Good morning and welcome to the AutoZone Conference Call. Your lines have been placed on listen-only until the question-and-answer session of the conference. Please be advised today's call is being recorded. If you have any objections, please disconnect at this time. This conference call will discuss AutoZone's fourth 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 A.M Central Time or 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 presentation are forward-looking statements. Forward-looking statements typically use words such as believe, anticipate, should, intend, plan, will, expect, estimate, project, position, strategy and similar expressions. These are based on assumptions and assessments made by our management in light of experience and perception of historical trends, current conditions, expected future developments and other factors that we believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties including without limitation 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, the 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 30, 2014, and these risk factors should be read carefully.

I’ll now hand the call over to Mr. Bill Rhodes, the Company’s Chairman, President, and CEO. Sir?

Good morning and thank you for joining us today for AutoZone's 2015 fourth quarter conference call. With me today are Bill Giles, Executive Vice President and Chief Financial Officer IT and ALLDATA and Brian Campbell, Vice President-Treasurer, Investor Relations and Tax. Regarding the fourth quarter, I hope you've had an opportunity to read our press release and learn about the quarter's results. If not, the press release, along with slides complementing our comments today, is available on our Web site www.autozoneinc.com. Please click on quarterly earnings conference calls to see them. To begin this morning, I want to thank all AutoZoners across the globe for another solid quarter and year. 2015 was a very busy and productive year for us. We continue to grow our business on a variety of front. Our U.S retail business expanded again in 2015 with the opening of another 157 net new stores. Our commercial business continues to gain traction growing sales 12.9% for the year with 296 net new programs open. We now have the commercial program in 81% of our domestic stores, having opened 720 new programs in just the past two years. And we continue to expand our presence in Mexico, where this quarter we celebrated the opening of our 441st store. While opening no additional stores in Brazil this quarter, we opened two for the year and now have seven stores in operation. Lastly, we opened three new IMC branches for the year. We’ve a lot of runway to open future IMC location. We currently have approximately 90% of our total Company sales coming from our domestic AutoZone stores. We believe we have great growth opportunities inside and outside of the U.S for many years to come. In 2015, we expanded our online offerings in both our traditional autozone.com and autozonepro.com…

Thanks, Bill. Good morning, everyone. To start this morning, let me take a few moments to talk more specifically about our retail, commercial and international results for the quarter. For the quarter total auto parts sales, which includes our domestic retail and commercial businesses, our Mexico and Brazil stores and our 20 IMC branches, increased 8.1%. Now switching to macro trends during the quarter, nationally unleaded gas prices started out at $2.69 a gallon and ended the quarter at $2.51 a gallon, an $0.18 decrease. Last year, gas prices decreased $0.21 per gallon during the fourth quarter, starting at $3.67 and ending at $3.46 a gallon. We continue to believe gas prices have a real impact on our customers' ability to maintain their vehicles, and cost reductions help all Americans, we hope to continue to benefit from this increase in disposable income. We also recognized that the impact of miles driven on cars over 10 years old, the current average is much different than on newer cars in terms of wear and tear. Miles driven increased 2.6% in May and 3.9% in June. We don't have July or August data yet. The other statistic we highlight is the number of seven-year and older vehicles on the road, which continues to trend in our industry’s favor. For the trailing four quarters, total sales per AutoZone store were $1,761,000. This statistic continued to set the pace for the rest of the industry. Now for the quarter, total commercial sales increased 13.1%. In the fourth quarter commercial represented 18% of our total sales and grew $70 million over last year's Q4. This past quarter we opened a 134 new programs versus 113 programs opened in our fourth quarter of last fiscal year. We now have our commercial program in 4,141 stores supported by…

Thanks, Bill. We’re pleased to report our 36th consecutive quarter of double-digit EPS growth, and for the year the reported EPS growth rate of 14.1%. We also surpassed an historic milestone in 2015 exceeding $10 billion in sales for the first time in our company’s rich history. Our company has continued to be successful over the long run. That success is attributable to our approach of leveraging our unique and powerful culture and focusing on the needs of our customers. To execute at a high level, we have to consistently adhere to living the pledge. We cannot and will not take our eye of off execution. While we study the external environment and react where appropriate, we must stay committed to executing day-in and day-out on our game plan. Success will be achieved with an attention to detail and exceptional execution. Before I conclude, I want to take this opportunity to reflect on fiscal 2015. We were able to build on past accomplishments and deliver some impressive results. In recognition of the dedication, passion and commitment of our AutoZoners, I want to highlight that, we grew sales to a record $10.2 billion this past year, and we grew same store sales at 3.8%. We grew our store base in Mexico and managed our expenses exceptionally well in spite of the foreign currency headwind with the peso. We began our IMC integration, opened three new branches and now have 20 locations. With the minority of our AutoZone stores today able to sell IMC products, we feel we’re well positioned to expand this business in the future. Our inventory availability testing in mega hub store remodels helped us to reach our conclusion and allowed us to announce our planned implementation schedule. I could not be more proud of the tremendous work everyone…

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Mr. Seth Basham with Wedbush Securities. Sir, your line is open.

Thanks a lot, and good morning.

Good morning.

My first question is regarding the new distribution strategy. Obviously you guys have worked really hard to test it; you now have a plan to roll it out, just trying a bit to understand the return dynamics and the financial implications here. So previously you had stated that you expect about $1000 or $1500 per week lift per store when all of a sudden it does -- when all of a sudden done from this initiative. I want to confirm that’s still on target?

Yes, I will start with -- that $1000 to $1500 per store is the target when both -- when they get both initiatives. Now, I’ve said in our prepared comments that about a third of the stores will not receive nor frequent delivery, and so some piece of that will not flow through to them. But on stores that get both the mega hub and the increased frequency of delivery it will be in a range of $1000 to $1500. It’s a little tough Bill at this point to narrow that range. There’s just a lot of variability depending on a lot, many different factors.

Got it. So as you roll us out to 1000 stores next year about 20% of your base, it would appear that on a run rate basis that should be driving, boost of comps between 75 and 100 basis points, at the same time you’ll be experiencing some gross margin pressure about 25 basis points, but that looks like a pretty good trade off in my book. It looks like you’ll be growing gross profit dollars from this initiative around $50 million next year on a run rate basis versus about $25 million to gross profit or expenses I’d say with the rollout, that’s a pretty good return. Is that the right way to think about it?

Well you did a lot of really good math there very quickly, much quicker than I can do it. I think generically speaking you’re in the ballpark, and we’re not going to go forward with even this business. We think they’re going to provide us with a growth and operating profit dollars that exceeds our return metrics, and we think that both of these initiatives will do that. Now we didn’t think that it would do it in the lowest volume stores with July, we’re not going to roll it for those stores at this point in time.

Got it. Understood and good luck.

Okay. Thank you.

Thank you. Our next question is from Ms. Kate McShane with Citi Research. Ma’am your line is open.

I just wondered more [indiscernible] on the quarter, and then I had a question about the successful test. For the comp during the quarter, can you talk a little bit about how you did compared to your plans, and if there was a strategy or plan where it did come from?

I think generally speaking that performance versus our plan was pretty much on track, particularly in the retail business. Frankly we had a pretty aggressive plan in the fourth quarter that we were a little bit daunted about coming into the quarter. May was very soft and we were behind, but June, July and August outperformed and generally ended on plan.

Okay, thank you. And my second question is just on some of your commentary around your GT build outs and opportunities for new store growth. How should we think about that from a location standpoint? Where are you aiming to build out your stores and with regards to the GT, where could they be located and are you considering where they’re located in relation to how your competitors supply chain are now?

Sure. As far as today we have distribution centers that can service our current strategy for anywhere in the United States. We’re not prepared yet to talk about specifically where these next two to three distribution centers are, we still have some work to do, but we can service every store today. The reason we need to expand it is one, as we continue to grow our store count we need more capacity in our supply chain. And then secondly, as we move to increase frequency of deliveries, we need to have some distribution centers that are closer in certain parts of the country and what we’ll be solving with these extra two to three distribution centers.

Okay. Thank you.

Thank you.

Thank you. Our next question is from Mr. Simeon Gutman with Morgan Stanley. Sir, your line is open.

Thanks, good morning. Following up on Seth’s question, regarding I guess, some of the margin trajectory going forward. Bill, you said some of these investments will weigh on margins. You quantified that the 25 bps from the multiple delivery and I think you said very modest de-leverage from on the SG&A line from DC. In all it doesn’t seem like a big amount, this quarter I think you had that run rate and X some of those currency headwinds and legal, you would have seen margins if not up at least flattish. So, my question is, is there a specific outlook on the margin side. It feels like margin could still go up even with that 25 basis point headwind. Do you agree or you’re just trying to just take a cautious outlook ahead of the rollout?

Yes, I think the way I would answer that is, that we wanted to carve out at least what the impact was if the initiative varied specifically, so we said that, that was 20 to 30 basis points, the majority of that is in gross margin as you highlighted a little bit of that would be in SG&A to support the mega hub operational activities, and frankly you’re right we had about a 24 basis point impact in supply chain for this past quarter which is probably a pretty good way to look at it for the next several quarters as we continue to rollout stores. Now separate and distinct from that our merchandising organization has done a terrific job in lowering acquisition cost during surprised optimization, and they’ve done a very good job in offsetting those costs. So, I think there are other opportunities for us to continue to improve gross margin rates. But we can clearly identify and quantify the investments and we wanted to highlight those for you. But I think as we look at out over the year we feel its pretty good about overall margin rates, but clearly we’ll have some headwinds.

Okay. My follow-up, on the tests, on the multiple delivery tests or the stores that you’ve been operating for a year, can you just give a little more color about the traction you’re seeing. Bill Rhodes mentioned saying yes, more frequent, are you growing the basket with the existing customer, are you moving up on the call list, are you getting new customers that wouldn’t -- that didn’t previously do business. Can you just add a little more color on so we can appreciate the curve of improvement after the rollout is ongoing?

Yes, I would say that number one, we’re seeing the benefit in both our retail and commercial businesses. We’ve been very pleased with the performance to date. Now this is -- you have to remember this is slower moving inventory. So when they call us and we have it, you can get the sales pretty much immediately because we haven’t seen anything ramp and what has happened over time. I do hope and expect over time that our commercial customers, the more frequently we say yes, the more we’ll up their call list. That’s all on increased frequency of delivery. Regarding mega hubs, that is a substantial different offering we’ve ever had in the market place. And I think by us being able to surprise and delight our commercials -- both retail and commercials that, that’s beginning to build traction over time.

Okay. Thanks.

Okay. Thank you.

Thank you. Our next question is from Mr. Dan Wewer with Raymond James. Sir, your line is open.

Yes. Thanks. Good morning, Bill.

Good morning.

So, when you think about the eventual distribution that work of 11 DC than 40 mega hubs, AutoZone’s capital investment in distribution will still be less than half of competitors which is O’Reilly and NAPA. When you think about the end game a few years out, how will the parts coverage compared to those competitors, when will it be significantly better than what AutoZone has had in the past, but if you are to benchmark it, I guess those competitors that made that, the much larger investment, what will be the difference?

I think we’ll be at the top of the heap in the industry with getting access to inventory. Certainly where we have frequency of delivery at three to five times a week, we’ll be able to pose out those in-stocks. When you think about -- you’re trying to solve two different problems. One is an in-stock problem where you have very low demand and when it spikes, if you don’t have an increased frequency of delivery you’re out of business for eight days. We believe this 10 to 11 distribution center model will allow us to do that at the optimum level. That does not mean that we won't forgo a few sales here and there, but we want to make sure that we get a return on the investments that we’re making that is sufficient for our expectations. And secondly with the mega hub you’re trying to solve expanded parts only. And by putting these 25 to 40 mega hubs in the markets we’re going to significantly increase the local market availability of product to 80,000 to 100,000 SKUs. That helps both our retail customer and our commercial customer on a same day basis in those markets. And then on an overnight basis it will go to other hubs stores which I think is best in class solution.

So if you think about the potential for an extra $1,500 of revenues per week per program where both of the initiatives are in place. Your commercial run rate is still up about $200,000 less per program, let’s say compared to O’Reilly. Is the difference the fact that its going to take a multiple number of years for your customers to recognize that your capabilities are greater or we’re not factoring, perhaps there’s going to be a need to a large or a number of sales people at AutoZone, but I would think that the upside could actually be more than the $15000 that you’re suggesting?

Well first of all we said $1,000 to $1,500 Dan, but I appreciate your optimism and I hope you’re right too. I hope the upside is more than that. Our testing hasn’t proven that out yet, but as I mentioned a few minutes ago, over time the more you say yes to your commercial customers especially on hard to find parts, the more confidence they’re going to get with you and there could potentially be a halo effect over the long time. This is a significant improvement for us, but it’s not a silver bullet. We still have to continue to refine the way we go to market, make sure we got the right product offerings, make sure that we have the best sales force -- sales force which I think we do and on and on. It’s going to take us some time but we’re closing those gaps even as we speak.

Okay, great. Thank you.

Thank you. The next question is from Mr. Michael Lasser with UBS. Sir, your line is open.

Good morning. Thanks a lot for taking my question. Bill, as you look out at your industry over the next few months, it looks -- it seems like the low gas prices are here to stay. The weather could be unique given some of the predictions that are out there. So what do you think is going to have a greater influence on demand for the industry gas prices or the weather over the next few months?

I would say that from a consistency perspective I think the gas prices have clearly done a couple of things for us, one of which is it has increased supposable income particularly for our customer and it also seems to have attributed to increased in miles driven and we’re seeing some miles driven numbers that are historically very high relative to anything we’ve seen in the past. And so I think those two things which increase wear and tear on automobiles those are the -- and the age of the vehicles. Those three factors I think are probably going to help support demand for the industry for over the long-term. But weather you maybe right, it’s very hard to predict for us. Obviously we had some favorability this fourth quarter particularly towards the end, but that’s really difficult for us to predict and forecast and we’ll just have to see it as it comes. But on the other ones, I think that those really are favorable underlying trends with the help of the industry.

Okay. And then following up on the inventory strategy that you’re pursuing, I think the market has come to expect a lot of flexibility in your cost structure where as sales gyrate from quarter-to-quarter, you’re still able to produce the type of earning that you have. Did the new inventory strategy reduce that flexibility such as, if the sales don’t come through the margin performance could be more at risk?

I guess theoretically that’s probably true because we’re adding some increased fixed cost structure to the organization, but at the same time as you pointed out we have been very good at determining how to manage our overall cost structure given the environment that we’re dealing with. Having said that we’re committed to this initiative and we’re very encouraged by and we’re going to see it throughout.

Okay. Last quick one, a few years ago you were decreasing your share count year-over-year by high single digit pace as moderated into a more like a mid single digit pace. Is that a reasonable rate to expect moving forward?

I think so. I mean, it’s obviously PE, its dependent on the PE. So, as our PE has gone, obviously our share repurchases as a percent is declined as you said to mid-high single digits to just this past quarter 5%. So it’s going to continue to be a very important part of our capital allocation strategy and its going to be a very key element of us driving EPS growth. We’ve got a nice balance of organic EBIT growth and share repurchase to drive EPS and I expect that to continue in the future.

Cool. Thank you so much.

Thank you.

Thank you. The next question is from Mr. Matthew Fassler with Goldman Sachs. Sir, you line is open.

Thanks a lot. Good morning and I appreciate all the additional information on the call today. My first question relates to this quarter, I’m just trying to understand some of the improvement. It looks like commercial saw more acceleration and Bill you gave us that 6.2% increase from mature programs. Can you tell us how that 6.2% compare to what you’ve done over the prior quarter or two and to what degree do you think the improvement you generated I think commercial is it all a function of some of that, the early testing and rollouts that you’ve been implementing on the inventory and help side?

I’d say the 6.2% is probably a bit of an acceleration and as we highlighted that’s on our mature program. So we’ve seen a little bit of acceleration on that and with some of the other questions we were going through on commercial, some of that relates to some of the things that we’ve done around inventory availability and inventory initiatives. But keep in mind, we’ve got several initiatives in our commercial programs and we’ve got a lot of things that we’re working on in order to continue to drive that average weekly sale or average dollars per program everyday. So it’s not just inventory availability initiatives, although that’s been helpful.

Great. Second question, as we model out the gross margin or the aggregate margin impact of the supply chain investments. You spoke about approximately 25 basis points year-on-year, is that 25 basis points each year incremental to the prior year until the rollout is essentially done?

Theoretically yes, although my guess is that, as we get past a year or 18 month that we’ll be able to dissipate some of that impact with improved sales performance and other tactics to improve margin rates.

Got it. And then finally, as you think about the incremental inventory, I know the dollars are not huge, to the extent that, that Bill Rhodes alluded to, as slow turning inventory to what degree do you think vendors are going to be able to carry that for you as a payable relative to the basis?

Yes, I think that’s a good question. I think right now we’re at 1.5 times turn, and so if we can kind of keep it around that number I think the vendors should be able to support our AP inventory ratio where it is.

Okay. Thanks so much guys.

Thank you. Our next question is from Mr. Greg Melich with Evercore ISI. Sir, your line is open.

Thanks. I had sure some housekeeping and a strategic question, but first on the housekeeping. If I got it right, the CapEx is probably going to go up to around $600 million if you factor in the M&A, but then it should build even a little more into 2017 given that’s when the DCs will actually open. Did we get that right -- did I get that right on the cash flow side?

Yes, Greg I think you’re pretty close on that on the $600 million, there maybe a little of an increase over that. We’ll have a little bit of DC dollars in ’16 but more on ’17?

Okay, great. And then, I just want to make sure on strategic side, and in your prepared comments I heard you guys mention the new hard parts replacement techniques. Can I assume that’s all part of the mega hubs and the expand availability. But what is, is that all that is, or is there something else going on there. It sounded like it might be a new software system or algorithms you run to figure out where to put those parts or am I reading too much into that?

Yes, Greg maybe -- I’m sorry we weren’t clear enough. That’s the work we did a year, year and a half ago, where we updated the algorithms to place, forward place the inventory with a slant towards newer merchandise, newer life cycle of vehicle and merchandise, so that work has been done for about a year now and it’s worked very well. Now we’re using those same methodologies to assort our mega hubs and as we continue to roll those out we’ll leverage that methodology there.

Got it. And then as part of that, that 21,000 SKUs per store, it sounds like as this plays itself out with more daily replenishment. Your plan is not to change that, that would have been shifted a couple of years ago with these algorithms. This is now just making sure you’re in stock faster.

That is exactly correct. We’ll modify our SKU count by category every time we do a category update. But the step function change in what we were going to stock in the store has been done. Now we’re going to make a step function change in 70% of the stores on how frequently they receive their replenishment orders.

And lastly if I could follow-up on that, how does this change -- you’ve always had a very strong private label program and you’ve built these brands, Duralast in particular. How does the shift affect that if we think out three, four, five years?

Yes, great question. It will have zero bearing on our merchandise strategy and branding strategy. Duralast has been a terrific strategy for us and it will continue to be so.

Great. Thanks a lot.

All right. Thank you.

Thank you. Our next question is from Mr. Chris Horvers with J.P. Morgan. Sir, your line is open.

Thanks. Good morning, guys.

Good morning.

So I wanted to, from an understanding perspective, what are the buckets of higher fixed costs associated with the new inventory initiatives, and perhaps any quantification of how much your cost structure will become more fixed over time, maybe as a percentage of total -- from a percentage of total cost perspective?

Probably I’ve got two things going on, one of which is it will open three distribution centers over the next several years, so that will increase the cost structure. We believe that obviously replacing those distribution centers will reduce the transportation cost, so hopefully that will offset it. And then there’ll be some increased transportation equipment if you will of tractors and trailers in order to increase delivery frequency, so those are the costs. They’re not overly significant, but you’re adding some capital into the equation.

And then from an ability to be flexible in terms of the rollout with the mega hubs and the increased frequency of delivery, that’s something that can -- you can perhaps accelerate more quickly if you saw more success and then on the other side if the environment weakened, isn’t there ability to dial those back?

On the margin absolutely, but obviously there’s a lot of work involved in increasing the delivery, like I said there’s transportation required, people required and then the same on the mega hubs we’ve got to find the real estate and expand the locations or create a new location. So, there’s some lead time in being able to do this and being able to do it in an efficient profitable manner.

And then last question, in case I missed it. Did you mention how many stores currently have both mega hub and increased frequency and how do you think about the percentage of stores that will have those long-term? Thanks.

Yes, we specifically said we’ve got about 900 stores on the increased frequency of deliveries and from our five mega hubs we have about 750 stores that are being serviced by those. I don’t even know off the top of my head how many of them have both. Over the long run, about 70% are going to have increased frequency of delivery. And the majority of the stores are going to have mega hubs. But ones that are in remote locations or small volume stores won't have either one of those.

Thanks very much.

All right. Thank you.

Thank you. And now, I’d like to hand the call back over to Mr. Bill Rhodes. Sir.

Okay. Before we conclude the call, I’d just like to take a moment to reiterate that our business model continues to be very solid. We’re excited about our growth prospects for the year. We will not take anything for granted as we understand our customers have alternatives. We have a solid plan to succeed this fiscal year, but I want to stress that this is a marathon and not a sprint. As we continue to focus on the basics and focus on optimizing long-term shareholder value, we’re confident AutoZone will continue to be very successful. We thank you for participating in today's call.

That concludes today's call. Thank you for your participation. You may now disconnect.