On May 8, 2004, since the information contained in our annual report on our instruments and positions, sensitive to market risk, no significant changes, with the exception of a variable debt reduction of $97.9 million, a net increase of $350.0 million in fixed-rate debt and the liquidation of all of our outstanding interest rate guarantee instruments, including interest rate swap contracts, cash lock-in agreements and term interest rate swaps. Based on a debt issuance scheduled for the first quarter of fiscal 2005, on March 31, 2004, we entered into a five-year fixed-rate floating rate swap of a fictitious amount of $300 million, effective October 2004. The fair value of these swaps was $16.7 million as of May 8, 2004 and is reflected in the accompanying abbreviated consolidated balance sheet as part of other assets. As of May 17, 2004, the Company had a capacity of $921.8 million under the new credit facilities. The interest rate payable under the credit facilities is a function of the London Interbank Offered Rate (LIBOR), the basic interest rate of the credit banks (as defined in the agreement) or a competitive offer rate in the “companies” option. AutoZone awaits self-zone standards that require compliance with L-G-L and Th-L standards. The company is responsible for identifying “nd” staff for the identification of “nd” staff. In November 2003, the Company issued $300 million on 5.5% of priority bonds maturing in November 2015 and $200 million on 4.75% of priority bonds maturing in November 2010. Interest on both bonds must be paid in May and November of each year.

Revenues were used to repay a $250 million bank loan, $150 million in priority debt by 6%, and to reduce commercial debt borrowing. In November 2003, the Company paid all outstanding interest rate guarantee instruments, including interest rate swap contracts, cash locking agreements and advance interest rate swaps. Gross margin for the twelve weeks to May 8, 2004 was $676.2 million, or 49.7% of net sales, compared to $598.8 million, or 46.5% of net sales for the same period last year. Of the 3.2 percentage point improvement in gross margin compared to the same period in the previous year, 1.5 percentage points less the effects of the previous year were offset by the change in the classification of funding by operating credits, Sales, general and administrative costs at the cost of turnover in accordance with Edition 02-16 of Task Force Emerging Issues, accounts by a customer (including a reseller) for the cash delivery (EITF 02-16) received by a creditor (EITF 02-16). We implemented EITF 02-16 in the quarter ended May 10, 2003 for all supplier agreements concluded or amended after January 1, 2003. Previous periods are not reclassified to be comparable to the current representation. The 1.7 percentage point improvement in gross margin was mainly due to many initiatives, such as our ongoing efforts. B to minimize our guarantee risk by renegotiating with our suppliers, supply chain initiatives, custom product mixes, continued implementation of our Good/Better/Best initiative, cost negotiations with suppliers and, where appropriate, price adjustments.

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