Note 5: Credit Arrangements - The Company has an $800 million senior credit facility. The facility is split into a $400 million five-year tranche, expiring in August 2006, and a $400 million 364-day tranche, expiring in July 2003, which is renewable annually. The Company intends to renew this facility in July 2003. The facility is used to support the Company's $800 million commercial paper program and for short-term borrowings. Borrowings made are priced based upon market conditions at the time of funding in accordance with the terms of the senior credit facility. The senior credit facility contains certain restrictive covenants which include maintenance of a specific ratio, among others. The Company was in compliance with these covenants at May 2, 2003. Sixteen banking institutions are participating in the $800 million senior credit facility and as of May 2, 2003, there were no outstanding loans under the facility.

The Company also has a $100 million revolving credit and security agreement with a financial institution, expiring in November 2003, which is renewable for successive periods not to exceed 364 days each. Interest rates under this agreement are determined at the time of borrowing based on market conditions in accordance with the terms of the agreement. The Company had $50 million outstanding under this agreement at May 2, 2003, and $163.9 million in accounts receivable pledged as collateral.

Note 7: Accounting for Stock-Based Compensation - The Company has three stock incentive plans which are described more fully in Note 9 to the consolidated financial statements presented in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2003. Prior to fiscal 2003, the Company accounted for these plans under the recognition and measurement provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Therefore, no stock-based employee compensation is reflected in fiscal 2002 net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

Effective February 1, 2003, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation,"

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prospectively for all employee awards granted, modified or settled after January 31, 2003. Therefore, in accordance with the requirements of SFAS No. 148, "Accounting for Stock-Based Compensation- Transition and Disclosure," the cost related to stock-based employee compensation included in the determination of net income for the three months ended May 2, 2003 is less than that which would have been recognized if the fair value based method had been applied to all awards since the original effective date of SFAS No. 123. During the three months ended May 2, 2003, the Company recognized compensation expense, totaling $5 million, relating to stock options and awards granted in that period, which generally vest over three years.

The fair value of each option grant is estimated using the Black-Scholes option pricing model.  The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all outstanding and unvested awards in each period.

Note 8: Recent Accounting Pronouncements - In November 2002, the Emerging Issues Task Force ("EITF") issued EITF 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor." EITF 02-16 provides guidance for classification in the reseller's income statement for various circumstances under which cash consideration is received from a vendor by a reseller. In addition, the issue also provides guidance concerning how cash consideration relating to rebates or refunds should be recognized and measured. This standard became effective for the Company for all vendor reimbursement agreements entered into or modified after December 31, 2002.

In April 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. This Statement is effective for contracts entered into or modified after June 30, 2003, except in certain instances stated within SFAS No. 149 and for hedging relationships designated after June 30, 2003. Management does not believe the initial adoption of this standard will have a material impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. The new Statement requires that those instruments be classified as liabilities in statements of financial position. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of non public entities. Management does not believe the initial adoption of this standard will have a material impact on the Company's financial statements.

This discussion summarizes the significant factors affecting the Company's consolidated operating results, liquidity and capital resources during the quarter ended May 2, 2003. This discussion should be read in conjunction with the financial statements and financial statement footnotes that are included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2003.

The Company is self-insured for certain losses relating to worker's compensation, automobile, general and product liability claims. Self-insurance claims filed and claims incurred but not reported are accrued based upon management's estimates of the aggregate liability for uninsured claims incurred using actuarial assumptions followed in the insurance industry and historical experience. Although management believes it has the ability to adequately record estimated losses related to claims, it is possible that actual results could differ from recorded self-insurance liabilities.

The Company has three stock incentive plans which are described more fully in Note 9 to the consolidated financial statements presented in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2003. Prior to fiscal 2003, the Company accounted for these plans under the recognition and measurement provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. No stock-based employee compensation is reflected in 2002 net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective February 1, 2003, the Company adopted the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," prospectively for all employee awards granted, modified or settled after January 31, 2003. Therefore, in accordance with the requirements of SFAS No. 148, "Accounting for Stock-Based Compensation- Transition and Disclosure," the cost related to stock-based employee compensation included in the determination of net income for the three months ended May 2, 2003 is less than that which would have been recognized if the fair value based method had been applied to all awards since the original effective date of SFAS No. 123. See Note 7 to the Consolidated Financial Statements for further description and disclosures in accordance with the requirements of SFAS No. 148.