capital across the board. And AP-to-inventory is perfect example of our ability to be able to do that. And there will be other areas, but AP-to-inventory is one of that again, as Bill mentioned, we hit a milestone of [100%]. That's behind us and now we'll move on to more milestones.

As you broke through that milestone, what really changed versus, say, just a year or two ago? Was it different vendors? Or just buying more volume from the same vendors? Or just longer terms with everybody?

It's a lot of different things and to be able to get there, and to exceed 100%, obviously those wheels need to be in motion a year or so ago. And so the merchandising organization, along with several others in the organization, have worked hard at this, and it's certainly not something that happened in one quarter or two quarters. It's probably been worked on very hard over the last eight quarters, and this is the culmination of a lot of work. But it includes both partnering with some of the vendors in terms of terms. It also includes inventory productivity. Inventory turn is up a little bit. I think the complexion of our inventory is actually healthier and stronger today, and so there's a lot of those factors that go into account to get us to an AP-to-inventory ratio of plus-100%.

Our next question comes from Kate McShane, Citi Investment Research. Your line is open.

I was wondering if you had any additional comments into some of the customer acquisitions that you've made on the commercial side as to what some of the commentary has been from your customers as to why they're switching and going to AutoZone versus a competitor?

Kate, I think it's a wide range of reasons why they shift, and one thing in this business is a customer does not have a sole supplier. So, it's not we come in and we take over for brand X. Maybe we get a foray into their brake business, or we have their brake business and we expand into starters and alternators. I think the biggest thing that we've done is a couple of things, and this is what we're hearing from our customers. Number one, we have improved our core execution. And whether that's inventory in our stores, whether that's great commercial specialists and great drivers giving consistent service, that's the first thing and at times we haven't been as good as we would like on that front. The second thing is we now have somebody out there telling our story. For years we were in the commercial business and there wasn't anybody going to the shop telling our story, and talking to the shop owners about what their challenges are, where are their headaches, where are their pain-points and what can we do to help them. Now we have well over 200 people that are in those locations every day making an enormous number of sales calls, that are telling our story and then also helping us refine where we do have operational issues back in the stores.

My next question is on what you called out during the call as your driver for comps during the quarter, and I think you had said that the biggest drivers were the age of cars and warmer weather. And I wondered if there was any insight into what it would have been like with more normalized weather, and if warmer weather has any implications for business in the winter months?

The second part of that is an excellent question. That's all a great question. But clearly, we would love to be able to tell you exactly what weather was, but it's really difficult to determine the specific impact. We believe it was a contributor, but it was one of many contributors. Macro factors helped us, but I've got to tell you that the hub store impact, the execution level at the stores - don't forget we ran 20% growth in commercial. I think there were a tremendous amount of factors that influenced it. As far as looking forward, last year we had a pretty extreme weather and this summer we had a pretty summer. Extremes put stress on parts, and I think it would be very understandable to expect that if we have a challenging winter season, that this summer's heat will encourage more part failures in the winter months. If you look at what we've talked about when we talked about the various types of categories where we saw growth, failure was the highest category, and that hasn't necessarily always been the case.

Another question Michael Lasser, Barclays Capital. Your line is open.

Now that you're complete with the rollout of the in-hand hub stores, do you think you're providing greater value to customers through broader parts coverage? And if that's the case, does it change your general view of product pricing? Might you take a more aggressive stance for the greater value you're delivering?

Yeah, the answer to the first part of your question is absolutely. There's no question that we're in a much better position to give great customer service. And candidly, on Kate's previous question, we were talking about the fact that commercial customers have multiple suppliers. If we say no to them on a certain part, they're not as likely to pick up the phone and call us the next time. So I think it deepens our relationship with both commercial and retail customers. As far as it having any difference in our pricing strategy, I would say absolutely not. This industry is not one that has tremendous elasticity to it. If we put starters and alternators on sale by 50% off, it's not going to change the demand. We'd pick up a few incremental sales, but not a material amount. So I don't think that parts coverage and expanded parts coverage has any determinant on our pricing philosophies.

I was actually thinking about it from the other side. Given the elasticity demand there may be some opportunity to raise prices given the increased value that you're offering.

Well it's a very competitive industry and it's also a very fragmented industry. We compete with all the name brands that you're all familiar with, but we also compete with a lot of mom and pops across the country, and we compete with other retailers, large retailers on certain parts of our assortment, and we compete with the WDs. I think our value proposition is we're not going to be undersold, and we feel comfortable with where our pricing philosophy is and obviously we've been able to generate great margins with the philosophy that we have.

I'll now turn the call back over to Mr. Rhodes for closing comments.