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Stock options that were not included in the pro forma fully diluted computation because they would have been anti-dilutive were 1.5 million shares at August 30, 2003, and 0.1 million shares at August 31, 2002. 

The effects of applying SFAS 123 and the results obtained through the use of the Black-Scholes option-pricing model in this pro forma disclosure are not necessarily indicative of future amounts. The weighted average fair value of the stock options granted was $24.59 per share during fiscal 2003, $16.10 per share during fiscal 2002 and $10.19 per share during fiscal 2001. The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions for grants in 2003, 2002 and 2001: 

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Recent Accounting Pronouncements: In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). FIN 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 requires the consolidation of certain types of entities in which a company absorbs a majority of another entity’s expected losses or residual returns, or both, as a result of ownership, contractual or other financial interests in the other entity. These entities are called variable inter- est entities. FIN 46 applies immediately to variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied at the end of periods ending after December 15, 2003. The Company is currently evaluating the impact of FIN 46 and does not expect its adoption to have a significant impact on its Consolidated Financial Statements. 

## Note B—Derivative Instruments and Hedging Activities: 

AutoZone has utilized interest rate swaps to convert variable rate debt to fixed rate debt. At August 30, 2003, the Company held an interest rate swap contract, with a September 2003 maturity date, to hedge $25 million variable rate debt associated with commercial paper borrowings. 

