Management Discussion & Analysis pg 1 2 3 4 5 6 7 8 9 10 11 12 13 14

For additional information regarding the convertible debentures, refer to note 3 of the Notes to Consolidated Financial Statements.

Our ability to access our credit facilities is subject to our compliance with the terms and conditions of the credit facilities, including financial covenants. The financial covenants require us to have minimum earnings before interest, taxes, depreciation and amortization (EBITDA), and a minimum net worth, as well as to maintain other financial ratios. As of the end of fiscal 2002, we were in compliance with all such covenants. In addition, in the event we were to default on any of our other debt, it would constitute default under our credit facilities as well.

Our current practice is to lease rather than own real estate. For those sites developed using working capital, we generally sell and lease back those properties under long-term lease agreements. In fiscal 2002, recoverable costs from the developed properties decreased $25 million compared with the prior fiscal year as we sold properties to unrelated third parties and leased them back under operating leases. In addition, in fiscal 2002 we utilized a $60 million master lease facility to finance new store development. Expenditures for stores developed under this financing facility are recorded on the balance sheet as property under capital lease with a corresponding lease obligation liability. At the end of fiscal 2002, $39 million in capitalized leases related to new stores had been financed under the master lease agreement.

In fiscal 2000, our Board of Directors authorized the purchase of up to $400 million of our common stock from time to time through open-market purchases. The stock purchase program has no stated expiration date. 
Approximately 2.9 million shares were purchased under this plan during fiscal 2000 at a cost of $100 million. No additional purchases were made in fiscal 2002 or 2001.

Significant Accounting Policies
Revenue Recognition
We recognize revenues from the sale of merchandise at the time the merchandise is sold. Service revenues are recognized at the time the service is provided, the sale price is fixed or determinable, and collectibility is reasonably assured. 

We sell extended service contracts, called Performance Service Plans, on behalf of an unrelated third party. In jurisdictions where we are not deemed to be the obligor on the contract at the time of sale, commissions are recognized in revenues at the time of sale. In jurisdictions where we are deemed to be the obligor on the contract at the time of sale, commissions are recognized in revenues ratably over the term of the service contract.