The company leases a portion of the real estate used in its operations. Most leases require the company to pay real estate taxes and other expenses; some require additional amounts based on percentages of sales.

Minimum rental commitments under noncancelable operating leases having a term of more than one year as of February 1, 2003 are as follows: Total rent expense, net of sublease income, was $267, $261 and $291 in 2002, 2001 and 2000, respectively. The company remains contingently liable for lease payments related to the sub-lease of locations to third parties. To the extent that sub-lessees fail to perform, the company's total net rent expense would be increased.

The company's new corporate headquarters facility, located in Wayne, New Jersey, is financed under a lease arrangement commonly referred to as a "synthetic lease." Under this lease, unrelated third parties, arranged by Wachovia Development Corporation, a multi-purpose real estate investment company, will fund up to $125 for the acquisition and construction of the facility. Upon completion of the construction, which is expected to be in 2003, the company will begin to pay rent on the facility until the lease expires in 2011. The rent will be based on a mix of fixed and variable interest rates that will be applied against the final amount funded. Upon expiration of the lease, the company would expect to either: renew the lease arrangement; purchase the facility from the lessor; or remarket the property on behalf of the owner. The lease agreement provides the lessor with a residual value guarantee equal to the funding for the acquisition and construction of the facility. Under accounting principles generally accepted in the United States, this arrangement is required to be treated as an operating lease for accounting purposes and as a financing for tax purposes.

The provisions for income taxes consist of the following:

At February 1, 2003 and February 2, 2002, the company had gross deferred tax assets, before valuation allowances, of $612 and $576, respectively, and gross deferred tax liabilities of $600 and $484, respectively. Deferred tax assets of $32 and $45 were included in "Prepaid Expenses and Other Current Assets" at February 1, 2003 and February 2, 2002, respectively. Deferred tax assets, net of valuation allowances, of $285 and $245 were included in "Other Assets" at February 1, 2003 and February 2, 2002, respectively. Deferred tax liabilities of $55 and $36 were included in "Accrued Expenses and Other Current Liabilities" at February 1, 2003 and February 2, 2002, respectively. The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following:

On February 1, 2003, the company had foreign loss carryforwards available to reduce future taxable income of certain foreign subsidiaries. The foreign loss carryforwards, as well as the related tax benefits associated with the foreign loss carryforwards, will expire as follows:

At February 1, 2003, the company had valuation allowances of $295 against the tax benefit of foreign loss carryforwards of $305.

A reconciliation of the federal statutory tax rate with the effective tax rate follows: