May 3, 2002

Note 8: 8: Recent Accounting Pronouncements - In November 2002, the Emerging Issues Task Force ("EITF") issued EITF 02-16, "Accounting

"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.

The Company has historically treated volume related discounts or rebates as a reduction of inventory cost and reimbursements of operating 

expenses received from vendors as a reduction of those specific expenses. The Company's historical accounting treatment for these vendor 

provided funds is consistent with EITF 02-16 with the exception of certain cooperative advertising allowances.allowances and in-store service funds 

provided by third parties for which the costs are ultimately funded by vendors. The Company previously treated thesethe cooperative advertising 

allowances and in-store service funds as a reduction of the overall advertisingrelated expense. Under EITF 02-16, cooperative
-9-
 advertising allowances and 

in-store service funds should be treated as a reduction of inventory cost unless they represent a reimbursement of specific, incremental, and 

identifiable costs incurred by the customer to sell the vendor's product. 

-9-

The Company reviewed its cooperative advertising agreements in order to determine if any of these funds would meet the specific, incremental 

and identifiable criteria in EITF 02-16 and would therefore qualify for direct offset against the related expense.  These agreements do not 

include proof of performance or specific substantiation requirements.  The agreements with the Company's vendors provide funds for general 

Company advertising to drive customer traffic, which in turn, increases sales of the vendors' products.  Based on this analysis of our vendor 

agreements and the guidance set forth in EITF 02-16, the Company believes that treating cooperative advertising funds as a reduction in the 

cost of inventory and recognizing these costs as a reduction of cost of sales when the inventory is sold complies with EITF 02-16.

The Company reviewed its third party in-store service agreements in order to determine if any of these funds would meet the specific, 

incremental and identifiable criteria in EITF 02-16 and would therefore qualify for direct offset against the related expense.  These agreements 

with the Company's vendors provide funds for third parties to provide general merchandising functions within the Company's retail stores.  

In analyzing third party in-store service funds, the Company determined that third party vendors providing these in-store services were 

servicing multiple areas and products within the Company's retail stores. Neither we, nor the third party service providers have the ability 

to specifically identify time spent on a merchandise vendor's products in multiple locations and match them to specific funds from merchandise 

vendors.  Based on this analysis and the guidance set forth in EITF 02-16, the Company believes that treating third party in-store service funds 

as a reduction in the cost of inventory and recognizing these costs as a reduction of cost of sales when the inventory is sold complies with 

EITF 02-16.  

The Company does not expect this issueaccounting change to have a material impact on the fiscal 2003 financial statements since substantially all 

of the cooperative advertising allowance agreements and in-store service reimbursement agreements for fiscal 2003 were entered into prior 

to December 31, 2002.  The Company has assessed the historic volume of cooperative advertising reimbursements that have been received in order to determine which of these reimbursements would meet the specific, identifiable and incremental criteria outlined under this issue and accordingly, qualify as a direct offset to advertising expense. Based on the Company's analysis of the impact on net income, and the administrative cost to identify and track reimbursements between those qualifying for expense offset and those requiring inventory cost reduction, the Company has elected to treat all cooperative advertising funds received from vendors as a reduction in the cost of inventory and recognize them as a reduction to cost of goods sold when the inventory is sold.
The Company estimates that this one time change in accounting will reduce fiscal 2004 EPS by approximately $0.12

$0.12 per share and fiscal 2005 EPS by approximately $0.01 per share.  The $0.01 per share impact in fiscal 2005 represents the estimated 

growth in cooperative advertising allowances and in-store service funds from fiscal 2004 to fiscal 2005.  This reflects the cooperative 

advertising allowances and in-store service funds capitalized into inventory in 2005 less the $0.12 impact from 2004 that will be recognized 

in 2005 as the inventory is sold.  There will be no impact on the Company's cash flows or the expected amount of funds to be received from 

vendors.  The earnings impact of EITF 02-16 recognized in fiscal 2004 the fiscal year of the initial implementation of EITF 02-16, will not be recurring in subsequent years.  Earnings in these 

subsequent years would be impacted only by future net changes in cooperative advertising programs.
programs and in-store service funds.

In AprilJanuary 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of 

Variable Interest Entities, an interpretation of ARB 51."  FIN 46 provides guidance on the identification and consolidation of variable interest 

entities, or VIEs, which are entities for which control is achieved through means other than through voting rights. The provisions of FIN 46 

are required to be applied to VIEs created or in which the Company obtains an interest after January 31, 2003.  For VIEs in which the 

Company holds a variable interest that it acquired before February 1, 2003, the provisions of FIN 46 are effective for the fourth quarter of 

2003. Due to the ongoing deliberations and clarifications by the FASB, we are still assessing the provisions of FIN 46.  However, the 

Company does not expect the adoption of FIN 46 in the fourth quarter of 2003 to have a material impact on its financial position, results of 

operations or cash flows.

-10-

In April 2003, the 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 theThe initial adoption of this standard will

did not 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 theThe initial adoption of this 

standard willdid not have a material impact on the Company's financial statements.

Note 9: Subsequent Event- On November 20, 2003, the Company entered into a definitive agreement to sell 26 commodity-focused locations 

operating under The Contractor Yard banner (the "Contractor Yards").   The sale is expected to close in the fourth quarter of fiscal 2003.   

Total assets included in the balance sheets relating to the Contractor Yards at October 31, 2003, November 1, 2002 and January 31, 2003 

were approximately $122 million, $103 million and $98 million, respectively.  Total liabilities included in the balance sheets relating to the 

Contractor Yards at October 31, 2003, November 1, 2002 and January 31, 2003 were approximately $25 million, $23 million and $21 

million, respectively.  The gain or loss associated with the Contractor Yard transaction is not expected to exceed $0.01 in diluted earnings 

per share.  The Company expects to account for this disposition as a discontinued operation in the fourth quarter of 2003.

-11-

INDEPENDENT ACCOUNTANTS' REPORT

To the Board of Directors and Stockholders of Lowe's Companies, Inc.  

We have reviewed the accompanying consolidated balance sheets of Lowe's Companies, Inc. and subsidiaries (the "Company") as of 

October 31, 2003 and November 1, 2002, and the related consolidated statements of current and retained earnings for the three-month and 

nine-month periods then ended, and cash flows for the nine-month periods ended October 31, 2003 and November 1, 2002.  These interim 

financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants.  A review of 

interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible 

for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with auditing standards generally 

accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a 

whole.  Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated financial statements for them 

to be in conformity with accounting principles generally accepted in the United States of America.
	

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance 

sheet of Lowe's Companies, Inc. and subsidiaries as of January 31, 2003, and the related consolidated statements of earnings, shareholders' 

equity, and cash flows for the year then ended (not presented herein); and in our report dated February 19, 2003, we expressed an unqualified 

opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying consolidated balance sheet as 

of January 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 7 to the consolidated interim financial statements, the Company has changed its method of accounting for stock-based 

compensation effective February 1, 2003.

DELOITTE & TOUCHE LLP

Charlotte, North Carolina
November 24, 2003

This discussion summarizes the significant factors affecting the Company's consolidated operating results, liquidity and capital resources during 

the quarterthree and nine months ended May 2,October 31, 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.
2003.

FORWARD-LOOKING STATEMENTS

The Company's quarterly report on Form 10-Q to be filed with the Securities and Exchange Commission talks about the future, particularly in 

the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." While the Company believes these 

expectations are reasonable, the Company cannot guarantee them and this should be considered when thinking about statements made that are 

not historical facts. Some of the things that could cause actual results to differ substantially from expectations are:

(1) The Company's sales are dependent upon the general geopolitical environment and economic health of the country, variations in the number 

of new housing starts and existing home sales, the level of repairs, remodeling and additions to existing homes, commercial building activity, and 

the availability and cost of financing. An economic downturn affecting consumer confidence in making housing and home improvement 

expenditures could affect sales because a portion of the Company's inventory is purchased for discretionary projects, which can be delayed.

(2) The Company's expansion strategy may be impacted by environmental regulations, local zoning issues and delays, availability and 

development of land, and more stringent land use regulations than traditionally experienced as well as the availability of sufficient labor to facilitate 

growth.

(3) Many of the Company's products are commodities whose prices fluctuate within an economic cycle, a condition especially true of lumber 

and plywood.

(4) The Company's business is highly competitive, and as it expands into new markets the Company may face new forms of competition, which 

do not exist in some of the markets traditionally served.

(5) The ability to continue the everyday competitive pricing strategy and provide the products that customers want depends on the Company's 

vendors providing a reliable supply of inventory at competitive prices.

(6) On a short-term basis, weather may affect sales of product groups like nursery, lumber, building materials and seasonal products.

(7)  The risk that the Company does not close The Contractor Yard transaction.

The Company receives funds from vendors in the normal course of business for a variety of reasons including purchase volume rebates, 

cooperative advertising allowances, and third party in-store service related costs. Volume related rebates are recorded based on estimated 

purchase volumes and historical experience and are treated as a reduction of inventory costs at the time of purchase. Vendor funds received for third party in-store service related costs and other vendor funds received 

as a reimbursement of specific, incremental and identifiable costs are recognized as a reduction of the related expense. Cooperative advertising 

allowances and in-store service reimbursements provided by vendors have historically been used to offset the Company's overall advertisingrelated expense.
-11-
Under

However, under the guidance set forth in Emerging Issues Task Force (EITF) 02-16, "Accounting by a Customer (Including a Reseller) for 

Certain Consideration Received From a Vendor," cooperative advertising allowances and in-store service funds should be treated as a reduction 

of inventory cost unless they represent a reimbursement of specific, incremental, and identifiable costs incurred by the customer to sell the 

vendor's product. Under

The Company reviewed its cooperative advertising agreements in order to determine if any of these funds would meet the transition rulesspecific, incremental 

and identifiable criteria in EITF 02-16 and would therefore qualify for direct offset against the related expense.  These agreements do not include 

proof of performance or specific substantiation requirements.  The agreements with the Company's vendors provide funds for general Company 

advertising to drive customer traffic, which in turn, increases sales of the vendors' products.  Based on this analysis of our vendor agreements 

and the guidance set forth in EITF 02-16, the Company believes that treating cooperative advertising funds as a reduction in the cost of inventory 

and recognizing these costs as a reduction of cost of sales when the inventory is sold complies with EITF 02-16.

-14-

The Company reviewed its third party in-store service agreements in order to determine if any of these funds would meet the specific, 

incremental and identifiable criteria in EITF 02-16 and would therefore qualify for direct offset against the related expense.  These agreements 

with the Company's vendors provide funds for third parties to provide general merchandising functions within the Company's retail stores.  In 

analyzing third party in-store service funds, the Company determined that third party vendors providing these in-store services were servicing 

multiple areas and products within the Company's retail stores. Neither we, nor the third party service providers have the ability to specifically 

identify time spent on a merchandise vendor's products in multiple locations and match them to specific funds from merchandise vendors.  Based 

on this treatmentanalysis and the guidance set forth in EITF 02-16, the Company believes that treating third party in-store service funds as a reduction in 

the cost of inventory and recognizing these costs as a reduction of cost of sales when the inventory is required for all agreements entered into or modified after December 31, 2002. sold complies with EITF 02-16.

The Company does not expect this issueaccounting change to have a material impact on the fiscal 2003 financial statements since substantially all of 

the cooperative advertising allowance agreements and in-store service reimbursement agreements for fiscal 2003 were entered into prior to 

December 31, 2002. The Company has assessed the historic volume of cooperative advertising reimbursements that have been received in order to determine which of these reimbursements would meet the specific, identifiable and incremental criteria outlined under this issue and accordingly, qualify as a direct offset to advertising expense. Based on the Company's analysis of the impact on net income, and the administrative cost to identify and track reimbursements between those qualifying for expense offset and those requiring inventory cost reduction, the Company has elected to treat all cooperative advertising funds received from vendors as a reduction in the cost of inventory and recognize them as a reduction to cost of goods sold when the inventory is sold.
The Company estimates that this one time change in accounting will reduce fiscal 2004 EPS by approximately $0.12 per share and fiscal 2005 EPS by approximately $0.01 per share.  The $0.01 per share impact in fiscal 2005 represents the estimated growth in cooperative advertising allowances from fiscal 2004 to fiscal 2005.  This reflects the cooperative advertising allowances capitalized into inventory in 2005 less the $0.12 impact from 2004 that will be recognized in 2005 as the inventory is sold.  There will be no impact on the Company's cash flows or the expected amount of funds to be received from vendors.  The earnings impact recognized in fiscal 2004, the fiscal year of the initial implementation of EITF 02-16, will not be recurring in subsequent years.  Earnings in these subsequent years would be impacted only by future net changes in cooperative advertising programs.

For the firstthird quarter of fiscal 2003, sales increased 11.4%23.5% to $7.2$7.9 billion, comparable store sales for the quarter increased 0.1%12.4%, and net 

earnings rose 21.7%33.3% to $421$451.7 million compared to last year's firstthird quarter results. Diluted earnings per share were $0.53$0.56 compared to $0.44 $0.43 

for the comparable quarter of last year.
  For the nine months ended October 31, 2003, sales increased 17.4% to $23.9 billion, comparable 

store sales increased 6.5%, and net earnings rose 27.5% to $1.5 billion compared to the first nine months of fiscal 2002. Diluted earnings per 

share increased 26.9% to $1.84 per share over the same period a year ago. 

-15-

The sales increase during the third quarter and first quarternine months of 2003 was primarily attributable to the addition of 11.212.9 million square feet of 

retail selling space relating to new and relocated stores since last year's first quarter. The Company's total sales andthird quarter, as well as the increase in comparable store sales were lower than expectedsales.   Sales in 

the third quarter benefited from favorable weather that allowed the continuation of outdoor projects through the late summer and into the fall.  In 

addition, increases in the wholesale prices of lumber and plywood during the first quarter primarilyhad a positive impact on sales in the quarter.  Consumer 

disposable income increased due to adverse weather conditions experienced throughout a large portion oflower Federal individual tax withholding rates and the Company's marketsFederal tax rebates distributed during July and August.

Further, purchases to prepare for and to repair damages caused by Hurricane Isabel in the late wintermid-Atlantic region contributed to increased third 

quarter sales.  Both customer traffic and early spring seasons. In addition, deflationaverage ticket improved significantly in lumber and building materials prices resulted in an unfavorable impact on comparable store sales of approximately 50 basis points.the third quarter. 

Several product categories generated above average performance during the firstthird quarter, including rough plumbing,lumber, building materials, hardware, nursery, seasonal living, paint, windows and walls, cabinets, flooring

outdoor power equipment and home organization. AppliancesMillwork, cabinets and appliances performed at approximately the overall corporate average.

Gross margin was 31.04%31.1% of sales for the quarter ended May 2,October 31, 2003 compared to 29.71%30.6% for last year's comparable quarter. Gross margin 

for the nine months ended October 31, 2003 was 30.7% versus 29.9% for the first nine months of 2002.  The increase in the margin rate for the 

third quarter is primarily due to better margin rates driven by lower inventory costs and lower inventory shrinkage, partially offset by negative 

product mix.  The increase in the margin rate for the first quarternine months of 2003 is primarily due to a reduction in inventory costs, product mix improvements and lower inventory shrinkage.
shrinkage and better margin 

rates driven by lower inventory costs.

Selling, general and administrative expenses (SG&A)("SG&A") were 18.22%18.5% of sales versus 17.64%18.6% in last year's firstthird quarter. SG&A increased by 15.2%

23.0% compared to the 11.4%23.5% increase in sales for the quarter. The de-leverageleveraging during the firstthird quarter was primarily due to lower payroll and 

occupancy costs as a percentage of sales for fiscal 2003 as compared to fiscal 2002, partially offset by increased store salaries resulting from planned staffing in anticipation of a normal spring season. In addition, higher energy and snow removal bonus estimates, insurance 

costs and compensation expense relating to stock options recognized in the current yearquarter.  During the first nine months of approximately $5 million also contributed 2003, SG&A was 

17.6% of sales, versus 17.5% for the same period in the prior year.  This de-leveraging was primarily caused by compensation expense relating 

to the de-leverage in SG&Astock options recognized in the first quarternine months of fiscal 2003.
2003 of approximately $28 million, which resulted from the adoption of the fair value 

recognition provisions of SFAS No. 123 prospectively for all employee awards granted or modified after January 31, 2003, as previously 

discussed in Note 7 to the Consolidated Financial Statements. 

Store opening costs were $19$37 million for the quarter ended May 2,October 31, 2003 compared to $37$28 million last year. This represents costs 

associated with the opening of 2138 stores during the current year's firstthird quarter (21(36 new and 02 relocated) compared to 4618 new stores for the 

comparable period last year (42 new and 4 relocated).year. Charges in thisthe third quarter of 2003 and 2002 for future and prior openings were $5 million and $7 million, 

respectively.  Store opening costs for the nine months ended October 31, 2003 were $82 million, compared to $88 million last year.  These 

costs were associated with the opening of 83 stores during both the first quarternine months of 2003 (79 new and 2002.4 relocated), compared to 86 stores 

during the first nine months of 2002 (81 new and 5 relocated). The Company's 2003 expansion plans are discussed under "Liquidity and 

Capital Resources" below.

Depreciation was $180$193 million and $557 million for the quarter and nine months ended May 2, 2003.October 31, 2003, respectively.  This represents an 

increase of 24%21.4% and 21.6% over comparable periods last year's first quarter.year.  The increase is primarily due to the addition of buildings, fixtures, displays 

and computer equipment relating to the Company's ongoing expansion program, the purchase of all the Company's short-term financing leases and the 

increase in the percentage of owned locations since last year's firstthird quarter. At the end of the current year's firstthird quarter, the Company owned 76%

78% of total locations compared to 73%74% in the prior year's firstthird quarter.

-16-

Interest expense increased from $47 million to $48was $42 million for the quarter ended May 2, 2003.
October 31, 2003, compared to $44 million last year.  For the nine months ended 

October 31, 2003 and November 1, 2002, interest expense totaled $136 million and $137 million, respectively.  

The Company's effective income tax rate was 37.8% for the quarter and nine months ended May 2,October 31, 2003, respectively, compared to

37.5% and 37.4% for last year's comparable period.periods, respectively. The higher rate during 2003 is primarily related to expansion into states with 

higher income tax rates.
-13-

The primary sources of liquidity are cash flows from operating activities and various lines of credit currently available to the Company. Net cash 

provided by operating activities was $1.0$2.0 billion for the threenine months ended May 2,October 31, 2003 and $1.2 billion for the three months ended May 3,November 1, 2002. The primary sourcessource of 

cash provided by operating activities in the current year were increasedwas net earnings and an increase in accounts payable.earnings. Working capital at May 2,October 31, 2003 was $2.1$2.4 billion compared to $1.9

$2.2 billion at May 3,November 1, 2002 and $2.0 billion at January 31, 2003.

The primary component of net cash used in investing activities continues to be new store facilities in connection with the Company's expansion 

plan. Cash acquisitions of fixed assets were $392 million$1.7 billion and $501 million$1.4 billion for the threenine months ended May 2,October 31, 2003 and May 3,November 1, 2002, 

respectively. At May 2,October 31, 2003, the Company operated 875932 stores in 45 states with 97.2103.7 million square feet of retail selling space, a 12.9% 14.2% 

increase over the selling space as of May 3,November 1, 2002.

Cash flows provided byused in financing activities were $1$23 million and $61 million for the threenine months ended May 2,October 31, 2003 and May 3, 2002.November 1, 2002, 

respectively. Cash provided byused in financing activities during boththe first nine months of the current and prior year's first quartersyear primarily resulted from proceeds generated by stock option exercises offset by cash dividend 

payments, short-term debt repayments, and scheduled long-term debt repayments. repayments offset by proceeds generated from stock option exercises. 

The ratio of long-term debt to equity plus long-term debt was 30%27.2%, 35%32.0% and 31%31.0% as of May 2,October 31, 2003, May 3,November 1, 2002 and 

January 31, 2003, respectively.

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

$400 million 364-day tranche, expiring in July 2003,2004, which is renewable annually. The Company plans 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. Any loans 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,
-14-
which include including maintenance of a 

specific financial ratio, among others.ratio. The Company was in compliance with these covenants at May 2,October 31, 2003. SixteenFifteen banking institutions are participating 

in the $800 million senior credit facility and, as of May 2,October 31, 2003, there were no outstanding loans under the facility.
The

-17-

In July 2003, the Company also hasterminated a $100 million revolving credit and security agreement with a financial institution, expiringwhich was scheduled to 

expire in November 2003, which is renewable for successive periods not to exceed 364 days each. Interest rates under this agreement are determined2003.  The remaining outstanding balance of $50 million was repaid at the time of borrowing based on market conditions in accordance with the terms of the agreement. The Company had $50 million outstanding at May 2, 2003 under this agreement, and $163.9 million in accounts receivable pledged as collateral.
termination.  

The Company's 2003 capital budget is $2.9 billion, inclusive of approximately $181 million of operating or capital leases. Approximately 80% of 

this planned commitment is for store expansion and new distribution centers. Expansion plans for 2003 consist of approximately 130 stores, including approximately 5 

relocations of older stores. This planned expansion is expected to increase sales floor square footage by approximately 15% - 16%. Approximately 1%

18% of the 2003 projects will be build-to-suit leases, 19% will be ground leased properties and 80%82% will be owned. At May 2,October 31, 2003, the Company operated nine9 regional 

distribution centers. DuringIn February 2003, the Company expects to beginbegan construction on an additional regional distribution center located in Poinciana, 

Florida, which is expected to be operational in the third quarter of 2004.  The Company plans to begin construction on an additional regional 

distribution center in Plainfield, Connecticut in fiscal 2004.  The Company also expects to open approximately 3 to 5 additional flatbed network facilities in 2003 

for the handling of lumber, building materials and long-length items.

The Company believes that funds from operations, leases and existing short-term lines of credit will be adequate to finance the 2003 expansion 

plan and other operating requirements. However, general economic downturns, fluctuations in the prices of products, unanticipated impact 

arising from competition and adverse weather conditions could have an effect on funds generated from operations and our expansion plans. 

In addition, the availability of funds through the issuance of commercial paper and new debt could be adversely affected due to a debt rating 

downgrade or a deterioration of certain financial ratios. There are no provisions in any agreements that would require early cash settlement of 

existing long-term debt or leases as a result of a downgrade in the Company's debt rating or a decrease in the Company's stock price. Holders 

of the Company's $580.7 million Senior Convertible notes may convert their notes into the Company's common stock during any period that the 

credit rating assigned to the notes is Baa3 or lower by Moody's, BBB or lower by Standard & Poor's or BBB or lower by Fitch.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the 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. See Note 8 to the Consolidated Financial Statements for 

further description of the estimated impact of EITF 02-16.

-18-

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities, an interpretation of ARB 51."  FIN 46 provides 

guidance on the identification and consolidation of variable interest entities, or VIEs, which are entities for which control is achieved through 

means other than through voting rights. The provisions of FIN 46 are required to be applied to VIEs created or in which the Company obtains 

an interest after January 31, 2003.  For VIEs in which the Company holds a variable  interest that it acquired  before February 1, 2003, the 

provisions of FIN 46 are effective for the fourth quarter of 2003. Due to the ongoing deliberations and clarifications by the FASB, we are still 

assessing the provisions of FIN 46.  However, the Company does not expect the adoption of FIN 46 in the fourth quarter of 2003 to have a 

material impact on its financial position, results of operations or cash flows.

In April 2003, the 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 theThe initial adoption of this standard will

did not have a material impact on the Company's financial statements.
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 theThe initial adoption of this standard will

did not have a material impact on the Company's financial statements.statements

Item 4 - Controls and Procedures

The Company has designed and maintains disclosure controls and procedures to ensure that information required to be disclosed in its reports 

filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the 

Commission's rules and forms. These controls and procedures are also designed to ensure that such information is communicated to the 

Company's management, including its Chief Executive and Chief Financial Officers as appropriate, to allow them to make timely decisions 

about required disclosures.

The Company's management, including the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness 

of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.13a-15(e). Based on that evaluation, which was conducted within 90 daysas of the filing end 

of the period covered by this quarterly report on Form 10-Q, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls 

and procedures are effective.
effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries)

required to be included in its periodic SEC filings.  

There havehas been no significant changeschange in the Company's internal controlscontrol over financial reporting during the quarter ended October 31, 2003 that has 

materially affected, or in other factors that could significantlyis reasonably likely to materially affect, internal controls subsequent to the date of the Chief Executive Officer's and Chief Financial Officer's most recent evaluation.control over financial reporting.