Sources of Liquidity
Funds generated by continuing operations and existing cash and cash equivalents continue to be our most significant sources of liquidity. Based on current levels of operations, we believe funds generated from the expected results of continuing operations and available cash and cash equivalents will be sufficient to finance anticipated expansion plans and strategic initiatives for the next fiscal year. In addition, our revolving credit facilities are available for additional working capital needs or investment opportunities. There can be no assurance, however, that we will continue to generate cash flow at or above current levels or that we will be able to maintain our ability to borrow under the revolving credit facilities.

We have a $200 million unsecured revolving credit facility scheduled to mature in March 2005, of which $197 million was available at March 1, 2003. Outstanding letters of credit reduce amounts available under this facility. We also have a $200 million inventory financing line. At March 1, 2003, approximately $174 million was available under the inventory credit facility. Borrowings under this line are collateralized by a security interest in certain merchandise inventories approximating the outstanding borrowings. We received no advances under the $200 million credit facility in fiscal 2003, 2002 or 2001. In addition, we have a $37 million unsecured credit facility related to International operations scheduled to mature in September 2003. At March 1, 2003, $15 million was available under this credit facility. Our current plans are to renew the $37 million unsecured credit facility during fiscal 2004.

We offer our customers extended financing through a third-party financial institution. The use of financing encourages consumers to purchase selected products and promotes our business. The third-party institution assumes the risk of collection from our customers and has no recourse against us for any uncollectible amounts. Generally, these financing offers allow customers to purchase products with repayment terms ranging from 90 days to 18 months without a finance charge. Our contract with the third-party financial institution extends through January 2009. If the contract were to be unexpectedly terminated or canceled, we would contract with an alternative third-party financial institution or directly provide our customers with extended financing. 

Off-Balance-Sheet Financing
Other than in connection with executing operating leases, we do not have any off-balance-sheet financing. We finance a portion of our new-store development program through sale-leaseback transactions, which involve selling stores to unrelated parties and then leasing the stores back under leases that are accounted for as operating leases in accordance with SFAS No. 13, Accounting for Leases. A summary of our operating lease obligations by fiscal year is included in the Contractual Obligations and Available Commercial
Commitments section below.

We view our long-term debt-to-capitalization ratio as an important indicator or our creditworthiness. Our long-term debt-to-capitalization ratio, which represents the ratio of total long-term debt to total capitalization (total long-term debt plus total shareholders’ equity), was 23% in fiscal 2003, compared with 24% in fiscal 2002. The ratio of total long-term debt to total capitalization including operating lease obligations (rental expenses for all operating leases multiplied by eight), was 67% in fiscal 2003, compared with 66% in fiscal 2002. Total long-term debt, including operating lease obligations, was $5.5 billion at March 1, 2003, and $5.0 billion at March 2, 2002. The long-term debt-to-capitalization ratio, including operating lease obligations, is not in accordance with, or preferable to, the ratio determined in accordance with accounting principles generally accepted in the United States. >>