On September 13, 2011, we filed an amended Annual Report on Form 10-K/A for the fiscal year ended January 29, 2011 to correct various errors in our accounting for leases. We are also restating herein our previously issued consolidated financial statements for the three and nine month periods ended October 30, 2010 to correct these errors.

The most significant of the corrections resulted from improper application of the sale-leaseback provisions of ASC 840, Leases. We are often involved extensively in the construction of leased stores. In many cases, we are responsible for construction cost over runs and/or we construct non-standard tenant improvements (e.g. roof or HVAC systems). As a result of this involvement, we are deemed the "owner" for accounting purposes during the construction period, so are required to capitalize the construction costs on our Balance Sheet. Upon completion of the project, we must perform a sale-leaseback analysis pursuant to ASC 840 to determine if we can remove the assets from our Balance Sheet. In many of our leases, we are reimbursed a portion of the construction costs via adjusted rental and/or cash payments and/or have terms which fix the rental payments for a significant percentage of the leased asset's economic life. These items are generally considered "continuing involvement" which preclude us from derecognizing the constructed assets from our Balance Sheet when construction is complete.

Additionally, certain store and equipment leases were improperly recorded as operating leases, rather than capital leases.

To correct the accounting errors, we have recorded additional property and the related capital lease and financing obligations on our Balance Sheets. In our Statements of Income, lease payments related to these properties are now recognized as depreciation and interest expense, rather than rent expense (which we record in Selling, General and Administrative Expense). The corrections impact the classification of cash flows from operations, financing activities and investing activities, but have no impact on the net increase or decrease in cash and cash equivalents reported in our Statements of Cash Flows. As part of the restatement, we also reversed a $31 million cumulative lease accounting correction to net income which was recorded in the quarterly period ended October 30, 2010 (as disclosed in our quarterly report on Form 10-Q which was filed on December 9, 2010) and recorded the adjustment in the proper accounting period.

The following tables present the corrections that were made to our financial statements for the period ended October 30, 2010.


	October 30, 2010
	Previously Reported (1)		Adjust- ments			Restated
			(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	2,441		—		$	2,441
Merchandise inventories		4,030		—			4,030
Income taxes receivable		25		—			25
Deferred income taxes		92		—			92
Other		218		(3	)		215

Total current assets		6,806		(3	)		6,803
Property and equipment, net		7,274		1,424			8,698
Long-term investments		275		—			275
Other assets		379		(150	)		229

Total assets	$	14,734	$	1,271		$	16,005


Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	2,125		—		$	2,125
Accrued liabilities		927		3			930
Current portion of long-term debt		400		—			400
Current portion of capital lease and financing obligations		17		70			87

Total current liabilities		3,469		73			3,542
Long-term debt		1,494		—			1,494
Capital lease and financing obligations		187		1,818			2,005
Deferred income taxes		379		(163	)		216
Other long-term liabilities		638		(203	)		435
Shareholders' equity		8,567		(254	)		8,313

Total liabilities and shareholders' equity	$	14,734	$	1,271		$	16,005

(1)	Includes certain reclassifications to conform to the current period presentation.


	Three Months Ended October 30, 2010
	Previously Reported		Adjust- ments			Restated
	(In Millions, Except per Share Data)
Sales	$	4,218		—		$	4,218
Cost of merchandise sold		2,596		—			2,596

Gross margin		1,622		—			1,622
Operating expenses:
Selling, general, & administrative		1,138		(79	)		1,059
Depreciation and amortization		190		17			207

Operating income		294		62			356
Interest expense, net		38		41			79

Income before income taxes		256		21			277
Provision for income taxes		93		8			101

Net income	$	163	$	13		$	176


Net income per share:
Basic	$	0.53	$	0.04		$	0.57
Diluted		0.53		0.04			0.57


	Nine Months Ended October 30, 2010
	Previously Reported		Adjust- ments			Restated
	(In Millions, Except per Share Data)
Sales	$	12,353		—		$	12,353
Cost of merchandise sold		7,543		—			7,543

Gross margin		4,810		—			4,810
Operating expenses:
Selling, general, & administrative		3,221		(205	)		3,016
Depreciation and amortization		495		68			563

Operating income		1,094		137			1,231
Interest expense, net		100		133			233

Income before income taxes		994		4			998
Provision for income taxes		372		—			372

Net income	$	622	$	4		$	626


Net income per share:
Basic	$	2.03	$	0.01		$	2.04
Diluted		2.02		0.01			2.03