John Lawrence (Morgan, Keegan and Company): Can you talk about the gross margin issue as far as direct imports are concerned and give a little timeline as far as the increase in pressure from cost and how that relates to different categories in terms of direct imports? Are you seeing any shift there? What will we look for going forward there?

William T. Giles: The import program for us is still relatively immature. We continue to make progress and increase in the amount of imports. We see commodity based increases predominantly from an import standpoint on steel. Many of our hard parts have that as a component and puts pressure on it. That is one tactic that we have, but we’re very much focused on being able to drive down our overall product acquisition costs so that we can continue to add value to our customers on our own term basis. This is something that will take time. I don’t expect this to have dramatic or significant swing improvement on imports. This is something that will take time and it’ll be over the next several years, but we’ll continue to make improvements in gross margins.

John Lawrence (Morgan, Keegan and Company): As commercial is getting a better foundation and structure going forward, how does ALLDATA play into this and are there some synergies there with using ALLDATA as you get further along in that process?

William C. Rhodes, III: Obviously ALLDATA is a terrific tool for the shops to use. As we move forward, we continue to look for ways to leverage ALLDATA with our commercial sales program. There’s some improvements going on there. First, the base product of ALLDATA continues to improve. We’ve also rolled out shop management systems so that we get more engaged with the shop and we’ve created some electronic ordering programs so that our customers can order directly from ALLDATA’s software and order parts from AutoZone. ALLDATA has also moved into the collision business, which gives us another avenue for growth. Not that we’re selling collision parts, but in a lot of those collision oriented repairs there are mechanical parts that have to be repaired as well. That gives us another entry into more customers.

Tony Cristello (BB&T Capital Markets): On the DIY side of the business, how much detail do you have now with respect to tracking the buying patterns of your customer and how loyal they’ve been?

William T. Giles: We implemented an electronic loyalty card program in December of last year. We are now beginning to compile that information. But it’s the first time we’ve look at it. So interpreting trends out of it is rather difficult so far. But we believe we will be able to do that over the long term.

Specifically oil change intervals, we’ve seen the industry information that says they’ve significantly increased over time. We’re working as hard as we can to convey to our customers that although your owner’s manual may say that you can wait until 7,000 miles or 7,500 miles that that says under normal operating conditions. Severe operating conditions are characterized as things like starting and stopping. We’re continuing to try to remind our customers that they do need to stick to those shorter intervals and what we believe is 3,000 miles.

David Cumberland (Robert W. Baird & Company): In the commercial business you mentioned overcoming the change with Midas. Can you comment on your progress on converting some of that business to more Hotshot business at Midas?

William C. Rhodes, III: At Midas we continue to focus very much on the Midas franchisees and growing our business with them. One of the things that happened when we came out was we were no longer a “approved” supplier of Midas Hotshot business. But that doesn’t mean that a lot of the Midas shops do not continue to buy with us. We’ve had headwind both from the supply chain side as well as on the Hotshot side with Midas. But we continue to do very well with many of the Midas dealers and franchisees and hope to continue to build upon our relationship with them.

Gregory Melich (Morgan Stanley): You’ve mentioned inflation as being lower mid-single digits. How did that trend sequentially, in particularly with lead and a lot of the commodity prices going up?

William T. Giles: I would say it probably hasn’t changed dramatically. We continue to see that. Obviously if we looked at it over the last two years it’s obvious you’d have quite a bit. But there’s no question that the oil based and energy based commodity prices have been there for quite some time, so we continue to see pressure on that. We continue to see some pressure on lead, maybe a little bit more recently.

Gregory Melich (Morgan Stanley): As you get people off the pay-on-scan do you take the offsetting benefit, do you typically get it in margin or do you get it from payables?

William T. Giles: It’s more from payables. This is a financing tool. We’re to some extent indifferent as to how the vendors want to finance it, whether we want to be on pay-on-scan or whether we want to negotiate it through terms. We’re committed on a long-term basis to get to 100% A/P’d inventory and we believe that we can get there. Pay-on-scan is simply one metric that we can use and obviously we’ve been unwinding that. If that’s beneficial to the vendors we’re going to continue to do that. But we’ll negotiate it back on terms.

Matt Nemer (Thomas Weisel Partners): The government data shows a significant increase in inflation in your product category this quarter versus last quarter. Why your experience would be different than that? Is it the composition of the basket?

William T. Giles: We’re talking about product acquisition. It takes time for that to roll in. We’ve been dealing with increased inflationary prices on product for some period of time and expect to continue to do so. That puts more emphasis on us to continue to try to reduce our product acquisition costs to the extent that we can pass those prices on or the market place passes those prices on and we will continue to do so. We’re are immune from it and we continue to receive significant pressure. We didn’t see anything in the individual quarter that was significant versus what we have been seeing.

Matt Nemer (Thomas Weisel Partners): Is there a way to quantify the pass-on rate to consumers? Have you been able to pass on 90% of that or is there any way to put some numbers around that?

William T. Giles: We haven’t quantified it. I would say that the majority of it has been passed on. I wouldn’t give you an exact percentage, but certainly a majority of it has been passed on.

Matt Nemer (Thomas Weisel Partners): On your late model coverage parts that you’ve added in commercial, can you talk to the take rates or the interest in that product set on the DIY side of the business?

William C. Rhodes, III: We see significant amount of the sales. Obviously 85% of our business is in retail. A significant amount of the sales of that late model inventory is still on the DIY side. It’s a higher percentage on the commercial than our normal products, but it’s still a significant amount that goes into DIY sales.

Peter Benedict (Wachovia Capital Markets): When we think about the inventory going forward and the growth, should we think these first quarter trends are somewhat representative of what we should think will play out over the balance of the year?