Financial Review (continued) • For fiscal 2003, a $4.7 million pre-tax gain associated with the settlement of certain liabilities and the repayment of a note associated with the fiscal 2002 sale of the TruckPro business • For fiscal 2002, the favorable impact of the additional week of the 53-week fiscal year For fiscal 2003, excluding the above items, gross profit, as a percentage of sales, improved by 0.7 percentage points while operating expenses, as a percentage of sales, declined by 1.9 percentage points. Comparable operating profit for fiscal 2003 increased by 23.9%, as operating  margin improved 2.6 percentage points to 16.8% from 14.2% last year (see Reconciliation of Non-GAAP Financial Measures). The improve- ments in gross profit and the gross margin reflect the additive impact of new merchandise, a reduction in our product warranty expense,  and the benefit of more strategic and disciplined pricing derived from our category management system. Improvements, in operating profit and operating margin, reflect our relentless expense discipline, in particular, the leveraging of salaries and information technology spending during fiscal 2003. Net interest expense for fiscal 2003 was $84.8 million compared with $79.9 million during fiscal 2002. The increase in interest expense for fiscal 2003 was primarily due to higher levels of debt compared with the 2002 fiscal year. Weighted average borrowings for fiscal 2003 were $1.51 billion, compared with $1.33 billion for fiscal 2002; and weighted average borrowing rates, excluding the impact of debt amortization and facility fees, remained relatively flat at 4.4% for both fiscal years. AutoZone’s effective income tax rate declined slightly to 37.9% of pretax income for fiscal 2003 as compared to 38.1% for fiscal 2002. Net income for fiscal 2003 increased by 20.9% to $517.6 million, and diluted earnings per share increased by 33.5% to $5.34 from $4.00 reported for the year-ago period. Excluding the non-recurring, infrequent items listed above, comparable net income increased 26.4%  and diluted earnings per share increased 39.4% (see Reconciliation of Non-GAAP Financial Measures). The impact of the fiscal 2003 stock repurchases on diluted earnings per share in fiscal 2003 was an increase of $0.19. Fiscal 2002 Compared with Fiscal 2001 Net sales for fiscal 2002 increased by $507.3 million, or 10.5%, over net sales for fiscal 2001. At August 31, 2002, we operated 3,068 domes- tic auto parts stores and 39 in Mexico, compared with 3,019 domestic auto parts stores, 21 in Mexico and 49 TruckPro stores at August 25, 2001. Excluding sales from the extra week in fiscal 2002, net sales increased 8.3% (see Reconciliation of Non-GAAP Financial Measures). Same store sales, or sales for domestic stores open at least one year, increased approximately 9% during fiscal 2002, including an increase in retail same store sales of approximately 8% and an increase for commercial sales in same stores by approximately 17%. Comparable store sales increased in fiscal 2002 as a result of an increase in customer count and an increase in average dollars spent per transaction over  the amounts in the 2001 fiscal year. New stores contributed approximately 2 percentage points to the increase during fiscal 2002; whereas, the overall sales increase was somewhat offset by the decrease in sales associated with TruckPro, which was sold in December 2001, of  $47.6 million in fiscal 2002 and $148.5 million in fiscal 2001. ALLDATA and Mexico sales composed the remainder of the increase in sales  during fiscal 2002. Gross profit for fiscal 2002 was $2.375 billion, or 44.6% of net sales, compared with $2.013 billion, or 41.8% of net sales for fiscal 2001. Excluding the impact of the extra week in fiscal 2002 and the nonrecurring charges in fiscal 2001, gross profit for fiscal 2002 was $2.325  billion, or 44.6% of net sales, compared with $2.043 billion, or 42.4% of net sales for fiscal 2001 (see Reconciliation of Non-GAAP Financial Measures). Gross margin improvement for fiscal 2002 reflected lower product costs, more efficient supply chain costs, reduced inventory shrinkage, the benefits of more strategic and disciplined pricing due to category management and the addition of more value-added, high- margin merchandise than in the 2001 fiscal year. Operating, selling, general and administrative expenses for fiscal 2002 increased by $105.5 million over such expenses for fiscal 2001 but declined as a percentage of net sales from 31.1% to 30.1%. The improved ratio reflected the fact that revenues rose more rapidly than the growth of store-level expenses (a 1.1 percentage point improvement), combined with operating savings resulting from the restructuring in fiscal 2001 related to controlling staffing, base salaries and technology spending of 0.4 percentage points. Additionally, the 2001 fiscal year included other expenses related to strategic initiatives not included in the restructuring and impairment charges of 0.3 percentage points. The adoption of new accounting rules for goodwill reduced operating expenses in fiscal 2002 by approximately $8.6 million, or 0.2 percentage points. These improvements in the expense ratio were partially offset by additional bonus, legal, pension and insurance expenses incurred in the 2002 fiscal year of 1.1 percentage points. Net interest expense for fiscal 2002 was $79.9 million compared with $100.7 million during fiscal 2001. The decrease in interest expense  for fiscal 2002 was primarily due to lower levels of debt compared with the 2001 fiscal year and lower average borrowing rates. Weighted average borrowings for fiscal 2002 were $1.33 billion, compared with $1.45 billion for fiscal 2001. Additionally, weighted average borrowing rates, excluding the impact of debt amortization and facility fees, were lower in the 2002 year compared with the 2001 fiscal year at 4.4% compared with 6.2%. 22