Our decision to own or lease real estate is based on an assessment of our financial liquidity, capital structure, our desire to own or to lease the location and the alternative that results in the highest returns to our shareholders. For those sites developed using working capital, we often sell and lease back those properties under long-term lease agreements. Through the end of fiscal 2003, $59 million in leases related to new stores had been financed under the master lease program. The master lease program is now complete and there will be no further new store development under this program. The program is set to expire on January 1, 2006, and is renewable for one year, subject to lenders’ consent.

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 under the stock purchase program in fiscal 2003, 2002 or 2001.

Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles. In connection with the preparation of the financial statements, we are required to make assumptions, make estimates and apply judgment that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on
historical experience, current trends and other factors that management believes to be relevant at the time the consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with generally accepted accounting principles. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our significant accounting policies are discussed in note 1 of the Notes to Consolidated Financial Statements. Management believes that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results. Management has reviewed these critical accounting policies and related disclosures with our independent auditor and the Audit Committee of our Board of Directors.

Inventory Reserves
We maintain inventory at the lower of cost or market. Markdown reserves are established based primarily on forecasted consumer demand, inventory aging and technological obsolescence. If our estimates regarding consumer demand are inaccurate or changes in technology impact demand for certain products in an unforeseen manner, we may be exposed to losses in excess of our established reserves that could be material.

We also establish inventory loss reserves. Independent physical inventory counts are taken on a regular basis to ensure the amounts reflected in our consolidated financial statements are properly stated. During the interim period between physical inventory counts, we accrue for anticipated physical inventory losses on a location-by-location basis, based on a number of factors, including historical results and current inventory loss trends.

If our estimates regarding inventory losses are inaccurate, we may be exposed to losses in excess of our established reserves that could be material.

We have not made any material changes in the accounting methodology used to establish our markdown or inventory loss reserves during the past three years. >>