NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (thousands of dollars unless otherwise indicated) NOTE 16—SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) of $14,877. Administrative expenses were increased by $4,170 due primarily to increased incentive compensa- tion accruals. Net income in the fourth quarter was increased by $6,029 ($.04 per share) due primarily to physical inven- tory adjustments. Gross profit was increased by $13,540 primarily as a result of physical inventory adjustments $15,752 in 2004, 2003 and 2002, respectively. Rental income, as lessor, from real estate leasing activities and sublease rental income for all years presented was not significant. During 2003, the Company completed sale-leaseback transactions involving two of its warehouses. The ware- houses were sold at fair market value resulting in a pre- tax gain of $2,701, which was deferred and is being amortized to offset rent expense over the life of the new operating leases. The Company does not have any retained or contingent interest in the warehouses. The operating leases that resulted from these transactions are included in the table below. Net income in the fourth quarter of 2003 was increased by $1,714 ($.01 per share) due to certain year-end adjustments. Gross profit in the fourth quarter of 2003 increased by $12,409 primarily as a result of physical inventory adjustments of $9,108. Selling, gen- eral and administrative expenses decreased $328 due to various year-end adjustments. Other expense–net increased $10,100 due primarily to provisions for environmental matters of $10,237 during the fourth quarter of 2003. Following is a schedule, by year and in the aggregate, of future minimum lease payments under noncan- cellable operating leases having initial or remaining terms in excess of one year at December 31, 2004: The Company leases certain stores, warehouses, manufacturing facilities, office space and equipment. Renewal options are available on the majority of leases and, under certain conditions, options exist to purchase certain properties. Rental expense for operating leases, recognized on a straight-line basis over the lease term in accordance with FASB Technical Bulletin No. 85-3, “Accounting for Operating Leases with Scheduled Rent Increases,” was $173,491, $155,268 and $151,555 for 2004, 2003 and 2002, respectively. Certain store leases require the payment of contingent rentals based on sales in excess of specified minimums. Contingent rentals included in rent expense were $18,134, $12,933 and 2004 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year Net sales ................................................................. $ 1,319,522  $1,617,955  $1,677,130  $1,499,182  $6,113,789  Gross profit............................................................. $ 571,627  $ 721,417  $ 743,545  $ 664,822  $2,701,411  Net income ............................................................. $ 51,468  $ 126,438  $ 132,863  $ 82,845  $ 393,254  Net income per share - basic................................... $ .36  $ .89  $ .95  $ .59  $ 2.79  Net income per share - diluted................................ $ .35  $ .87  $ .92  $ .57  $ 2.72  2003 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Full Year Net sales ................................................................. $ 1,148,461  $1,471,678  $1,503,086  $1,284,539  $5,407,764  Gross profit............................................................. $ 501,764  $ 665,752  $ 678,646  $ 609,133  $2,455,295  Net income ............................................................. $ 30,802  $ 110,130  $ 120,297  $ 70,829  $ 332,058  Net income per share - basic................................... $ .21  $ .76  $ .83  $ .49  $ 2.29  Net income per share - diluted................................ $ .21  $ .75  $ .82  $ .48  $ 2.26  2005.................................................................. $ 155,973 2006.................................................................. 134,826 2007.................................................................. 110,089 2008.................................................................. 83,897 2009.................................................................. 59,322 Later years ........................................................ 117,824 Total minimum lease payments ......................... $ 661,931 67 NOTE 17—OPERATING LEASES