Consolidated Statements of Cash Flows Year Ended August 30, August 31, August 25, 2003 2002 2001 (in thousands) (52 Weeks) (53 Weeks) (52 Weeks) Cash flows from operating activities: Net income $ 517,604 $ 428,148 $ 175,526 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 109,748 118,255 122,576 Amortization of intangible and other assets — — 8,757 Deferred income tax expense (benefit) 65,701 28,483 (46,981) Restructuring and impairment charges — — 156,822 Income tax benefit realized from exercise of options 37,402 42,159 13,495 Net change in accounts receivable and prepaid expenses (27,468) (12,879) 10,562 Net increase in merchandise inventories (135,732) (168,150) (164,164) Net increase in accounts payable and accrued expenses 145,455 285,329 187,801 Net change in income taxes payable (3,460) 13,743 10,798 Net change in other assets and liabilities (10,995) 4,003 (16,255) Net cash provided by operating activities 698,255 739,091 458,937 Cash flows from investing activities: Capital expenditures (182,242) (117,239) (169,296) Proceeds from sale of business — 25,723 — Proceeds from disposal of capital assets 14,443 25,094 44,601 Notes receivable from officers — 1,911 2,552 Net cash used in investing activities (167,799) (64,511) (122,143) Cash flows from financing activities: Net change in commercial paper 44,800 (162,247) (381,853) Proceeds from issuance of debt 500,000 150,000 465,000 Repayment of debt (215,000) (15,000) (105,000) Net proceeds from sale of common stock 45,303 55,676 48,410 Purchase of treasury stock (891,095) (698,983) (366,097) Settlement of interest rate hedge instruments (28,524) — — Other 14,304 (4,814) 3,063 Net cash used in financing activities (530,212) (675,368) (336,477) Net increase (decrease) in cash and cash equivalents 244 (788) 317 Cash and cash equivalents at beginning of year 6,498 7,286 6,969 Cash and cash equivalents at end of year $ 6,742 $ 6,498 $ 7,286 Supplemental cash flow information: Interest paid, net of interest cost capitalized $ 77,533 $ 77,935 $ 97,968 Income taxes paid $ 215,760 $ 178,417 $ 100,702 See Notes to Consolidated Financial Statements. AutoZone, Inc. 2003 Annual Report 33