7 ELEVEN INC - 10-Q Quarterly Report

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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-16626
-----------------

7-ELEVEN, INC.
(Exact name of registrant as specified in its charter)

TEXAS 75-1085131
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2711 NORTH HASKELL AVE., DALLAS, TEXAS 75204-2906
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code, 214/828-7011

--------------

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No

APPLICABLE ONLY TO CORPORATE ISSUERS:

104,964,024 shares of common stock, $.0001 par value (the issuer's
only class of common stock), were outstanding as of June 30, 2002.

7-ELEVEN, INC.
INDEX

PAGE
NO.
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Part I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

Condensed Consolidated Balance Sheets -
December 31, 2001 and June 30, 2002 1

Condensed Consolidated Statements of Earnings -
Three Months and Six Months Ended June 30, 2001 and 2002 2

Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and 2002 3

Notes to Condensed Consolidated Financial Statements 4

Report of Independent Accountants 11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 12

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24

Part II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 25

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 25

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 26

SIGNATURES 27

Exhibit (15) - Letter re Unaudited Interim Financial Information Tab 1

Exhibit 99(i)(1) - Certification by Chief Executive Officer
Required by Section 906 of the Sarbanes-
Oxley Act of 2002 Tab 2
Exhibit 99(i)(2) - Certification by Chief Financial Officer
Required by Section 906 of the Sarbanes-
Oxley Act of 2002 Tab 3

(i)

See notes to condensed consolidated financial statements.

1

7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2002

(UNAUDITED)

1. BASIS OF PRESENTATION

The condensed consolidated balance sheet as of June 30,
2002, and the condensed consolidated statements of earnings
for the three-month and six-month periods ended June 30, 2001
and 2002, and the condensed consolidated statements of cash
flows for the six-month periods ended June 30, 2001 and 2002,
have been prepared by 7-Eleven, Inc. (the "Company") without
audit. In the opinion of management, all adjustments
necessary to present fairly the financial position at
June 30, 2002, and the results of operations and cash flows
for all periods presented have been made. Certain prior-
period amounts have been reclassified to conform to current-
period presentation. The results of operations for the
interim periods are not necessarily indicative of the
operating results for the full year.

The reported results include approximately 5,800
convenience stores that are operated or franchised in the
United States and Canada by the Company along with royalty
income from worldwide 7-Eleven area licensees. Sales and
cost of goods sold of stores operated by franchisees are
consolidated with the results of Company-operated stores in
the condensed consolidated statements of earnings. Gross
profit from franchise stores is split between the Company and
its franchisees pursuant to the terms of franchise
agreements.

The condensed consolidated balance sheet as of
December 31, 2001, is derived from the audited financial
statements but does not include all disclosures required by
generally accepted accounting principles. The notes
accompanying the consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended
December 31, 2001, include accounting policies and additional
information pertinent to an understanding of both the
December 31, 2001, balance sheet and the interim financial
statements. The information has not changed except as a
result of normal transactions in the six months ended June
30, 2002, and as discussed in the following notes.

4

2. GOODWILL AND OTHER INTANGIBLE ASSETS

Effective January 1, 2002, the Company adopted the
provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets,"
which addresses financial accounting and reporting for
acquired goodwill and other intangible assets. The statement
eliminates amortization of goodwill and intangible assets
with indefinite lives and requires a transitional impairment
test of these assets within six months of the date of
adoption and an annual impairment test thereafter and in
certain circumstances. The Company has completed the
transitional impairment tests of goodwill and intangible
assets with indefinite lives as of January 1, 2002, and no
impairment was noted.

Included in other assets in the accompanying Condensed
Consolidated Balance Sheets are the following amounts for
intangible assets and goodwill (in thousands):

Other intangible assets that will continue to be
amortized over their remaining useful lives totaled $1.4
million and $1.2 million as of December 31, 2001 and June 30,
2002, respectively.

The following is a reconciliation of both the net
earnings (loss) and the basic and diluted net earnings (loss)
per common share between the amounts reported by the Company
and the adjusted amounts reflecting the new accounting
requirements for the periods presented (in thousands, except
per-share data):

5

3. ASSET RETIREMENT OBLIGATION

Effective January 1, 2002, the Company adopted the
provisions of SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 generally applies to legal
obligations associated with the retirement of long-lived
assets that result from the acquisition, construction,
development and/or the normal operation of a long-lived
asset. SFAS No. 143 requires the Company to recognize an
estimated liability for the removal of its underground
gasoline storage tanks.

As of January 1, 2002, the Company recognizes the future
cost to remove an underground storage tank over the estimated
useful life of the storage tank in accordance with the
provisions of SFAS No. 143. A liability for the fair value
of an asset retirement obligation with a corresponding
increase to the carrying value of the related long-lived
asset is recorded at the time an underground storage tank is
installed. The Company amortizes the amount added to
property and equipment and recognizes accretion expense in
connection with the discounted liability over the remaining
life of the respective underground storage tank.

The estimated liability is based on historical experience
in removing these tanks, estimated tank useful lives, external
estimates as to the cost to remove the tanks in the future and
federal and state regulatory requirements. The liability is
discounted using a credit-adjusted risk-free rate of
approximately 8%. Revisions to the liability could occur due
to changes in tank removal costs or tank useful lives, or if
federal or state regulators enact new requirements on the
removal of such tanks.

Upon adoption of SFAS No. 143, the Company recorded a
discounted liability of $53.6 million, increased net property
and equipment by $6.7 million and recognized a one-time
cumulative effect charge of $28.1 million (net of deferred
tax benefit of $18.8 million). The Company amortizes the
amount added to property and equipment and recognizes
accretion expense in connection with the discounted liability
over the remaining lives of the respective underground
storage tanks. Pro forma effects on earnings from continuing
operations before cumulative effect of accounting change for
the three and six months ended June 30, 2001, assuming the
adoption of SFAS No. 143 as of January 1, 2001, were not
material to net earnings or earnings per share.

A reconciliation of the Company's liability for the six
months ended June 30, 2002, is as follows (in thousands):

Upon adoption at January 1, 2002 $ 53,648
Liabilities incurred 55
Liabilities settled (396)
Accretion expense 1,518
Revisions to estimate -
---------
$ 54,825
=========

As of June 30, 2002, $1.9 million of the $54.8 million
liability is included in accrued expenses and other
liabilities in the accompanying Condensed Consolidated
Balance Sheets. The remaining $52.9 million is included in
deferred credits and other liabilities in the accompanying
Condensed Consolidated Balance Sheets.

6

4. STORE CLOSINGS, ASSET IMPAIRMENT AND COST REDUCTIONS

The Company adopted the provisions of SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets," effective January 1, 2002. SFAS No. 144 provides
new guidance on the recognition of impairment losses on long-
lived assets to be held and used or to be disposed of. The
statement also broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued
operation are to be measured and presented. Adoption of the
standard did not have a material impact on the Company's
impairment policy or net earnings; however, it did result in
classifying the operations of certain stores as discontinued
operations in the accompanying Condensed Consolidated
Statements of Earnings.

The Company writes down property and equipment of stores
it is closing to estimated net realizable value at the time
that management commits to a plan to close such stores. If
the stores are leased, the Company will accrue for related
future estimated rent and other expenses if the expenses are
expected to exceed estimated sublease rental income. The
Company bases the estimated net realizable value of property
and equipment on its experience in utilizing and/or disposing
of similar assets and on estimates provided by its own and/or
third-party real estate experts. The Company also uses its
experience in subleasing similar property to estimate future
sublease income.

The Company's long-lived assets are reviewed for
impairment and written down to fair value whenever events or
changes in circumstances indicate that the carrying value may
not be recoverable.

Effective January 1, 2002, the results of operations of
certain owned and leased stores are presented as discontinued
operations in accordance with the provisions of SFAS No. 144.
The results of operations of owned stores are presented as
discontinued operations beginning in the quarter in which
management commits to a plan to close the related store. The
results of operations of a leased store are presented as
discontinued operations beginning in the quarter in which the
related store ceases operations. The results of operations
include related write-downs of stores to estimated net
realizable value and accruals for future estimated rent and
other expenses in excess of estimated sublease rental income.

In the first quarter of 2002, management committed to a
plan to close up to 128 underperforming stores in 2002. The
stores being closed include those stores for which the
Company recorded an asset impairment charge of $5.3 million
in the fourth quarter of 2001. In connection with the
planned store closings, the Company recorded a pretax charge
of $11.8 million in the first quarter of 2002 for write-downs
of stores to net realizable value and for anticipated future
rent and other expenses in excess of related estimated
sublease income. Of the $11.8 million, $1.4 million is
included in operating, selling, general and administrative
("OSG&A") expense and the remaining $10.4 million is included
in discontinued operations in the accompanying Condensed
Consolidated Statements of Earnings for the six months ended
June 30, 2002. The Company has closed 111 stores as of June
30, 2002.

In addition to the store closings, the Company initiated
cost reduction efforts to streamline administrative functions
and consolidate divisions, resulting in the elimination of
125 positions. The results of operations for the six months
ended June 30, 2002, include a $6.9 million charge to OSG&A
expense for severance costs and other expenses, all of which
was recorded in the first quarter of 2002. As of June 30,
2002, $2.6 million was included in accrued expenses and other
liabilities in the accompanying Condensed Consolidated
Balance Sheets relating to unpaid severance costs.

7

The stores presented as discontinued operations had
total revenues and pretax operating losses as follows for the
periods presented (in thousands):

As of December 31, 2001 and June 30, 2002, assets held
for sale were $15.0 million and $13.0 million, respectively,
and are included in other current assets in the accompanying
Condensed Consolidated Balance Sheets. The properties are
being actively marketed.

5. COMPREHENSIVE EARNINGS

The components of comprehensive earnings (loss) of the
Company for the periods presented are as follows (in
thousands):

6. DISTRIBUTION SERVICES

On July 10, 2002, the Company signed a new 40-month
service agreement with McLane Company, Inc. ("McLane") under
which McLane will provide distribution services to 7-Eleven
stores and designated combined distribution centers in the
United States. The new agreement becomes effective September
2002.

8

7. EARNINGS PER SHARE

Computations for basic and diluted earnings (loss) per
share are presented below (in thousands, except per-share
data):

9

8. RECENTLY ISSUED ACCOUNTING STANDARDS

The Company is currently reviewing SFAS No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections," which was
issued on May 1, 2002. The statement rescinds FASB No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," and
an amendment of that statement, FASB No. 64, "Extinguishments
of Debt Made to Satisfy Sinking-Fund Requirements." As a
result, gains and losses from extinguishment of debt will no
longer be aggregated and classified as an extraordinary item,
net of related income tax effect, on the statement of
earnings. Instead, such gains and losses will be classified
as extraordinary items only if they meet the criteria of
unusual or infrequently occurring items. SFAS No. 145 also
requires that gains and losses from debt extinguishments,
which were classified as extraordinary items in prior periods,
be reclassified to continuing operations if they do not meet
the criteria for extraordinary items. The provisions related
to this portion of the statement are required to be applied in
fiscal years beginning after May 15, 2002, with earlier
application encouraged.

SFAS No. 146, "Accounting for Costs Associated with Exit
or Disposal Activities," was issued in July 2002. The
statement requires that costs associated with exit or disposal
activities must be recognized when they are incurred rather
than at the date of a commitment to an exit or disposal plan.
Such costs include lease termination costs and certain
employee severance costs associated with a restructuring,
discontinued operation or other exit or disposal activity.
The Company is currently reviewing SFAS No. 146, which is
effective for exit or disposal activities initiated after
December 31, 2002.

10

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of 7-Eleven, Inc.:

We have reviewed the accompanying condensed consolidated
balance sheet of 7-Eleven, Inc. and Subsidiaries as of June
30, 2002, and the related condensed consolidated statements
of earnings for the three-month and six-month periods ended
June 30, 2001 and 2002, and the condensed consolidated
statements of cash flows for the six-month periods ended
June 30, 2001 and 2002. These financial statements are the
responsibility of the Company's management.

We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express
such an opinion.

Based on our review, we are not aware of any material
modifications that should be made to the accompanying
condensed consolidated interim financial statements for them
to be in conformity with accounting principles generally
accepted in the United States of America.

We previously audited, in accordance with auditing standards
generally accepted in the United States of America, the
consolidated balance sheet as of December 31, 2001, and the
related consolidated statements of earnings, shareholders'
equity (deficit), and cash flows for the year then ended (not
presented herein); and in our report dated January 31, 2002,
except as to Note 19, for which the date is February 6, 2002,
we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance
sheet as of December 31, 2001, is fairly stated in all
material respects in relation to the consolidated balance
sheet from which it has been derived.

PRICEWATERHOUSECOOPERS LLP
Dallas, Texas
July 25, 2002

11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THIS REPORT INCLUDES CERTAIN STATEMENTS THAT ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ANY
STATEMENT IN THIS REPORT THAT IS NOT A STATEMENT OF
HISTORICAL FACT MAY BE DEEMED TO BE A FORWARD-LOOKING
STATEMENT. WE OFTEN USE THESE TYPES OF STATEMENTS WHEN
DISCUSSING OUR PLANS AND STRATEGIES, OUR ANTICIPATION OF
REVENUES FROM DESIGNATED MARKETS AND STATEMENTS REGARDING THE
DEVELOPMENT OF OUR BUSINESSES, THE MARKETS FOR OUR SERVICES
AND PRODUCTS, OUR ANTICIPATED CAPITAL EXPENDITURES,
OPERATIONS, SUPPORT SYSTEMS, CHANGES IN REGULATORY
REQUIREMENTS AND OTHER STATEMENTS CONTAINED IN THIS REPORT
REGARDING MATTERS THAT ARE NOT HISTORICAL FACTS. WHEN USED
IN THIS REPORT, THE WORDS "EXPECT," "ANTICIPATE," "INTEND,"
"PLAN," "BELIEVE," "SEEK," "ESTIMATE," AND OTHER SIMILAR
EXPRESSIONS ARE GENERALLY INTENDED TO IDENTIFY FORWARD-
LOOKING STATEMENTS. BECAUSE THESE FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES, ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-
LOOKING STATEMENTS. THERE CAN BE NO ASSURANCE THAT: (I) WE
HAVE CORRECTLY MEASURED OR IDENTIFIED ALL OF THE FACTORS
AFFECTING THESE MARKETS OR THE EXTENT OF THEIR LIKELY IMPACT;
(II) THE PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO THESE
FACTORS ON WHICH OUR ANALYSIS IS BASED IS COMPLETE OR
ACCURATE; (III) OUR ANALYSIS IS CORRECT OR (IV) OUR STRATEGY,
WHICH IS BASED IN PART ON THIS ANALYSIS, WILL BE SUCCESSFUL.
WE DO NOT ASSUME ANY OBLIGATION TO UPDATE OR REVISE ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.

We are the world's largest operator, franchisor and
licensor of convenience stores and the largest convenience
store chain in North America. Our revenue principally
consists of merchandise and gasoline sales and, to a lesser
extent, royalty income from licensees. Our primary expenses
consist of cost of goods sold, operating, selling, general
and administrative, occupancy and interest expense and taxes.

2002 BUSINESS ISSUES

STORE CLOSINGS AND COST REDUCTIONS

During the first quarter of 2002, we committed to a plan
to close up to 128 underperforming stores. The stores being
closed include those stores for which we recorded an asset
impairment charge of $5.3 million in the fourth quarter of
2001. In connection with the planned store closings, we
recorded a pretax charge of $11.8 million in the first
quarter of 2002 for write-downs of stores to net realizable
value and for anticipated future rent and other expenses in
excess of related estimated sublease income. Of the $11.8
million, $1.4 million is included in Operating, Selling,
General and Administrative ("OSG&A") expense and the
remaining $10.4 million is included in discontinued
operations in the Condensed Consolidated Statements of
Earnings for the six months ended June 30, 2002. As of June
30, 2002, we had closed 111 stores. We anticipate the
remainder of the stores identified for closing under our plan
will be closed by year-end 2002.

In addition, during the first quarter of 2002, we
implemented cost reduction efforts to continue to streamline
administrative functions and also consolidated two divisions,
resulting in the elimination of 125 positions. Our results
of operations for the six months ended June 30, 2002, include
a $6.9 million pretax charge to OSG&A expense for severance
costs and other expenses, all of which was recorded in the
first quarter of 2002.

12

We expect to realize an annual pretax operating earnings
benefit of approximately $17 million due to our store
closings and cost reduction efforts. We will not realize the
full amount of these savings until 2003. We intend to
initiate and continue other cost reductions to improve
operating earnings such as standardizing procurement
procedures. In addition, we recently signed a new primary
wholesale agreement with more favorable terms that will go
into affect in September 2002. See "Liquidity and Capital
Resource - Contractual Obligations and Commercial
Commitments."

ROYALTY PAYMENT REDUCTION

We have a licensing agreement with Seven-Eleven Japan
under which Seven-Eleven Japan pays us a royalty fee based on
a percentage of its total revenues. Under the terms of a
1988 amendment to that agreement, Seven-Eleven Japan will
reduce its royalty payments to us by approximately 70%
beginning in August 2002. This will decrease our Seven-
Eleven Japan royalty receipts by approximately $18 million in
2002 compared to 2001. Our Seven-Eleven Japan royalty
receipts will decrease in 2003 by approximately $24 million
compared to 2002. These estimates will be impacted by
fluctuations in the Japanese yen to U.S. dollar exchange
rate. We do not anticipate any further reductions in the
amount of the license fee percentage.

NEW ACCOUNTING STANDARDS

We adopted three new accounting standards effective
January 1, 2002, which had an impact on our reported results
of operations. We adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets." Adopting SFAS No. 142 means we no longer amortize
goodwill and certain intangible assets. This resulted in a
reduction in amortization expense for the three- and six-
month periods ending June 30, 2002, of $4.9 million and $9.8
million, respectively.

We also adopted the provisions of SFAS No. 143,
"Accounting for Asset Retirement Obligations," which for our
purposes relates to the accounting for costs associated with
future removal of underground gasoline tanks. This adoption
resulted in a one-time, cumulative effect after-tax charge of
$28.1 million. We anticipate the adoption will reduce our
2002 earnings from continuing operations before cumulative
effect of accounting change by approximately $2 million.

SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," provides new guidance on the
recognition of impairment losses on long-lived assets to be
held and used or to be disposed of. This statement also
broadens the definition of what constitutes a discontinued
operation and how the results of a discontinued operation are
to be measured and presented. The provisions did not have a
material impact on our net earnings; however, adoption of the
standard resulted in our presenting discontinued operations
in the Condensed Consolidated Statement of Earnings. See
"Critical Accounting Policies and Estimates - Store Closings
and Asset Impairment," "Comparison of Three Months Ended June
30, 2002 to Three Months Ended June 30, 2001 - Discontinued
Operations" and "Comparison of Six Months Ended June 30, 2002
to Six Months Ended June 30, 2001 - Discontinued Operations."

13

We are currently reviewing SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections," which was issued on May
1, 2002. The statement rescinds FASB No. 4, "Reporting Gains
and Losses from Extinguishment of Debt," and an amendment of
that statement, FASB No. 64, "Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements." As a result, gains and
losses from extinguishment of debt will no longer be
aggregated and classified as an extraordinary item, net of
related income tax effect, on the statement of earnings.
Instead, such gains and losses will be classified as
extraordinary items only if they meet the criteria of unusual
or infrequently occurring items. SFAS No. 145 also requires
that the gains and losses from debt extinguishments, which
were classified as extraordinary items in prior periods, be
reclassified to continuing operations if they do not meet the
criteria for extraordinary items. The provisions related to
this portion of the statement are required to be applied in
fiscal years beginning after May 15, 2002, with earlier
application encouraged.

SFAS No. 146, "Accounting for Costs Associated with Exit
or Disposal Activities," was issued in July 2002. The
statement requires that costs associated with exit or
disposal activities must be recognized when they are incurred
rather than at the date of a commitment to an exit or
disposal plan. Such costs include lease termination costs
and certain employee severance costs associated with a
restructuring, discontinued operations or other exit or
disposal activity. We are currently reviewing SFAS No. 146,
which is effective for exit or disposal activities initiated
after December 31, 2002.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

STORE CLOSINGS AND ASSET IMPAIRMENT

We write down property and equipment of stores we are
closing to estimated net realizable value at the time we
commit to a plan to close such stores. If we lease the
store, we also accrue for related future estimated rent and
other expenses if we believe the expenses will exceed
estimated sublease rental income. We base the estimated net
realizable value of property and equipment on our experience
in utilizing and/or disposing of similar assets and on
estimates provided by our own and/or third-party real estate
experts. We also use our experience in subleasing similar
property to estimate future sublease income. If there is a
significant change in the real estate market, our net
realizable value estimates and/or our estimated future
sublease income could change materially.

We review our long-lived assets for impairment and write
them down to fair value whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable.

Effective January 1, 2002, we present the results of
operations of certain owned and leased stores as discontinued
operations in accordance with the provisions of SFAS No. 144
(see "2002 Business Issues - New Accounting Standards"). The
results of operations of owned stores are reflected in
discontinued operations beginning in the quarter in which
management commits to a plan to close the related store. The
results of operations of leased stores are reflected in
discontinued operations beginning in the quarter in which the
related store is actually closed. The results of operations
include related write-downs of stores to estimated net
realizable value and accruals for future estimated rent and
other expenses in excess of estimated sublease rental income.

14

ASSET RETIREMENT OBLIGATIONS

Effective January 1, 2002, we recognize the future cost
to remove an underground gasoline storage tank over the
estimated useful life of the storage tank in accordance with
the provisions of SFAS No. 143 (see "2002 Business Issues -
New Accounting Standards"). SFAS 143 requires that we record
a liability for the fair value of an asset retirement
obligation with a corresponding increase to the carrying
value of the related long-lived asset. We amortize the
amount added to property and equipment and recognize
accretion expense in connection with the discounted liability
over the remaining lives of the respective underground
storage tanks.

Our liability estimate is based on historical experience
in removing these tanks, estimated tank useful lives,
external estimates as to the cost to remove the tanks in the
future and federal and state regulatory requirements. The
liability is discounted using a credit-adjusted risk-free
rate of approximately 8%. Revisions to the liability could
occur due to changes in tank removal costs or tank useful
lives, or if federal or state regulators enact new
requirements on the removal of such tanks.

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2002 TO THREE MONTHS
ENDED JUNE 30, 2001

NET SALES

Merchandise sales for the three months ended June 30,
2002, increased $78.8 million, or 4.4%, over the same period
in 2001. U.S. same-store merchandise sales increased 2.6%
for the three months ended June 30, 2002, on top of 4.8% for
the three months ended June 30, 2001. Contributors to the
merchandise sales increase in 2002 include the categories of
beer, prepaid cards, cigarettes, non-carbonated beverages,
and grill items. Increases in the retail price of cigarettes
due to wholesale cost increases accounted for less than 1.5%
of the increase in 2002 and approximately 1% of the increase
in 2001.

Gasoline sales for the three months ended June 30, 2002,
decreased $33.7 million or 4.4% compared to the same period in
2001. We attribute this decrease to a 20-cent per gallon lower
average retail price of gasoline in the second quarter of 2002.
Partially offsetting the decrease in the retail price of
gasoline was an increase of 8.6% in gallons sold, to 507.2
million gallons. On a per-store month basis, growth in gallons
increased 3.5%, which is primarily due to the addition of new
higher-volume gasoline stores, which typically have more
gasoline pumps than existing stores.

15

GROSS PROFIT

Merchandise gross profit for the three months ended June
30, 2002, increased $41.7 million, or 6.7%, over the same
period in 2001. This is a result of higher sales and an
increase in our gross profit margin to 35.17% for the second
quarter of 2002 from 34.40% for the same period in 2001. Our
increases in overall gross profit margin and gross profit per
store are attributable to a variety of factors. We continue
to focus on improved cost of goods management through
initiatives like daily cost reporting, enhanced competitive
bidding practices and improving results at the store level to
lower write-offs and shortages. Product mix also contributed
to the improvement, as we sold more higher-margin products.
We anticipate that our merchandise gross profit margin will
improve in 2002 over the gross profit margins we achieved
during 2001 through aggressive monitoring of our retail
pricing and continued efforts to reduce our cost of goods
sold.

Gasoline gross profit for the three months ended June
30, 2002, increased $7.2 million, or 10.4%, to $76.6 million.
Expressed as cents per gallon, our gasoline margin was 15.1
cents in the second quarter of 2002 compared to 14.9 cents in
the second quarter of 2001. Relatively stable wholesale
costs during the second quarter contributed to favorable
gasoline results for the quarter. Based on current market
conditions, we expect to maintain our gasoline margins
(expressed as cents per gallon) during the remainder of the
year in the range of 13 to 14 cents per gallon.

OTHER INCOME

Other income for the three months ended June 30, 2002,
was $28.0 million, an increase of $281,000, or 1.0%, from
$27.7 million for the same period in 2001. Our royalty
income from our area licensees was $22.1 million for the
three months ended June 30, 2002, compared to $20.5 million
for the same period in 2001. This increase is primarily due
to increased sales at stores operated by our licensees,
partially offset by lower franchise fees.

FRANCHISEE GROSS PROFIT EXPENSE

Franchisee gross profit expense for the three months ended
June 30, 2002, was $192.6 million, an increase of $9.6 million,
or 5.2%, from $183.0 million for the same period in 2001. The
increase is due to higher per-store gross profits at franchised
stores and an increase in the number of stores operated by
franchisees.

16

OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
(OSG&A)

The primary components of OSG&A are store labor,
occupancy (including depreciation) and corporate expenses.
OSG&A for the three months ended June 30, 2002, was $498.6
million, an increase of $36.8 million, or 8.0%, from $461.8
million for the same period in 2001. Excluding a $10.4
million unfavorable impact from the change in currency
conversion from 2001 to 2002, which primarily relates to our
yen-denominated loans, and the elimination of $4.9 million of
amortization expense in 2002 due to the adoption of SFAS No.
142 (see "2002 Business Issues - New Accounting Standards"),
OSG&A increased $31.4 million or 6.9% to $484.6 million. The
primary drivers of the increase were higher occupancy
expenses from new store openings and labor costs.

The ratio of OSG&A to net sales increased to 19.1% for
the second quarter of 2002 from 18.0% for the second quarter
of 2001. Adjusting for the 20-cent decline in the retail
price of gasoline, the currency conversion loss, and the
elimination of amortization, the ratio of OSG&A to net sales
for the second quarter 2002 would have been 17.9% compared to
17.7% for the second quarter of 2001. We expect pressure on
this ratio as a result of our continued efforts to enhance
our store image and grow our store base. To mitigate this
impact, we continue to focus on our expense reduction efforts.

INTEREST EXPENSE, NET

Net interest expense for the three months ended June 30,
2002, was $16.3 million, an increase of $540,000, or 3.4%, from
$15.8 million for the same period in 2001. The increase is
primarily due to an increase in our total debt and a decline in
interest income due to lower interest rates, partially offset
by lower interest rates during the quarter on our variable rate
debt.

In accordance with SFAS No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructuring," our debentures are
recorded at an amount equal to the undiscounted cash payments
of both principal and interest, and we do not recognize
interest expense on our debentures in our Condensed
Consolidated Statement of Earnings. Accordingly, we charge the
cash interest payments against the recorded amount of the
debentures.

INCOME TAX EXPENSE

Income tax expense for the three months ended June 30,
2002, was $22.9 million compared to income tax expense of $21.4
million for the same period in 2001. Our effective tax rate
was 40.0% for the second quarter of 2002 compared to 39.0% for
the second quarter of 2001.

EARNINGS FROM CONTINUING OPERATIONS

For the three months ended June 30, 2002, our earnings
from continuing operations were $34.3 million ($0.30 per
diluted share), compared to $33.5 million ($0.29 per diluted
share) for the same period in 2001.

17

DISCONTINUED OPERATIONS

Discontinued operations for the three months ended June
30, 2002, resulted in a loss of $889,000 (net of $593,000 tax
benefit) compared to a loss of $690,000 (net of $441,000 tax
benefit) for the same period in 2001. The stores included in
discontinued operations for the three months ended June 30,
2002 and 2001, had total revenues of $4.5 million and $37.2
million, respectively, and pretax operating losses of $1.5
million and $1.1 million, respectively. See "2002 Business
Issues - Store Closings and Cost Reductions."

NET EARNINGS

Net earnings for the three months ended June 30, 2002,
were $33.4 million ($0.29 per diluted share), compared to $32.8
million ($0.28 per diluted share) for the same period in 2001.

SEASONALITY

Weather conditions can have a significant impact on our
sales, as our customers tend to buy more and to purchase higher
profit margin products when weather conditions are favorable.
Consequently, our results are seasonal, and we typically earn
more during the warmer second and third quarters.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2002 TO SIX MONTHS
ENDED JUNE 30, 2001

NET SALES

Merchandise sales for the six months ended June 30, 2002,
increased $153.1 million, or 4.6%, over the same period in
2001. U.S. same-store merchandise sales increased 3.1% for
the six months ended June 30, 2002, on top of 4.2% for the
six months ended June 30, 2001. Key contributors to the
merchandise sales increases in 2002 included the categories
of cigarettes, beer, prepaid cards, non-carbonated beverages
and snacks. Increases in the retail price of cigarettes due
to wholesale cost increases accounted for less than 1.5% of
the increase in 2002 and less than 1% of such growth in 2001.

Gasoline sales for the six months ended June 30, 2002,
decreased $123.0 million or 8.6% compared to the same period in
2001. We attribute this decrease to a decline of 24-cent per
gallon lower average retail price of gasoline in the six months
ended June 30, 2002, compared to the same period in 2001.
Gasoline sold increased 7.9%, to 982.1 million gallons. On a
per-store month basis, growth in gallons increased 3.0%
primarily due to the addition of new higher-volume gasoline
stores, which typically have more gasoline pumps than existing
stores.

18

GROSS PROFIT

Merchandise gross profit for the six months ended June
30, 2002, increased $80.0 million, or 7.0%, over the same
period in 2001. This was a result of higher sales and an
increase in our gross profit margin to 34.89% for the six
months ended June 30, 2002 from 34.09% for the same period in
2001. Our increases in overall gross profit margin and gross
profit per store are attributable to a variety of factors.
We continue to focus on improved cost of goods management
through initiatives like daily cost reporting, enhanced
competitive bidding practices and improving results at the
store level to lower write-offs and shortages. Product mix
also contributed to the improvement, as we sold more higher-
margin products.

Gasoline gross profit for the six months ended June 30,
2002, decreased $518,000, or 0.4%, to $120.0 million.
Expressed as cents per gallon, our gasoline margin was
12.2 cents for the six months ended June 30, 2002 compared to
13.2 cents for the same period of 2001. The decrease is due
to retail prices falling faster than wholesale costs
resulting in lower retail margins early in the first quarter
of 2002. Our retail gasoline margins stabilized in the
second quarter of 2002.

OTHER INCOME

Other income for the six months ended June 30, 2002, was
$54.5 million, an increase of $551,000, or 1.0%, from $54.0
million for the same period in 2001. Our royalty income from
our area licensees was $41.7 million for the six months ended
June 30, 2002, compared to $40.7 million for the same period
in 2001. This increase is primarily due to increased sales
at stores operated by our licensees, partially offset by the
strengthening of the dollar against the Japanese yen in the
first quarter of 2002 compared to the same period for 2001.

FRANCHISEE GROSS PROFIT EXPENSE

Franchisee gross profit expense for the six months ended
June 30, 2002, was $355.4 million, an increase of $18.5
million, or 5.5%, from $336.9 million for the same period in
2001. The increase is due to higher per-store gross profits at
franchised stores and an increase in the number of stores
operated by franchisees.

19

OPERATING, SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
(OSG&A)

The primary components of OSG&A are store labor,
occupancy (including depreciation) and corporate expenses.
OSG&A for the six months ended June 30, 2002, was $950.5
million, an increase of $69.6 million, or 7.9%, from $880.9
million for the same period in 2001. Excluding the one-time
charges of the store write-downs and reserve for future rent
of $1.4 million, the severance and other expenses of $6.9
million (see "2002 Business Issues - Store Closings and Cost
Reductions"), a $22.0 million unfavorable impact from the
change in currency conversion from 2001 to 2002, which
primarily relates to our yen-denominated loans, and the
elimination of $9.8 million of amortization expense in 2002
due to the adoption of SFAS No. 142 (see "2002 Business
Issues - New Accounting Standards"), OSG&A increased $49.2
million or 5.6% to $929.4 million. The primary drivers of
the increase were higher occupancy expenses from new store
openings and labor costs.

The ratio of OSG&A to net sales increased to 19.8% for the
six months ended June 30, 2002 from 18.5% for the same period
in 2001. Adjusting for the 24-cent decline in the retail price
of gasoline, the one-time charges, the currency conversion, and
the elimination of amortization, the ratio of OSG&A to net
sales for the six months ended June 30, 2002 and 2001 was
18.5%. We expect pressure on this ratio as a result of our
continued efforts to enhance our store image and grow our
store base. To mitigate this impact, we continue to focus on
our expense reduction efforts.

INTEREST EXPENSE, NET

Net interest expense for the six months ended June 30,
2002, was $32.2 million, a decrease of $799,000, or 2.4%, from
$33.0 million for the same period in 2001. The decrease is
primarily due to lower interest rates during 2002 on our
variable rate debt, partially offset by increased debt levels
and decreased interest income.

INCOME TAX EXPENSE

Income tax expense for the six months ended June 30, 2002,
was $21.4 million compared to income tax expense of $23.7
million for the same period in 2001. Our effective tax rate
was 40.0% for the six months ended June 30, 2002, compared to
39.0% for the same period in 2001.

EARNINGS FROM CONTINUING OPERATIONS

For the six months ended June 30, 2002, earnings from
continuing operations before cumulative effect of accounting
change were $32.0 million ($0.29 per diluted share), compared
to $37.0 million ($0.33 per diluted share) for the same period
in 2001.

DISCONTINUED OPERATIONS

Discontinued operations for the six months ended June
30, 2002, resulted in a loss of $9.1 million (net of $6.0
million tax benefit) compared to a loss of $1.9 million (net
of $1.2 million tax benefit) for the same period in 2001.
Included in the discontinued operations loss for the six
months ended June 30, 2002, is a charge of $6.2 million (net
of $4.2 million tax benefit) for write-downs of stores to net
realizable value and anticipated future rent and other
expenses in excess of related estimated sublease income. See
"2002 Business Issues - Store Closings and Cost Reductions."

20

The stores included in discontinued operations for the
six months ended June 30, 2002 and 2001, had total revenues
of $22.7 million and $69.5 million, respectively, and pretax
operating losses of $15.1 million and $3.1 million,
respectively.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE

On January 1, 2002, we adopted SFAS No. 143, "Accounting
for Asset Retirement Obligations," which resulted in a one-
time charge of $28.1 million, net of deferred tax benefit,
related to the cumulative effect of the accounting change for
accounting of costs associated with the future removal of
underground gasoline storage tanks.

On January 1, 2001, we adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which
resulted in a one-time charge of $9.8 million, net of
deferred tax benefit, related to the cumulative effect of the
accounting change on our yen-denominated debt.

NET (LOSS) EARNINGS

Net loss for the six months ended June 30, 2002, was $5.2
million ($0.00 per diluted share), compared to net earnings of
$25.3 million ($0.24 per diluted share) for the same period in
2001.

LIQUIDITY AND CAPITAL RESOURCES

We obtain the majority of our working capital from three
sources:

* cash flows generated from our operating activities;
* a $650 million commercial paper facility, guaranteed
by Ito-Yokado Co., Ltd.; and
* borrowings of up to $200 million under our revolving
credit facility.

We believe that operating activities, available working
capital sources and additional borrowings will provide
sufficient liquidity in 2002 to fund our operating costs,
capital expenditures and debt service. In addition, we intend
to continue accessing the leasing market to finance our new
stores and certain equipment, including Vcom kiosks.

Our capital expenditures were $223.4 million for the six
months ended June 30, 2002, compared to $150.6 million for the
same period in 2001. Our new capital lease commitments during
the six months ended June 30, 2002, were $19.2 million compared
to $9.6 million for the same period in 2001. These increases
are due to our growth initiatives, which were disclosed in our
Report on Form 10-K for the year ended December 31, 2001. For
the six months ended June 30, 2002, our capital expenditures
were primarily related to developing new stores and replacing
store equipment. We opened 48 stores in the first six months
of 2002.

We are obligated to a group of banks under a $200
million unsecured revolving credit agreement ("Credit
Agreement"). Effective March 31, 2002, we executed an
amendment to the Credit Agreement, which modified our
financial covenants to increase our flexibility for capital
spending on our growth initiatives.

21

The amendment modified the applicable margin rate; the
facility fee and utilization fee remained unchanged. The
applicable margin rate was 0.725% as of June 30, 2002. The
amendment includes modifications to existing financial and
operating covenants that require, among other things, the
maintenance of certain financial ratios. In addition, the
amendment adds a new financial covenant of senior
indebtedness to earnings before interest, income taxes,
depreciation, amortization and the interest component of rent
expense on certain lease facilities.

In April 2002, Moody's Investor Service announced it had
downgraded our credit rating. The downgrade did not increase
the fees and interest we are required to pay to our lenders.
Our commercial paper program was not affected by the
downgrade due to the guarantee of the program by Ito-Yokado
through 2003.

VCOM

Vcom is our proprietary kiosk solution to meet
consumer demands for convenient and continuously available
financial and e-commerce services. We believe that the
deployment of these web-enabled, integrated services kiosks
represents a significant market opportunity to offer
financial and e-commerce services to a large segment of our
current and future customers who have little or no access to
banks or the Internet. We believe that we are uniquely
positioned to capitalize on this opportunity because of the
demographics of our existing customer base and the large
number of our conveniently located stores. Through exclusive
agreements with third party service providers, we currently
offer or plan to offer ATM services (American Express Co.),
money order and money transfer services (Western Union
Financial Services, Inc.), check cashing services (Certegy
Inc.), telecommunications services (Verizon Select Services,
Inc.) and e-shopping (Cyphermint, Inc.).

We plan to expand Vcom to 1,000 stores starting in
the third quarter of 2002, adding to our current Vcom pilot
program in Texas and Florida. We estimate that our capital
investment for the additional kiosks will be approximately
$55 million. Financing options are being reviewed. In
addition, we estimate that we will need approximately $110
million to fund the amount of cash in the kiosks necessary
for check cashing and ATM transactions, which will initially
be funded through our commercial paper program. We are
pursuing alternatives to financing the cash required for the
kiosks.

In connection with our longer-range plans to roll out Vcom to
a total of 3,500 stores, we estimate that we will incur
cumulative pretax losses of up to $20 million during 2002 and
2003. These estimates assume that we will use third-party
financing for the Vcom equipment and cash balance
requirements to fund the check cashing and ATM transactions.
We expect Vcom to be profitable in 2004 and beyond

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Distribution Services. On July 10, 2002, we signed a
40-month service agreement with McLane Company, Inc.
("McLane"), a wholly-owned subsidiary of Wal-Mart Stores,
Inc., under which McLane will be our primary distributor of
traditional grocery products to our U.S. stores and
designated combined distribution centers in the United
States. The new agreement becomes effective September 2002.
We believe the terms of the distribution services agreement
are more favorable than those set forth in our existing
agreement with McLane.

22

CASH FLOWS FROM OPERATING ACTIVITIES

Net cash provided by operating activities for the six
months ended June 30, 2002, was $246.3 million compared to
$86.8 million for the six months ended June 30, 2001. We
attribute this increase to changes in balance sheet items,
primarily due to the timing of working capital items such as
the funding for money orders, receipt of vendor promotional
allowances and the payment of merchandise and gasoline
payables and other liabilities.

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities for the six months
ended June 30, 2002, was $241.4 million, an increase of
$102.0 million, or 73.2%, from $139.4 million for the six
months ended June 30, 2001. The primary driver of the
increase was a $72.8 million increase in capital expenditures
to $223.4 million for the six months ended June 30, 2002,
from $150.6 million for the same period in 2001, primarily as
a result of our strategic growth initiatives. In addition,
restricted cash in connection with our yen loans increased
$23.2 million during the six months ended June 30, 2002,
compared to the same period in 2001.

CASH FLOWS FROM FINANCING ACTIVITIES

Net cash used in financing activities was $4.4 million
for the six months ended June 30, 2002, compared to net cash
provided by financing activities of $7.3 million for the six
months ended June 30, 2001. Net proceeds under commercial
paper and revolving credit facilities for the six months
ended June 30, 2002, totaled $26.6 million compared to $56.0
million for the same period in 2001. Long-term debt
repayments of $21.5 million for the six months ended June 30,
2002, consist of payments of scheduled debt maturities
compared to $49.5 million for the same period in 2001. The
decrease in scheduled debt payments is due to our repayment
of the 1988 yen loan in August 2001.

OTHER ISSUES

ENVIRONMENTAL

At June 30, 2002, our estimated undiscounted liability
for our environmental costs related to remedial action at
existing and previously operated gasoline storage sites and
other operating and non-operating properties where releases
of regulated substances have been detected was $32.4 million.
We anticipate that substantially all of the future
remediation costs for detected releases of regulated
substances at remediation sites of which we are aware, as of
June 30, 2002, will be incurred within the next five to six
years. The estimated liability could change for several
reasons, including revisions to or the creation of
governmental requirements, existing remediation projects
become fully defined and cost-to-closure estimates become
available, and unplanned future failures of underground
gasoline storage tank systems.

23

Under state reimbursement programs, we are eligible to
be reimbursed for a portion of remediation costs previously
incurred. At June 30, 2002, we had recorded a net receivable
of $54.1 million for the estimated state reimbursements, of
which $33.2 million relates to remediation costs incurred in
California. In assessing the probability of state
reimbursements, we take into consideration each state's fund
balance, revenue sources, existing claim backlog, historical
payments and claim ranking systems. As a result of these
assessments, the recorded receivable amounts at June 30,
2002, are net of allowances of $10.2 million. The estimated
future state reimbursement amounts could change as
governmental requirements and state reimbursement programs
continue to be revised or extended. Our estimated
reimbursement amounts could change materially as remediation
costs are spent and as receipts of state trust funds are
recorded.

While we cannot be certain of the timing of our receipt
of state reimbursement funds, based on our experience we
expect to receive the majority of state reimbursement funds
within one to six years after our payment of eligible
remediation expenses. This time period assumes that the
state administrative procedures for processing such
reimbursements have been fully developed. One exception to
our assumption is California, where we estimate that we will
receive reimbursement funds within one to ten years after our
payment of eligible remediation expenses. As a result of the
timing for reimbursements, we have present-valued the portion
of the recorded receivable amount that relates to remediation
activities that have already been completed at a discount
rate of approximately 3.4%. Thus, in addition to the
allowance set forth in the preceding paragraph, the recorded
receivable amount is also net of a discount of $11.2 million.

The estimated future remediation expenditures and
related state reimbursement amounts could change as
governmental requirements and state reimbursement programs
continue to be implemented or revised. Such revisions could
have a material impact on our operations and financial
position.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK

See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," above.

24

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings.

There are no reportable suits or proceedings pending or
threatened against the Company.

Item 4. Submission of Matters to a Vote of Security Holders.

On April 24, 2002, the Company held its annual meeting
of shareholders. Each of the twelve nominated directors was
elected without contest. In addition, the shareholders
ratified the approval of PricewaterhouseCoopers LLP to be the
Company's independent accountants for 2002.

(a) The votes for and the votes withheld for each of
the nominees for director were as follows:

(b) The votes for, against, abstaining and broker
non-votes in connection with the ratification of
the appointment of PricewaterhouseCoopers LLP to be
the independent accountants of the Company for 2002
were as follows:

90,150,075 shares were voted for; 521,530 shares
were voted against; 8,056 shares abstained from
voting; and no broker non-votes were received.

25

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

1. Exhibit (15) - Letter re Unaudited Interim
Financial Information. Letter of
PricewaterhouseCoopers LLP.

2. Exhibit 99(i)(1) - Certification by Chief
Executive Officer Required by Section 906 of the
Sarbanes-Oxley Act of 2002

3. Exhibit 99 (i)(2) - Certification by Chief
Financial Officer Required by Section 906 of the
Sarbanes-Oxley Act of 2002

(b) 8-K Reports:

During the second quarter of 2002, the Company
filed no reports on Form 8-K.

26

SIGNATURES

Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.

7-ELEVEN, INC.
(Registrant)

Date: August 9, 2002 /s/ James W. Keyes
---------------------------

(Officer)
James W. Keyes
President and Chief
Executive Officer

Date: August 9, 2002 /s/ Edward W. Moneypenny
---------------------------

(Principal Financial Officer)
Edward W. Moneypenny
Senior Vice President and
Chief Financial Officer

27