Financial Review The following table sets forth income statement data of AutoZone expressed as a percentage of net sales for the periods indicated: We are the nation’s leading specialty retailer of automotive parts and accessories, with most of our sales to do-it-yourself (DIY) customers. We began operations in 1979 and at August 30, 2003, operated 3,219 auto parts stores in the United States and 49 in Mexico. We also sell parts and accessories online at  autozone.com . Each of our stores carries an extensive product line for cars, sport utility vehicles, vans and light trucks, including new and remanufactured automotive hard parts, maintenance items and accessories. We also have a commercial sales  program in the United States (AZ Commercial) that provides commercial credit and prompt delivery of parts and other products to local, regional and national repair garages, dealers and service stations. We do not derive revenue from automotive repair or installation. In addition, we sell the ALLDATA automotive diagnostic and repair software which is also available through  alldatapro.com and  alldatadiy.com . For an understanding of the significant factors that influenced our performance during the past three fiscal years, this financial review should be read in conjunction with the Consolidated Financial Statements presented in this Annual Report. For the year ended August 30, 2003, AutoZone reported sales of $5.457 billion (52 weeks) compared with $5.326 billion (53 weeks) for the year ended August 31, 2002, a 2.5% increase from fiscal 2002. At August 30, 2003, we operated 3,219 domestic auto parts stores and 49 in Mexico, compared with 3,068 domestic auto parts stores and 39 in Mexico at August 31, 2002. Excluding sales from the extra week included in the prior year, sales were up 4.6% (see Reconciliation of Non-GAAP Financial Measures). Same store sales, or sales for domestic stores open at least one year, increased approximately 3% during the year, including flat retail same store sales and an increase for commercial  sales in same stores by approximately 27%. The improvement in same store sales was due more to an increase in average dollars spent per  transaction over the amounts in the same period of the prior year than an increase in customer count. The balance, of the sales increase  of 4.6%, was due to new store sales for fiscal 2003 which contributed 1.9 percentage points of the increase; ALLDATA and Mexico sales which contributed 0.5 percentage points of the increase, while the TruckPro sales in the prior year of $47.6 million reduced the increase by 0.9 percentage points. Gross profit for fiscal 2003 was $2.515 billion, or 46.1% of net sales, compared with $2.375 billion, or 44.6% of net sales for fiscal 2002. Operating, selling, general and administrative expenses for fiscal 2003 decreased to $1.597 billion, or 29.3% of net sales from $1.604 billion, or 30.1% of sales for fiscal 2002. For fiscal 2003, gross profit, as a percentage of sales, improved by 1.5 percentage points, while operating expenses, as a percentage of sales, declined by 0.8 percentage points. Operating profit for fiscal 2003 increased 19% over the prior year. Gross profit, operating expenses and operating profit for fiscal years 2003 and 2002 were impacted by the following non-recurring or  infrequent items: • For fiscal 2003, a $4.6 million pre-tax gain as a result of the disposition of properties associated with the fiscal 2001 restructuring and impairment charges • For fiscal 2003, a $10.0 million pre-tax negative impact and the reclassification of certain vendor funding to increase operating expenses by $53 million and decrease cost of goods sold by $43 million, both as a result of the adoption of Emerging Issues Task Force Issue  No. 02-16 regarding vendor funding AutoZone, Inc. 2003 Annual Report 21 Results of Operations Fiscal 2003 Compared with Fiscal 2002 Year Ended August 30, August 31, August 25, 2003 2002 2001 Net sales 100.0% 100.0% 100.0% Cost of sales, including warehouse and delivery expenses 53.9 55.4 58.2 Gross profit 46.1 44.6 41.8 Operating, selling, general and administrative expenses 29.3 30.1 31.1 Restructuring and impairment charges — — 2.7 Operating profit 16.8 14.5 8.0 Interest expense—net 1.5 1.5 2.1 Income taxes 5.8 5.0 2.3 Net income 9.5% 8.0% 3.6% Overview