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SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 4, 2002

or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission File Number 001-13927

CSK AUTO CORPORATION

(602) 265-9200

N/A

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes     x     No     o

      As of September 13, 2002, CSK Auto Corporation had 45,156,696 shares of common stock outstanding.

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PART I

FINANCIAL INFORMATION

Item 1.     Financial Statements

CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

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CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements.

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CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these consolidated financial statements.

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CSK AUTO CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

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CSK AUTO CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      CSK Auto Corporation is a holding company. At August 4, 2002, CSK Auto Corporation had no business activity other than its investment in CSK Auto, Inc., a wholly-owned subsidiary (“Auto”). On a consolidated basis, CSK Auto Corporation and Auto are referred to herein as the “Company.”

      Auto is a specialty retailer of automotive aftermarket parts and accessories. At August 4, 2002, the Company operated 1,114 stores in 19 Western and Northern Plains states as a fully integrated company and single business segment under three brand names: Checker Auto Parts, founded in 1969 and operating in the Southwestern, Rocky Mountain and Northern Plains states and Hawaii; Schuck’s Auto Supply, founded in 1917 and operating in the Pacific Northwest and Alaska; and Kragen Auto Parts, founded in 1947 and operating primarily in California.

      Auto also operates Automotive Information Systems, Inc. (“AIS”) as a wholly-owned subsidiary. AIS, based in St. Paul, Minnesota, is a leading provider of diagnostic vehicle repair information to automotive technicians, automotive replacement parts manufacturers, automotive test equipment manufacturers and the do-it-yourself consumer.

Note 1 — Basis of Presentation

      The unaudited consolidated financial statements included herein were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission, but do not include all information and footnotes required by generally accepted accounting principles. In the opinion of management, the consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the Company’s financial position and the results of its operations. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto for the fiscal year ended February 3, 2002, as included in the Company’s Annual Report on Form 10-K/ A filed on May 10, 2002.

Note 2 — Inventories

      Inventories are valued at the lower of cost or market, cost being determined utilizing the last-in, first-out (LIFO) method. An actual valuation of inventory under the LIFO method can only be calculated at the end of a fiscal year based upon the inventory levels and costs at that time. Accordingly, interim LIFO calculations reflected herein are based upon management’s estimates of year-end inventory levels and costs. The replacement cost of inventories approximated $549 million and $528 million at August 4, 2002 and February 3, 2002, respectively.

      The carrying value of the inventory exceeds the current replacement cost primarily as a result of the application of the LIFO inventory method of accounting. The Company’s costs of acquiring inventories through normal purchasing activities have been decreasing in recent years as the Company’s increased size and cash flows have enabled it to take advantage of volume discounts and lower product acquisition costs resulting in a lower current replacement cost of inventory.

      From time to time, the Company performs an analysis of the net realizable value of the inventory, after consideration of expected disposal costs and normal profit margins, to determine if the LIFO carrying value of the inventory is impaired. Should an impairment be indicated, the carrying value of the inventory would be reduced. No such impairment is indicated based on current market conditions. Historically, the net realizable value of the inventory has exceeded its carrying value. The Company’s analysis for the first half of fiscal 2002 indicated that the net realizable value approximated the carrying value of inventories at August 4, 2002. This was a result of the Company’s program to increase promotional pricing (temporarily reducing selling prices of its products) in order to attract customers, resulting in the lowering of gross profit margins in the first half of fiscal 2002. The Company reduced promotional activity during the second quarter and plans to continue this trend throughout the remainder of fiscal 2002. Accordingly, the Company expects the net realizable value of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the inventories to be higher than the carrying values at the end of fiscal 2002. Should the Company be unable to increase gross profit margins as planned, an impairment of the carrying amount of inventories could result.

Note 3 — Issuance of Common Stock and Earnings Per Share

      On May 20, 2002, at the option of the Company, the $50 million 7% Convertible Subordinated Debentures issued in December 2001 were converted into approximately 5.75 million shares of CSK Auto Corporation common stock. Pursuant to the agreements relating to the debentures, interest on the debentures was paid in shares of the Company’s common stock in lieu of cash. In the first quarter of 2002, interest was paid on the debentures in the form of 105,708 shares of CSK Auto Corporation common stock. The Company elected to pay interest accrued on the debentures, for the period April 1, 2002 to the date of conversion, in the form of 30,872 additional shares of CSK Auto Corporation common stock. The following table illustrates the book value of the notes at the time of conversion ($ in thousands):

      On July 2, 2002, CSK Auto Corporation sold 6,878,300 primary shares of common stock in an underwritten public offering at $12 per share. In addition, a selling stockholder sold an additional 2,600,000 shares in the offering. The Company received no proceeds from the shares sold by the selling stockholder. Issuance costs related to the stock offering approximated $0.7 million. These costs included approximately $0.4 million of legal, accounting and printing fees charged to additional paid in capital for the primary offering and approximately $0.3 million of costs charged to operating expense for the secondary offering. Proceeds from the primary offering were used to retire approximately $71.7 million of Auto’s outstanding 11% Senior Subordinated Notes due 2006. The early extinguishment of this debt resulted in an extraordinary loss of approximately $3.7 million, net of approximately $2.3 million of income tax benefit, primarily as a result of the payment of an early redemption premium and the write off of deferred debt issuance costs. The components of this transaction are as follows ($ in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Calculation of shares used in computing per share amounts is summarized as follows (unaudited):

Note 4 — Recent Accounting Pronouncements

      In June 2001, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards No. 141 (SFAS 141), “Business Combinations”, and No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” SFAS 141 supersedes Accounting Principles Board Opinion (“APB”) No. 16, “Business Combinations.” The provisions of SFAS 141: (1) require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001; (2) provide specific criteria for the initial recognition and measurement of intangible assets apart from goodwill; and (3) generally require that unamortized negative goodwill be written off immediately as an extraordinary gain instead of being deferred and amortized. SFAS 141 also requires that upon adoption of SFAS 142, the Company reclassify the carrying amounts of certain intangible assets into or out of goodwill, based on certain criteria. SFAS 142 supersedes APB 17, Intangible Assets, and is effective for fiscal years beginning after December 15, 2001. SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The provisions of SFAS 142: (1) prohibit the amortization of goodwill and indefinite-lived intangible assets; (2) require that goodwill and indefinite-lived intangibles assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or indefinite-lived intangible assets may be impaired); (3) require that reporting units be identified for the purpose of assessing potential future impairments of goodwill; and (4) remove the forty-year limitation on the amortization period of intangible assets that have finite lives.

      SFAS 142 requires that goodwill be tested annually for impairment using a two-step process. The first step is to identify a potential impairment and, in transition, this step must be measured as of the beginning of the fiscal year. However, a company has six months from the date of adoption to complete the first step. The second step of the goodwill impairment test measures the amount of the impairment loss (measured as of the beginning of the year of adoption), if any, and must be completed by the end of the fiscal year. Intangible

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assets deemed to have an indefinite life will be tested for impairment using a one-step process which compares the fair value to the carrying amount of the asset as of the beginning of the fiscal year.

      The Company adopted the provisions of SFAS 141 and 142 on February 4, 2002. The Company completed the transitional impairment test during the second quarter of 2002 and determined that there was no impairment of existing goodwill. The remaining balance of goodwill is $127.1 million. In accordance with SFAS 142, the Company ceased amortization of its remaining goodwill.

      SFAS 142 requires the presentation of net income and related earnings per share data adjusted for the effect of goodwill amortization. The following table provides pro forma net income and earnings per share data for the thirteen and twenty-six weeks ended August 4, 2002 and August 5, 2001, to illustrate the impact of goodwill amortization on the results of the prior year period ($ in thousands except per share amounts):

      In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies to all entities that have legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal use of the asset. SFAS 143 is effective for fiscal years beginning after June 15, 2002. The Company does not expect the adoption of SFAS 143 to have a significant impact on its financial statements.

      In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 replaces certain previously issued accounting guidance, develops a single accounting model for long-lived assets, and broadens the framework previously established for assets to be disposed of by sale (whether previously held or newly acquired). The Company adopted SFAS No. 144 as of the beginning of fiscal 2002. The adoption of this standard did not have a material effect on the Company’s financial statements.

      In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS 145 updates, clarifies and simplifies existing accounting pronouncements and addresses the reporting of debt extinguishments and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company plans to adopt the provisions of SFAS 145 by February 3, 2003. During the second

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

quarter of fiscal 2002, the Company recorded an extraordinary loss of $3.7 million (net of income tax benefit) relating to the early retirement of debt. SFAS No. 145 will require that this amount be reclassified to operations.

      In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires companies to recognize the present value of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease rental and termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, store closing, or other exit or disposal activity. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002, with early implementation encouraged. The Company is currently analyzing the impact of this pronouncement on its financial statements; however, adoption of the pronouncement may impact the timing of recognition of closed store charges.

Note 5 — Interest Rate Swap

      During February 2002, the Company entered into an interest rate swap agreement to convert the interest rate payment obligation on $100.0 million of its 12% Senior Notes to a floating rate, set quarterly, equal to the 3 month LIBOR rate plus 760 basis points. At the time the agreement commenced, the Company’s fixed rate debt was approximately 66% of its outstanding debt. The Company’s fixed rate debt, on average, carries higher interest rates than its variable rate debt. The interest rate swap is intended to provide a better balance of fixed and variable rate debt instruments and to hedge the fair value of these notes against potential movements in market interest rates. For accounting purposes, the interest rate swap is designated and qualifies as a fair value hedge of a portion of the Company’s fixed rate debt instruments. As the critical terms of the swap match those of the underlying hedged debt, the change in fair value of the swap is perfectly offset by changes in fair value of the debt.

      At August 4, 2002, the fair value of the interest rate swap approximated $2.9 million. The differential to be paid or received under this agreement is accrued consistently with the terms of the agreement and is recognized in interest expense over the term of the related debt. The related amounts payable to or receivable from counter parties are included in other liabilities or assets. Cash flows related to the interest rate swap agreement are classified as operating activities in the Consolidated Statement of Cash Flows. For the thirteen and twenty-six weeks ended August 4, 2002, the Company reduced interest expense by approximately $0.6 million and $1.1 million respectively, as a result of the interest rate swap. There were no interest rate swaps in place in the comparable period last year.

Note 6 — Legal Matters

      The Company was served on March 8, 2000 with a complaint filed in Federal Court in the Eastern District of New York by the Coalition for a Level Playing Field, O.K. and, based on the current amended complaint, 255 individual auto parts dealers. The complaint alleges that the Company and seven other auto parts dealers (AutoZone, Inc., Wal-Mart Stores, Inc., Advance Stores Company, Inc., Discount Auto, Inc., The Pep Boys — Manny, Moe and Jack, Inc., O’Reilly Automotive, Inc., and Keystone Automotive Operations, Inc.) violated the Robinson-Patman Act. Only 15 of the individual plaintiffs asserted claims against the Company. The complaint, as amended, alleges that the Company and other defendants knowingly either induced or received discriminatory prices from large suppliers, allegedly in violation of Section 2(a) and 2(f) of the Robinson-Patman Act, as well as received compensation from large suppliers for services not performed for those suppliers, allegedly in violation of Section 2(c) of the Robinson-Patman Act. In May 2002, the Company reached a settlement with all the plaintiffs that provides for the payment of nominal

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consideration by the Company. As the first step in the settlement, the attorneys for the Company and the plaintiffs have filed with the Court a Stipulation and Order for the dismissal with prejudice of all claims by all plaintiffs against the Company. This Stipulation and Order has been signed by the Court.

      The Company currently and from time to time is involved in other litigation incidental to the conduct of its business. The damages claimed in some of this litigation are substantial. Although the amount of liability that may result from these matters cannot be ascertained, the Company does not currently believe that, in the aggregate, they will result in liabilities material to its consolidated financial position, results of operations or cash flows.

Note 7 — Store Closing Costs

      On an on-going basis, store locations are reviewed and analyzed based on several factors including market saturation, store profitability, and store size and format. In addition, the Company analyzes sales trends and geographical and competitive factors to determine the viability and future profitability of its store locations. If a store location does not meet the Company’s required projections, it is identified for closure. As a result of the Company’s acquisitions over the last several years, the Company has closed numerous locations as a result of store overlap with previously existing store locations. In these situations, the Company negotiates with the landlord to attempt to cancel the lease or the Company attempts to sublease the closed store to a third party to reduce the Company’s future exposure.

      The Company provides an allowance for estimated costs to be incurred in connection with store closures. The allowance for store closing costs primarily consists of three components: (1) future rents to be paid over the remaining terms of the lease agreements for the stores (net of estimated probable sublease recoveries); (2) lease commissions associated with the anticipated store subleases; and (3) occupancy expenses associated with the closed store vacancy periods. Such costs are recognized when a store is specifically identified, costs can be estimated and closure is planned to be completed within the next twelve months. No provision is made for employee termination costs. For stores to be relocated, such costs are recognized when an agreement for the new location has been reached with a landlord and site plans meet preliminary municipal approvals. During the period that they remain open for business, the rent and other operating expenses for the stores to be closed continue to be reflected in normal operating expenses. The actual costs of relocating a store, such as transporting of inventories, are considered a normal operating expense and are not included in the store closing reserve.

      As of August 4, 2002, the Company had a total of 239 store locations included in the allowance for store closing costs. Of this total, 52 locations were vacant, 176 locations were subleased and 11 locations were identified for closure but remained open. In addition to these store locations, we had 66 service centers of which 10 were vacant and 56 were subleased. During the second half of fiscal 2002, the Company expects cash outflows related to these locations of approximately $2.5 million for rent on vacant locations, related occupancy expenses, leasing commissions and net shortfalls on cash rents from subleased locations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      During the first half of fiscal 2002, the Company recorded gross store closing costs of $0.5 million relating to 13 stores identified for closure. Activity in the provision for store closings and the related store closing costs for the first half of fiscal 2002, is as follows ($ in thousands):

      On a fiscal year basis, store count activity and the remaining number of stores to be closed are summarized as follows:

      At August 4, 2002, there were 11 stores remaining to be closed under the Company’s store closing plans. The table below details the progress of store closings under the store closing plans by fiscal year:

Note 8 — Sale of Stores

      During the second quarter of fiscal 2002, the Company sold 13 stores in Texas. The stores were sold, as they are geographically remote from the Company’s other operations. This transaction resulted in net cash proceeds of approximately $4.2 million and a loss on sale of approximately $0.8 million.

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Overview

      Our business is somewhat seasonal in nature, with the highest sales occurring in the months of June through October (overlapping our second and third fiscal quarters). Our business is, in addition, affected by weather conditions. While unusually severe or inclement weather tends to reduce sales, as our customers tend to defer elective maintenance during such periods, extremely hot and cold temperatures tend to enhance sales by causing auto parts to fail and sales of seasonal products to increase.

Results of Operations

      The following table expresses the statements of operations as a percentage of sales for the periods shown: