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41
PART II
cash, stock, or a combination of cash and stock. Since
holders may require usto purchase all or a portion of their
debentures on January15, 2007, we haveclassified our
convertible subordinated debentures in the current portion
of long-term debt at February 25, 2006.
The debentures will be convertible into shares of our
common stock at aconversion rate of 21.7391 shares
per $0.001 principal amount of debentures, equivalent to
an initial conversion price of $46.00 per share,if the
closingprice of our common stock exceeds a specified
price for 20 consecutive tradingdays in a 30-trading day
period preceding the date of conversion, if our credit rating
falls below specified levels, if the debentures are called for
redemption or if certain specified corporate transactions
occur. At February 25, 2006, none of the criteria for
conversion had been met. Since March 31, 2006, our
closing stock price has exceeded the specified stock price
for more than 20 days, therefore, holders currently have the
option to convert their debentures into our common stock.
As of May9, 2006, no debentures had been converted to
shares of our common stock.
The debentures have an initial interest rate of 2.25% per
annum. The interest rate may be reset, but not below 2.25%
or above 3.25%,on July 15, 2006; July 15, 2011; and
July 15, 2016. One of our subsidiaries has guaranteed the
convertible debentures.
In June 2004, we redeemed our convertible debentures that
were duein 2021 for $355 million.
During the fourth quarter of fiscal 2005, in connection with
the review of our lease accountingpractices, we recorded a
$107 million financing leaseobligation for leases that did
not qualify for sale-leaseback accounting treatment. At the
end of fiscal 2006, $157 million is outstanding under
financing lease obligations.
We had a master lease programwhich wasused to
construct and lease new retail locations. At the end of fiscal
2005, $55 million in leases related to new stores were
outstanding under the master lease program. In May 2005,
we repaid the outstandingbalance of $54 million on our
master lease obligation.
Share Repurchases and Dividends
In April 2005,our Boardauthorized a $1.5 billion share
repurchase program. The program, which became effective
April 27, 2005, terminated and replaced a $500 million
share repurchase program authorized by our Board in
June 2004. There is no expiration date governing the
periodover which wecan make our share repurchases
under the $1.5 billion share repurchase program.
The $500 million share repurchase program, which
became effective on June 24, 2004, terminated and
replaceda$400 million share repurchase program
authorized byour Board in fiscal 2000.
During fiscal 2006, wepurchased andretired 16.5 million
shares at a cost of $711 million under the $1.5 billion
share repurchase program,and 1.8 million shares at acost
of $61 million under the $500 million share repurchase
program. At the end of fiscal 2006,$790 million of the
$1.5 billion originally authorized by our Boardwas
available for future share repurchases.
During fiscal 2005, we purchased andretired 3.4 million
shares at a cost of $118 million under the $500 million
share repurchase program,and 2.4 million shares at acost
of $82 million under the $400 million share repurchase
program.
We considerseveral factors in determining when to make
share repurchases including, among other things, ourcash
needs and the market price of our stock. We expect that
cash provided by future operatingactivities, as well as
available cash and cash equivalents andshort-term
investments, will be the sources of fundingfor the share
repurchase program.
In fiscal 2004, our Board initiated the payment of aregular
quarterly cash dividend, then $0.07per common share per
quarter. A quarterly cash dividend has been paidin each
subsequent quarter. Effective with the quarterly cash
dividend paid inthe third quarter of fiscal 2005 we
increased our quarterly cash dividend per common share by
10 percent. Effective with the quarterly cash dividendpaid
in the thirdquarter of fiscal 2006, we increased our
quarterly cash dividend per common share by 9percent, to
$0.08 per share perquarter. The payment of cash
dividends is subject to customary legal and contractual
restrictions. During fiscal 2006, we made four dividend