Notes to Consolidated Financial Statements

Note 7:
Discontinued Operations

In January 1999, the Company adopted a plan to discontinue its same-day delivery business. This business is accounted for as discontinued operations and, accordingly, its operations are segregated in the accompanying financial statements. The Company has retained an investment banking firm to assist in the sale of the same-day delivery business and expects to complete this sale by the end of fiscal 1999. This business was primarily acquired in March 1996 through the acquisition of Delivery and in November 1996 through the acquisition of UT. These acquisitions were accounted for as poolings of interests and, accordingly, their accounts and results are included as discontinued operations for all periods presented. In connection with the sale, including the results of operations between the measurement date (January 28, 1999) and the expected disposal date of the same-day delivery business, the Company recorded a provision for estimated losses to be incurred on the sale of $52,000,000, net of applicable income tax benefits of $6,000,000 in the fiscal 1998 results. The effective income tax benefit rate for the estimated loss on disposal differs from the U.S. statutory tax rate primarily as a result of insufficient capital gains to record the tax benefit of an anticipated capital loss. The provision for estimated losses is based on management's best estimates of the amounts expected to be realized on the sale of the same-day delivery business. The amounts the Company will ultimately realize, if any, could differ from the amounts assumed in arriving at the loss anticipated on disposal of the discontinued operations.

Net sales for the discontinued delivery business for fiscal 1998 were $721,696,000 compared to net sales of $807,230,000 for the twelve months ended January 31, 1998. Net sales for the eleven months ended January 31, 1998 (fiscal 1997) were $736,195,000 compared to net sales of $686,986,000 for the eleven months ended February 1, 1997. Net sales for fiscal 1996 were $758,021,000. Net loss from discontinued operations in fiscal 1998 of $17,652,000 includes a tax benefit of $9,934,000, net income from discontinued operations in fiscal 1997 of $3,355,000 includes related tax expense of $2,949,000, and the net income from discontinued operations in fiscal 1996 of $5,706,000 includes related tax expense of $7,275,000. The results of discontinued operations include allocations of interest expense based on the ratio of net assets of discontinued operations to the sum of total net assets of the Company. The total interest, including allocated interest, for fiscal 1998, 1997 and 1996 was $8,616,000, $4,293,000 and $6,903,000, respectively. The estimated allocated interest from the measurement date to the estimated disposal date was $6,200,000 and was used in estimating the Loss on Disposal. The results of the discontinued operations do not include any allocation of corporate overhead from the Company during the periods presented.

At January 30, 1999, the Net Assets of Discontinued Operations as presented in the accompanying Consolidated Balance Sheet are as follows: