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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, 2003

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:

105,013,268 shares of common stock, $.0001 par value (the
issuer's only class of common stock), were outstanding as of
June 30, 2003.





7-ELEVEN, INC.
INDEX




PAGE
NO.
----

Part I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

Condensed Consolidated Balance Sheets -
December 31, 2002 and June 30, 2003 1

Condensed Consolidated Statements of Earnings -
Three Months and Six Months Ended June 30, 2002 and 2003 2

Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2002 and 2003 3

Notes to Condensed Consolidated Financial Statements 4

Report of Independent Auditors 10


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 11

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 21

ITEM 4. CONTROLS AND PROCEDURES 21

Part II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 21

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 23

SIGNATURES 24

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

Exhibit 31(1) - Certification of Chief Executive Officer Required by
Section 302 of the Sarbanes-Oxley Act Tab 2

Exhibit 31(2) - Certification of Chief Financial Officer Required by
Section 302 of the Sarbanes-Oxley Act Tab 3

Exhibit 32(1) - Certification of Chief Executive Officer Required by
Section 906 of the Sarbanes-Oxley Act Tab 4

Exhibit 32(2) - Certification of Chief Financial Officer Required by
Section 906 of the Sarbanes-Oxley Act Tab 5









(i)






7-ELEVEN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)




DECEMBER 31, JUNE 30,
2002 2003
------------- -------------

(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 82,423 $ 113,184
Cash for Vcom kiosks 38,342 70,136
------------- -------------
Total cash and cash equivalents 120,765 183,320
Accounts receivable 248,483 239,877
Inventories 114,091 100,880
Other current assets 140,837 165,147
------------- -------------
Total current assets 624,176 689,224
Property and equipment 2,175,360 2,196,956
Goodwill and intangible assets 140,490 140,579
Other assets 124,299 127,372
------------- -------------
Total assets $ 3,064,325 $ 3,154,131
============= =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 260,978 $ 256,040
Accrued expenses and other liabilities 457,623 420,991
Long-term debt due within one year 48,609 49,211
------------- -------------
Total current liabilities 767,210 726,242
Deferred credits and other liabilities 386,995 431,809
Long-term debt 1,366,623 1,388,184
Convertible quarterly income debt securities 380,000 380,000
Commitments and contingencies
Shareholders' equity
Preferred stock, $.01 par value - -
Common stock, $.0001 par value 10 11
Additional capital 1,168,182 1,168,455
Accumulated deficit (990,107) (945,866)
Unearned compensation (1,068) (842)
Accumulated other comprehensive earnings (loss) (13,520) 6,138
------------- -------------
Total shareholders' equity 163,497 227,896
------------- -------------
Total liabilities and shareholders' equity $ 3,064,325 $ 3,154,131
============= =============


See notes to condensed consolidated financial statements.




1







7-ELEVEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

(UNAUDITED)

THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
---------------------------- ---------------------------
2002 2003 2002 2003
------------- ------------- ------------ -------------

REVENUES
Merchandise sales (including $176,199, $221,657,
$328,896 and $413,600 in excise taxes) $ 1,858,701 $ 1,955,988 $ 3,454,077 $ 3,664,565
Gasoline sales (including $190,401, $205,508,
$372,306 and $399,593 in excise taxes) 720,778 831,925 1,278,559 1,654,944
------------- ------------- ------------ ------------
Net sales 2,579,479 2,787,913 4,732,636 5,319,509
Other income 27,997 24,227 54,498 44,993
------------- ------------- ------------ ------------
Total revenues 2,607,476 2,812,140 4,787,134 5,364,502

COSTS AND EXPENSES
Merchandise cost of goods sold 1,204,556 1,276,105 2,248,174 2,405,170
Gasoline cost of goods sold 645,229 739,640 1,160,399 1,494,535
------------- ------------- ------------ ------------
Total cost of goods sold 1,849,785 2,015,745 3,408,573 3,899,705
Franchisee gross profit expense 191,832 203,380 353,934 377,791
Operating, selling, general and administrative
expenses 492,618 511,976 937,013 979,336
Interest expense, net 16,355 16,424 32,165 32,795
------------- ------------- ------------ ------------
Total costs and expenses 2,550,590 2,747,525 4,731,685 5,289,627
------------- ------------- ------------ ------------

EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME
TAX AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 56,886 64,615 55,449 74,875

INCOME TAX EXPENSE 22,754 24,451 22,179 28,453
------------- ------------- ------------ ------------
EARNINGS FROM CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 34,132 40,164 33,270 46,422

LOSS ON DISCONTINUED OPERATIONS (net of tax
benefit of $477, $504, $6,871 and $1,337) (716) (879) (10,307) (2,181)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE (net of
tax benefit of $18,759) - - (28,139) -
------------- ------------- ------------- ------------
NET EARNINGS (LOSS) $ 33,416 $ 39,285 $ (5,176) $ 44,241
============= ============= ============= ============
NET EARNINGS (LOSS) PER COMMON SHARE
BASIC
Earnings from continuing operations before
cumulative effect of accounting change $ .33 $ .38 $ .32 $ .44
Loss on discontinued operations (.01) (.01) (.10) (.02)
Cumulative effect of accounting change - - (.27) -
------------- ------------- ------------- ------------
Net earnings (loss) $ .32 $ .37 $ (.05) $ .42
============= ============= ============= ============
DILUTED
Earnings from continuing operations before
cumulative effect of accounting change $ .30 $ .34 $ .30 $ .41
Loss on discontinued operations (.01) (.01) (.08) (.02)
Cumulative effect of accounting change - - (.22) -
------------- ------------- ------------- ------------
Net earnings $ .29 $ .33 $ - $ .39
============= ============= ============= ============




See notes to condensed consolidated financial statements.



2




7-ELEVEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

(UNAUDITED)
SIX MONTHS ENDED
JUNE 30
------------------------------
2002 2003
------------- -------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ (5,176) $ 44,241
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Cumulative effect of accounting change 28,139 -
Depreciation and amortization of property and equipment 134,037 146,783
Other amortization 177 158
Deferred income tax expense 13,593 9,808
Noncash interest expense 620 325
Foreign currency net conversion loss (gain) 12,830 (3,773)
Other noncash (income) loss (445) 2,786
Net loss on property and equipment 8,074 2,026
(Increase) decrease in accounts receivable (22) 10,688
(Increase) decrease in inventories (2,085) 13,211
Decrease (increase) in other assets 13,632 (17,458)
Increase (decrease) in trade accounts payable and other liabilities 45,948 (16,145)
------------- -------------
Net cash provided by operating activities 249,322 192,650
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of property and equipment (225,312) (117,774)
Proceeds from sale of property and equipment 2,907 4,273
Proceeds from sale of domestic securities 1,493 990
Restricted cash (23,191) (7,486)
Other (271) 74
------------- -------------
Net cash used in investing activities (244,374) (119,923)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from commercial paper and revolving credit facilities 2,691,022 2,877,527
Payments under commercial paper and revolving credit facilities (2,664,450) (2,972,177)
Proceeds from issuance of long-term debt - 100,000
Principal payments under long-term debt agreements (21,453) (18,120)
(Decrease) increase in outstanding checks in excess of cash in bank (8,139) 2,640
Net proceeds from issuance of common stock 51 -
Other (1,443) (42)
------------- -------------
Net cash used in financing activities (4,412) (10,172)
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 536 62,555
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 125,599 120,765
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 126,135 $ 183,320
============= =============

RELATED DISCLOSURES FOR CASH FLOW REPORTING
Interest paid, excluding SFAS No.15 Interest $ (34,797) $ (33,819)
============= =============
Net income taxes refunded (paid) $ 2,461 $ (8,234)
============= =============
Assets obtained by entering into capital leases $ 19,165 $ 43,637
============= =============
1998 Yen loan principal and interest payments from restricted cash $ (22,790) $ (7,359)
============= =============






See notes to condensed consolidated financial statements.



3





7-ELEVEN, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2003

(UNAUDITED)

1. BASIS OF PRESENTATION

The condensed consolidated balance sheet as of June
30, 2003, and the condensed consolidated statements of
earnings for the three-month and six-month periods ended
June 30, 2002 and 2003, and the condensed consolidated
statements of cash flows for the six-month periods ended
June 30, 2002 and 2003, 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, 2003, 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, 2002, 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, 2002, include accounting policies and
additional information pertinent to an understanding of
both the December 31, 2002, 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, 2003, and as discussed in the following
notes.

2. STOCK-BASED COMPENSATION

The Company adopted the interim disclosure provisions
of Statement of Financial Accounting Standards ("SFAS") No.
148, "Accounting for Stock-Based Compensation - Transition
and Disclosure - an Amendment of FASB Statement No. 123,"
effective January 1, 2003.

The fair value of each option grant under the
Company's 1995 Stock Incentive Plan ("Stock Incentive
Plan") is estimated on the date of grant using the Black-
Scholes option-pricing model with the following weighted-
average assumptions used for the options granted: expected
life of five years and no dividend yields combined with
risk-free interest rates of 4.67% and 2.65% and expected
volatility of 67.54% and 64.98% for the options granted in
2002 and 2003, respectively.

The Company has recognized no compensation expense for
its stock options as it is accounting for its Stock
Incentive Plan for employees under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." If compensation expense had
been determined based





4


on the fair value at the grant date for awards under this
plan consistent with the method prescribed by SFAS No. 123,
"Accounting for Stock-Based Compensation," the Company's
net earnings (loss) and net earnings (loss) per common share
for the three months and six months ended June 30, 2002 and
2003, would have been reduced to the pro forma amounts
indicated in the following table (dollars in thousands,
except per-share data):



Three Months Six Months
Ended June 30 Ended June 30
------------------ ------------------
2002 2003 2002 2003
-------- -------- -------- --------

Net earnings (loss) as reported $ 33,416 $ 39,285 $ (5,176) $ 44,241
Add: stock-based compensation expense included
in reported net earnings (loss), net of tax - 436 - 808
Less: Total stock-based compensation expense
determined under the fair-value-based method
for all stock-based awards, net of tax (1,024) (1,638) (1,849) (3,010)
--------- -------- -------- --------
Pro forma net earnings (loss) $ 32,392 $ 38,083 $ (7,025) $ 42,039
========= ======== ======== ========

Net earnings (loss) per common share as reported
Basic $ .32 $ .37 $ (.05) $ .42
Diluted .29 .33 - .39
Pro forma net earnings (loss) per common share
Basic $ .31 $ .36 $ (.07) $ .40
Diluted .28 .32 (.01) .38





3. COMPREHENSIVE EARNINGS

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




Three Months Six Months
Ended June 30 Ended June 30
------------------ ------------------
2002 2003 2002 2003
-------- -------- -------- --------

Net earnings (loss) $ 33,416 $ 39,285 $ (5,176) $ 44,241
Other comprehensive earnings:
Unrealized gains (losses) on equity securities
(net of ($390), $70, ($223) and ($283)
deferred taxes) (792) 109 (530) (360)
Reclassification adjustments for gains
included in net earnings (net of $300, $192,
$591 and $407 deferred taxes) (450) (301) (906) (586)
Unrealized gain (loss) related to interest
rate swap (net of ($716), $1,123, $242 and
$2,209 deferred taxes) (1,748) 1,557 255 2,773
Foreign currency translation adjustments 3,675 10,446 3,326 17,831
-------- -------- -------- --------
Other comprehensive earnings 685 11,811 2,145 19,658
-------- -------- -------- --------
Total comprehensive earnings (loss) $ 34,101 $ 51,096 $ (3,031) $ 63,899
========= ======== ======== ========




5

4. STORE CLOSINGS, ASSET IMPAIRMENT AND ASSET RETIREMENT
OBLIGATIONS

The results of operations of certain owned and leased
stores are presented as discontinued operations in
accordance with the provisions of SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." 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 and
actively markets the 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. Amounts
related to discontinued operations of prior periods have
been reclassified to conform to discontinued operations of
the current period in the accompanying condensed
consolidated statements of earnings.

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





Three Months Six Months
Ended June 30 Ended June 30
------------------- ------------------
2002 2003 2002 2003
-------- -------- -------- --------

Total revenue $ 36,522 $ 4,451 $ 82,103 $ 23,325
Pretax loss (1,193) (1,383) (17,178) (3,518)




Included in the pretax loss for the six months ended
June 30, 2002, is a loss on disposal of $11.6 million for
write-downs of property and equipment to net realizable
value and anticipated future rent and other expenses in
excess of related estimated sublease income in connection
with the store closings.

As of June 30, 2002 and 2003, assets held for sale
were $13.0 million and $15.3 million, respectively, and are
included in other current assets in the accompanying
condensed consolidated balance sheets.

As required by SFAS No. 143, "Accounting for Asset
Retirement Obligations," the Company recognizes an
estimated liability for the removal of its underground
storage tanks. Upon adoption of SFAS 143 in January 2002,
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).

5. SEJ NOTES AND RETIREMENT OF SENIOR SUBORDINATED
DEBENTURES

In January 2003, the Company entered into a note
purchase agreement with Seven-Eleven Japan Co., Ltd.
("SEJ") that authorizes the issuance and sale of up to $400
million aggregate principal amount of Senior Subordinated
Notes due January 27, 2010 ("SEJ Notes"), which were issued
by the Company and purchased by SEJ in multiple tranches.
Interest on the SEJ Notes was calculated for each tranche
on its issuance date and was set by a formula tied to the
United States Treasury Rate and Japanese government bond
rates. The SEJ Notes are subordinate to all obligations
outstanding under the Company's revolving credit facility.
The Company is required to repay the SEJ Notes in eight
equal semiannual installments beginning July 2006 and
ending January 2010, and interest payments on the unpaid
balance of the SEJ Notes are required semiannually
beginning January 2003.




6

On January 10, 2003, the Company received $100 million
from SEJ under the note purchase agreement; the interest
rate on this tranche is stated at 3.41%. On July 9, 2003,
the Company received the remaining $300 million from SEJ
under the note purchase agreement in three equal payments
of $100 million; the interest rate on these tranches is
stated at 3.01%, 3.34% and 3.71%, respectively.

In July 2003, the Company used a portion of the
proceeds of the SEJ Notes to retire $239.3 million
principal amount of its 5% First Priority Senior
Subordinated Debentures due 2003, $111.4 million principal
amount of its 4 1/2% Second Priority Senior Subordinated
Debentures (Series A) due 2004 and $18.5 million principal
amount of its 4% Second Priority Senior Subordinated
Debentures (Series B) due 2004. As a result of the
inclusion of SFAS No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructuring," interest in the
carrying amount of the retired debt, the Company will
recognize a pretax gain of approximately $10.0 million in
the third quarter of 2003. The gain will be recorded in
operating, selling, general and administrative expenses.

6. OTHER RELATED PARTY TRANSACTIONS

In May 2002, a financial-services subsidiary of SEJ
made a personal loan of 227.5 million Japanese yen
(approximately $1.75 million) to one of the Company's non-
employee directors. The term of the loan, which is secured
by certain shares of stock owned by the director and bears
interest at 2.6%, has been extended from May 2003 to
November 2003. As of June 30, 2003, interest expense
incurred on the loan approximates $51,000.






7

7. EARNINGS PER SHARE

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




Three Months Six Months
Ended June 30 Ended June 30
--------------------- --------------------
2002 2003 2002 2003
---------- --------- --------- ---------

BASIC
Earnings from continuing operations before
cumulative effect of accounting change $ 34,132 $ 40,164 $ 33,270 $ 46,422
Loss on discontinued operations (716) (879) (10,307) (2,181)
Cumulative effect of accounting change - - (28,139) -
---------- ---------- ---------- ----------
Net earnings (loss) $ 33,416 $ 39,285 $ (5,176) $ 44,241
========== ========== ========== ==========

Weighted-average common shares outstanding 104,824 104,902 104,821 104,878
========== ========== ========== ==========

Earnings per common share from continuing operations
before cumulative effect of accounting change $ .33 $ .38 $ .32 $ .44
Loss per common share on discontinued operations (.01) (.01) (.10) (.02)
Loss per common share on cumulative effect of
accounting change - - (.27) -
---------- ---------- ---------- ----------
Net earnings (loss) per common share $ .32 $ .37 $ (.05) $ .42
========== ========== ========== ==========
DILUTED
Earnings from continuing operations before
cumulative effect of accounting change $ 34,132 $ 40,164 $ 33,270 $ 46,422
Add interest on convertible quarterly income debt
securities, net of tax 2,608 2,695 5,216 5,389
---------- ---------- ---------- ----------
Earnings from continuing operations before cumulative
effect of accounting change plus assumed conversions $ 36,740 $ 42,859 $ 38,486 $ 51,811
Loss on discontinued operations (716) (879) (10,307) (2,181)
Cumulative effect of accounting change - - (28,139) -
---------- ---------- ---------- ----------
Net earnings plus assumed conversions $ 36,024 $ 41,980 $ 40 $ 49,630
========== ========== ========== ==========

Weighted-average common shares outstanding (Basic) 104,824 104,902 104,821 104,878
Add effects of assumed conversions:
Stock options, stock units, performance share
units and restricted stock (1) 140 822 141 632
Convertible quarterly income debt securities 20,924 20,924 20,924 20,924
---------- ---------- ---------- ----------
Weighted-average common shares outstanding plus
shares from assumed conversions (Diluted) 125,888 126,648 125,886 126,434
========== ========== ========== ==========
Earnings per common share from continuing operations
before cumulative effect of accounting change $ .30 $ .34 $ .30 $ .41
Loss per common share on discontinued operations (.01) (.01) (.08) (.02)
Loss per common share on cumulative effect of
accounting change - - (.22) -
---------- ---------- ---------- ----------
Net earnings per common share $ .29 $ .33 $ - $ .39
========== ========== ========== ==========



(1) Stock options for 6.6 million, 5.0 million, 4.0 million and 6.3 million shares of
common stock for the three-month and six-month periods ended June 30, 2002 and 2003,
respectively, have exercise prices that are greater than the average market prices of the
common shares for each respective period. Therefore, these shares have not been included
in the diluted earnings per share calculations.





8


8. RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2003, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 149, "Amendment of SFAS No.
133 on Derivative Instruments and Hedging Activities."
SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities
under SFAS No. 133. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, for
hedging relationships designated after June 30, 2003, and
to certain preexisting contracts. The Company will adopt
the provisions of SFAS No. 149 on a prospective basis for
any contracts entered into after June 30, 2003. The
Company does not expect that the statement will have a
material impact on its consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of
both Liabilities and Equity." SFAS No. 150 establishes
standards for classifying and measuring as liabilities
certain financial instruments that embody obligations of
the issuer and have characteristics of both liabilities and
equity. The provisions of SFAS No. 150 are effective for
all financial instruments created or modified after May 31,
2003, and otherwise shall be effective at the beginning of
the first interim period beginning after June 15, 2003.
The Company will adopt the provisions of SFAS No. 150 as of
July 1, 2003. The Company does not expect that the
statement will have a material impact on its consolidated
financial statements.

FASB Interpretation No. 46, "Consolidation of Variable
Interest Entities - an Interpretation of ARB No. 51," was
issued in January 2003. The Interpretation addresses
consolidation of variable interest entities ("VIEs") to
which the usual condition for consolidation described in
Accounting Research Bulletin No. 51, "Consolidated
Financial Statements," does not apply because the VIEs have
no voting interests or otherwise are not subject to control
through ownership of voting interests. It requires
existing unconsolidated VIEs to be consolidated by their
primary beneficiaries if the entities do not effectively
disperse risks among parties involved. The provisions of
the Interpretation are effective immediately for VIEs
created after January 31, 2003, and to VIEs in which an
entity obtains an interest after that date. An entity with
a variable interest in a VIE created before February 1,
2003, must apply the provisions no later than the first
reporting period beginning after June 15, 2003. The
Interpretation may be applied prospectively with a
cumulative-effect adjustment as of the date on which it is
first applied or by restating previously issued financial
statements.

The Company expects to include the assets,
liabilities, noncontrolling interests and results of
activities of certain trusts in its consolidated financial
statements effective July 1, 2003. The trusts, which were
funded by a group of senior lenders, were established in
connection with two lease facilities that have provided the
Company with $191.0 million in off-balance sheet financing
as of June 30, 2003, for constructing new stores and
acquiring operating convenience stores from unaffiliated
third parties. The trusts acquired land and undertook
construction projects for which the Company was the
construction agent or acquired operating convenience stores
from third parties. The Company estimates that this will
result in an after-tax, one-time cumulative effect charge
of approximately $9 million to $12 million in the third
quarter of 2003. On an annual basis, the Company expects
the after-tax impact on earnings from continuing operations
to be a charge of approximately $5 million to $7 million.





9


REPORT OF INDEPENDENT AUDITORS



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, 2003, and the related
condensed consolidated statements of earnings for the
three-month and six-month periods ended June 30, 2002
and 2003, and the condensed consolidated statements
of cash flows for the six-month periods ended
June 30, 2002 and 2003. 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, 2002, 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 30, 2003, which included an explanatory
paragraph for the adoption of newly issued accounting
standards in 2001 and 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, 2002, 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 31, 2003



10






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 expense; occupancy expense; interest
expense and taxes.

We seek to meet the changing needs of convenience
customers and maintain a leadership position in the
convenience store industry by leveraging our scale,
technology, people and widely recognized brand. We continue
to focus on our traditional convenience store business as
well as our growth strategy to further our competitive
advantage and improve our financial results.

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2003, TO THREE MONTHS
ENDED JUNE 30, 2002

NET SALES




Three Months Ended June 30
--------------------------
2002 2003
--------- ----------

Net Sales: (in millions)
Merchandise sales $ 1,858.7 $ 1,956.0
Gasoline sales 720.8 831.9
-------- --------
Total net sales $ 2,579.5 $ 2,787.9
U.S. same-store merchandise sales growth 2.6% 2.3%
Gasoline gallons sold (in millions) 497.6 531.8
Gasoline gallon sales change per store 3.5% 4.1%
Average retail price of gasoline per gallon $ 1.45 $ 1.56







11


Merchandise sales for the three months ended June 30,
2003, increased $97.3 million, or 5.2%, over the same period
in 2002. U.S. same-store merchandise sales growth was 2.3%
for the three months ended June 30, 2003, on top of 2.6% for
the three months ended June 30, 2002. Key contributors to
the merchandise sales growth in 2003 were increases in the
sales of prepaid cards, fresh food, beverages and
cigarettes.

Gasoline sales for the three months ended June 30, 2003,
increased $111.1 million, or 15.4%, compared to the same
period in 2002. We attribute this to an increase of 11 cents
per gallon in our average retail price of gasoline in the
second quarter of 2003, compared to the same quarter in 2002,
as well as an increase in gallons sold of 6.9% to 531.8
million gallons. This increase in gallons sold translates
into 4.1% growth on a per store basis.

GROSS PROFIT





Three Months Ended June 30
--------------------------
2002 2003
-------- ---------

Gross Profit (in millions)
Merchandise gross profit $ 654.1 $ 679.9
Gasoline gross profit 75.6 92.3
-------- --------
Total gross profit $ 729.7 $ 772.2
Merchandise gross profit margin 35.19% 34.76%
Merchandise gross profit growth per store 4.7% 2.0%
Gasoline gross profit margin cents per gallon 15.2 17.4
Gasoline gross profit change per store 5.3% 19.0%



Merchandise gross profit for the three months ended
June 30, 2003, increased $25.8 million, or 3.9%, over the
same period in 2002 as a result of higher sales. Gross
profit margin declined 43 basis points to 34.76% for the
second quarter of 2003 from 35.19% for the same period in
2002. Changes in product mix positively impacted
merchandise sales and gross profit dollars, but resulted in
a lower merchandise margin during the quarter. In addition,
unseasonably cold weather in several parts of the country
also affected sales of higher margin items like Slurpee(r) and
fountain drinks. The impact on merchandise margin was
partially offset by a continuation of the favorable trend
from managing cost of goods and shortage.



OTHER INCOME

Other income for the three months ended June 30, 2003,
was $24.2 million, a decrease of $3.8 million, or 13.6%,
from $28.0 million for the same period in 2002. Our royalty
income from our area licensees was $12.4 million for the
three months ended June 30, 2003, compared to $22.1 million
for the same period in 2002. This decrease was due to the
anticipated reduction in the Seven-Eleven Japan licensing
royalties of $10.0 million. The decrease in the licensing
royalties was partially offset by an increase in franchise
fees and an increase in Vcom placement fee income as a
result of the installation of additional kiosks over the
prior-year quarter. See "Liquidity and Capital Resources."





12

FRANCHISEE GROSS PROFIT EXPENSE

Franchisee gross profit expense for the three months
ended June 30, 2003, was $203.4 million, an increase of $11.6
million, or 6.0%, from $191.8 million for the same period in
2002. The increase is due to higher per-store gross profit,
which resulted from increased sales at franchised stores as
well as an increase in the number of stores operated by
franchisees.

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

The primary components of OSG&A are store expenses,
occupancy (including depreciation) and corporate expenses.
OSG&A for the three months ended June 30, 2003, was $512.0
million, an increase of $19.4 million, or 3.9%, from $492.6
million for the same period in 2002. The primary drivers of
the increase were higher occupancy expenses from new store
openings, compensation and benefits, and credit card
processing fees, partially offset by a gain on currency
conversion.

The ratio of OSG&A to revenues decreased to 18.2% for the
second quarter of 2003 from 18.9% for the second quarter of
2002. Included in OSG&A for the three months ended June 30,
2003 was a $3.4 million currency conversion gain. Included in
OSG&A for the same period of 2002 was a $14.0 million currency
conversion loss.

INTEREST EXPENSE, NET

Net interest expense for the three months ended June 30,
2003, and June 30, 2002, was $16.4 million. See "Liquidity
and Capital Resources."

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.

On July 11, 2003, we redeemed all of our outstanding
senior subordinated debentures. Therefore, interest on the
debentures ceased to accrue as of that date. See "Liquidity
and Capital Resources."


INCOME TAX EXPENSE

Income tax expense for the three months ended June 30,
2003, was $24.5 million compared to $22.8 million for the same
period in 2002. Our effective tax rate was 37.8% for the
second quarter of 2003, compared to 40.0% for the second
quarter of 2002.

EARNINGS FROM CONTINUING OPERATIONS

For the three months ended June 30, 2003, our earnings
from continuing operations were $40.2 million ($0.34 per
diluted share), compared to $34.1 million ($0.30 per diluted
share) for the same period in 2002.




13

DISCONTINUED OPERATIONS

Discontinued operations for the three months ended June
30, 2003, resulted in a loss of $879,000 (net of $504,000
tax benefit) compared to a loss of $716,000 (net of $477,000
tax benefit) for the same period in 2002. These stores had
total revenues of $4.5 million and $36.5 million and pretax
losses of $1.4 million and $1.2 million for the three months
ended June 30, 2003 and 2002, respectively.

NET EARNINGS

Net earnings for the three months ended June 30, 2003,
were $39.3 million ($0.33 per diluted share), compared to
$33.4 million ($0.29 per diluted share) for the same period in
2002.

SEASONALITY

Weather conditions can have a significant impact on our
sales, as buying patterns have shown that our customers
increase their transactions and also 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, 2003 TO SIX MONTHS
ENDED JUNE 30, 2002

NET SALES




Six Months Ended June 30
--------------------------
2002 2003
--------- ---------

Net Sales: (in millions)
Merchandise sales $ 3,454.1 $ 3,664.6
Gasoline sales 1,278.5 1,654.9
-------- --------
Total net sales $ 4,732.6 $ 5,319.5
U.S. same-store merchandise sales growth 3.1% 3.3%
Gasoline gallons sold (in millions) 963.3 1,037.2
Gasoline gallon sales change per store 3.1% 4.5%
Average retail price of gasoline per gallon $ 1.33 $ 1.60



Merchandise sales for the six months ended June 30,
2003, increased $210.5 million, or 6.1%, over the same
period in 2002. U.S. same-store merchandise sales growth
was 3.3% for the six months ended June 30, 2003, on top of
3.1% for the six months ended June 30, 2002. Key
contributors to the merchandise sales growth in 2003 were
increases in the sales of prepaid cards, fresh food, beer,
non-carbonated beverages and cigarettes.

Gasoline sales for the six months ended June 30, 2003,
increased $376.4 million, or 29.4%, compared to the same
period in 2002. We attribute this increase to an increase of
27 cents per gallon in our average retail price of gasoline in
the first six months of 2003, compared to the same period in
2002, as well as an increase of 7.7% in gallons sold to
1,037.2 million gallons. This increase in gallons sold was
primarily due to the addition of new gasoline stores, and
equates to a 4.5% growth in gallons sold per store.




14


GROSS PROFIT




Six Months Ended June 30
--------------------------
2002 2003
------ -------

Gross Profit (in millions)
Merchandise gross profit $ 1,205.9 $ 1,259.4
Gasoline gross profit 118.2 160.4
--------- ---------
Total gross profit $ 1,324.1 $ 1,419.8
Merchandise gross profit margin 34.91% 34.37%
Merchandise gross profit growth per store 5.2% 2.4%
Gasoline gross profit margin cents per gallon 12.3 15.5
Gasoline gross profit change per store (4.9)% 31.8%



Merchandise gross profit for the six months ended June
30, 2003, increased $53.5 million, or 4.4%, over the same
period in 2002 as a result of higher sales. Gross profit
margin declined 54 basis points to 34.37% for the six months
ended June 30, 2003 from 34.91% for the same period in 2002.
The decrease in overall gross profit margin is attributable
to our strategy of maximizing gross profit dollars. The
changing product mix affects merchandise margins as we sell
more items that contribute to gross profit dollars but
negatively impact gross profit margin, such as cigarette
cartons. The impact from product assortment changes was
partially offset by the continued emphasis on managing cost
of goods.

Gasoline gross profit for the six months ended June 30,
2003, increased $42.2 million, or 35.8%, to $160.4 million.
Expressed as cents per gallon, our gasoline margin was
15.5 cents in the six-month period ended June 30, 2003,
compared to 12.3 cents for the same period in 2002. Although
wholesale costs were greater in the six-month period ended
June 30, 2003, than in the same period a year ago, retail
prices were much higher than in the prior-year period,
contributing to the increase in profit margin.

OTHER INCOME

Other income for the six months ended June 30, 2003, was
$45.0 million, a decrease of $9.5 million, or 17.4%, from
$54.5 million for the same period in 2002. Our royalty income
from our area licensees was $24.6 million for the six months
ended June 30, 2003, compared to $41.7 million for the same
period in 2002. This decrease was due to the anticipated
reduction in the Seven-Eleven Japan licensing royalties of
$18.9 million. The decrease in the licensing royalties was
partially offset by an increase in franchise fees and an
increase in Vcom placement fee income as a result of the
installation of additional kiosks over the prior-year six-
month period. See "Liquidity and Capital Resources."

FRANCHISEE GROSS PROFIT EXPENSE

Franchisee gross profit expense for the six months ended
June 30, 2003, was $377.8 million, an increase of $23.9
million, or 6.8%, from $353.9 million for the same period in
2002. The increase is due to higher per-store gross profit,
which resulted from increased sales at franchised stores as
well as an increase in the number of stores operated by
franchisees.




15

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

The primary components of OSG&A are store expenses,
occupancy (including depreciation) and corporate expenses.
OSG&A for the six months ended June 30, 2003, was $979.3
million, an increase of $42.3 million, or 4.5%, from $937.0
million for the same period in 2002. The primary drivers of
the increase were higher occupancy expenses from new store
openings, compensation and benefits, and credit card
processing fees, partially offset by a currency conversion
gain.

The ratio of OSG&A to revenues decreased to 18.3% for the
six months ended June 30, 2003 from 19.6% for the same period
in 2002. Included in OSG&A for the six months ended June 30,
2003 was a $3.6 million gain related to life insurance proceeds
and a $3.8 million currency conversion gain. Included in OSG&A
for the same period of 2002 was a $6.9 million charge related
to severance and other expenses and a $12.8 million currency
conversion loss.

INTEREST EXPENSE, NET

Net interest expense for the six months ended June 30,
2003, was $32.8 million, an increase of $630,000, or 2.0%, from
$32.2 million for the same period in 2002. The slight increase
is primarily due to an increase in capital lease commitments
during the first six months of 2003 compared to the same period
a year ago. See "Liquidity and Capital Resources."

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 six months ended June 30, 2003,
was $28.5 million compared to $22.2 million for the same period
in 2002. Our effective tax rate was 38.0% for the six months
ended June 30, 2003 compared to 40.0% for the six months ended
June 30, 2002.

EARNINGS FROM CONTINUING OPERATIONS

For the six months ended June 30, 2003, our earnings from
continuing operations before cumulative effect of accounting
change was $46.4 million ($0.41 per diluted share), compared to
$33.3 million ($0.30 per diluted share) for the same period in
2002.

DISCONTINUED OPERATIONS

Discontinued operations for the six months ended June
30, 2003, resulted in a loss of $2.2 million (net of $1.3
million tax benefit) compared to a loss of $10.3 million (net
of $6.9 million tax benefit) for the same period in 2002.
These stores had total revenues of $23.3 million and $82.1
million and pretax losses of $3.5 million and $17.2 million
for the six months ended June 30, 2003 and 2002,
respectively. Included in the pretax loss for the six
months ended June 30, 2003 is a loss on disposal of $11.6
million. The loss on disposal represents write-downs of
property and equipment to net realizable value and
anticipated future rent and other expenses in excess of
related estimated sublease income in connection with the
store closings.




16


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 which relates to the accounting for costs associated
with future removal of underground gasoline storage tanks.

NET EARNINGS (LOSS)

Net earnings for the six months ended June 30, 2003, were
$44.2 million ($0.39 per diluted share), compared to a net loss
of $5.2 million ($0.00 per diluted share) for the same period
in 2002.

LIQUIDITY AND CAPITAL RESOURCES

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

* Cash flows generated from our operating activities;
* A $650 million commercial paper facility, guaranteed
by Ito-Yokado Co., Ltd.;
* 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 2003 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.

We expect capital expenditures for 2003, excluding lease
commitments, will be between $335 million and $365 million.
Our new capital lease commitments for the first six months of
2003 were $43.6 million compared to $19.2 million for the same
period in 2002. For the six months ended June 30, 2003, our
capital expenditures and capital lease commitments were
primarily related to developing new stores, replacing store
equipment and information technology. We opened 35 stores in
the first six months of 2003 and expect to open approximately
100 stores during the full year 2003. Therefore, we expect
capital expenditures to increase in the second half of 2003.

In January 2003, we entered into a note purchase
agreement with SEJ that authorizes the issuance and sale of
up to $400 million aggregate principal amount of Senior
Subordinated Notes due January 27, 2010 ("SEJ Notes"), which
we issued and SEJ purchased in multiple tranches. Interest
on the SEJ Notes was calculated for each tranche on its
issuance date and was set by a formula tied to the United
States Treasury Rate and Japanese government bond rates. The
SEJ Notes are subordinate to all obligations outstanding
under our revolving credit facility. On January 10, 2003, we
received $100 million from SEJ under the note purchase
agreement; the interest rate on this tranche is 3.41%. On
July 9, 2003, we received the remaining $300 million from SEJ
under the note purchase agreement in three equal payments of
$100 million; the interest rate on these tranches is stated
at 3.01%, 3.34% and 3.71% respectively.

In July 2003, we used a portion of the proceeds of the
note purchase agreement to retire $239.3 million principal
amount of our 5% First Priority Senior Subordinated
Debentures due 2003, $111.4 million principal amount of our
41/2% Second Priority Senior Subordinated Debentures (Series A)
due 2004 and $18.5 million principal amount of our 4% Second
Priority Senior Subordinated Debentures (Series B) due 2004.
As a result of including the SFAS No. 15 interest in the
carrying amount of the retired debt, we will recognize a
pretax gain of approximately $10.0 million in the third
quarter of 2003 in OSG&A.





17


As a result of the retirement of the senior
subordinated debentures, interest expense will increase in
2003 by approximately $8.0 million (approximately $14.0
million on an annual basis) because during the period they
were outstanding, we did not recognize interest expense on
these debentures. See - Comparison of Three Months Ended
June 30, 2003 to Three Months Ended June 30, 2002 - Interest
Expense, Net and Note 5 to the Notes to the condensed
consolidated financial statements.

VCOM

We announced plans in the third quarter of 2002 to
expand our rollout of Vcom to 1,000 stores, adding to our
original Vcom pilot program in Texas and Florida. As of
June 30, 2003, this expanded rollout was virtually complete.
We funded the $55 million capital investment
needed for the Vcom rollout primarily by a capital lease
program. We estimate that we will need approximately $110
million by year-end to fund check-cashing and ATM transaction
disbursements to consumers. We are funding this requirement
through our commercial paper program.

In exchange for our granting strategic partners
exclusive rights to offer their services or products on our
Vcom kiosks, the partners will pay us placement fees, a
percentage of the transaction fees and, in certain
circumstances, expense reimbursement. Placement fee
commitments for the 1,000 units total approximately $150
million.

CASH FLOWS FROM OPERATING ACTIVITIES

Net cash provided by operating activities for the six
months ended June 30, 2003, was $192.7 million compared to
$249.3 million for the six months ended June 30, 2002. We
attribute this decrease to changes in working capital items,
primarily as a result of timing of the funding for money
orders, the timing of the receipt of vendor allowances and
other receivables, the timing of payment of merchandise and
gasoline payables and decreases in employee benefits
payables.

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash used in investing activities for the six
months ended June 30, 2003, was $119.9 million, a decrease of
$124.5 million, or 50.9%, from $244.4 million for the six
months ended June 30, 2002. The primary driver of the
decrease was a $107.5 million decrease in capital
expenditures to $117.8 million for the six months ended June
30, 2003, from $225.3 million for the same period in 2002.

CASH FLOWS FROM FINANCING ACTIVITIES

Net cash used in financing activities was $10.2
million for the six months ended June 30, 2003, an increase
of $5.8 million from $4.4 million for the six months ended
June 30, 2002. Net payments under commercial paper and
revolving credit facilities for the six months ended June 30,
2003, totaled $94.7 million, compared to net proceeds of
$26.6 million for the same period in 2002. The $100 million
in proceeds from issuance of long-term debt in 2003 resulted
from the borrowing under the $400 million SEJ Notes, referred
to above. See also Note 5 to the notes to the condensed
consolidated financial statements.



18


OTHER ISSUES

ENVIRONMENTAL

At June 30, 2003, 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 $37.5 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, 2003, will be incurred within the next five to six
years. The estimated liability could change within the near
future for several reasons, including revisions to or the
creation of governmental requirements, existing remediation
projects become fully defined and revised cost-to-closure
estimates become available and unplanned future failures of
underground gasoline storage tank systems.

Under state reimbursement programs, we are eligible to
be reimbursed for a portion of remediation costs previously
incurred. At June 30, 2003, we had recorded a net receivable
of $60.2 million for the estimated state reimbursements, of
which $34.8 million relates to remediation costs incurred in
the State of 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. As a result of these
assessments, the recorded receivable amounts at June 30,
2003, are net of allowances of $11.0 million. The estimated
future state reimbursement amounts could change within the
near future as governmental requirements and state
reimbursement programs continue to be revised or extended.
The California program separates claims into four classes (A,
B, C and D). Our claims are in class D. Reimbursement
amounts related to the California program could be impacted
by the current trend of the program to appropriate more funds
to classes A, B and C, leaving our claims as part of a
growing backlog of class D claims.

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 three 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 eight 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 3.5%. Thus, in addition to
the allowance set forth in the preceding paragraph, the
recorded receivable amount is also net of a discount of
$8.0 million.

Any revisions to our estimated future remediation
expenditures and related state reimbursement amounts could
have a material impact on our operations and financial
position.



19

NEW ACCOUNTING STANDARDS

In April 2003, the Financial Accounting Standards Board
("FASB") issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149
amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133.
SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, for hedging relationships
designated after June 30, 2003, and to certain preexisting
contracts. We will adopt the provisions of SFAS No. 149 on a
prospective basis for any contracts entered into after
June 30, 2003. We do not expect that the statement will have
a material impact on our consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of
both Liabilities and Equity." SFAS No. 150 establishes
standards for classifying and measuring as liabilities
certain financial instruments that embody obligations of the
issuer and have characteristics of both liabilities and
equity. The provisions of SFAS No. 150 are effective for all
financial instruments created or modified after May 31, 2003,
and otherwise shall be effective at the beginning of the
first interim period beginning after June 15, 2003. We will
adopt the provisions of SFAS No. 150 as of July 1, 2003; we
do not expect that the statement will have a material impact
on our consolidated financial statements.

FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities - an Interpretation of ARB No.
51," was issued in January 2003. The Interpretation
addresses consolidation of variable interest entities
("VIEs") to which the usual condition for consolidation
described in Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," does not apply because
the VIEs have no voting interests or otherwise are not
subject to control through ownership of voting interests. It
requires existing unconsolidated VIEs to be consolidated by
their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. The
provisions of the Interpretation are effective immediately
for VIEs created after January 31, 2003, and to VIEs in which
an entity obtains an interest after that date. An entity
with a variable interest in a VIE created before February 1,
2003, must apply the provisions no later than the first
reporting period beginning after June 15, 2003. The
Interpretation may be applied prospectively with a
cumulative-effect adjustment as of the date on which it is
first applied or by restating previously issued financial
statements.

We expect to include the assets, liabilities,
noncontrolling interests and results of activities of certain
trusts in its consolidated financial statements effective
July 1, 2003. The trusts, which were funded by a group of
senior lenders, were established in connection with two lease
facilities that have provided us with $191.0 million in off-
balance sheet financing as of June 30, 2003, for constructing
new stores and acquiring operating convenience stores from
unaffiliated third parties. The trusts acquired land and
undertook construction projects for which we were the
construction agent or acquired operating convenience stores
from third parties. We estimate that this will result in an
after-tax, one-time cumulative effect charge of approximately
$9 million to $12 million in the third quarter of 2003. On
an annual basis, we expect the after-tax impact on earnings
from continuing operations to be a charge of approximately $5
million to $7 million.




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK

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

ITEM 4. CONTROLS AND PROCEDURES.

We maintain a system of controls and procedures
designed to provide reasonable assurance as to the
reliability of the financial statements and other disclosures
included in this report, as well as to safeguard assets from
unauthorized use or disposition. Within 90 days prior to the
filing of this report, our Chief Executive Officer and Chief
Financial Officer have evaluated the effectiveness of the
design and operation of our disclosure controls and
procedures with the assistance and participation of other
members of management. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures are effective for
gathering, analyzing and disclosing the information we are
required to disclose in the reports we file under the
Securities Exchange Act of 1934 within the time periods
specified in the SEC's rules and forms. There have been no
significant changes in our internal controls or in other
factors which could significantly affect internal controls
subsequent to the date we carried out our evaluation.

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 23, 2003, we held our annual meeting of
shareholders. Each of the eleven nominated directors was
elected without contest. In addition, our shareholders
ratified the approval of PricewaterhouseCoopers LLP to be our
independent auditors for 2003, approved an amendment to our
1995 Stock Incentive Plan to increase the pool of shares
available under the plan by 3 million and approved an
amendment to our Stock Compensation Plan for Non-Employee
Directors authorizing the award of grants of restricted stock
and stock options to our independent directors.





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

NOMINEE FOR WITHHELD

Toshifumi Suzuki 90,502,830 1,782,448
Yoshitami Arai 91,536,235 749,043
Masaaki Asakura 90,940,085 1,345,193
Timothy N. Ashida 90,464,144 1,821,134
Jay W. Chai 90,872,517 1,412,761
Gary J. Fernandes 90,865,319 1,419,959
Masaaki Kamata 90,939,676 1,345,602
James W. Keyes 90,433,610 1,851,668
Kazuo Otsuka 90,444,733 1,840,545
Lewis E. Platt 90,877,656 1,407,622
Nobutake Sato 90,940,095 1,345,183


(b) The votes for, against, abstaining and broker
non-votes in connection with the ratification of
the appointment of PricewaterhouseCoopers LLP to
be our independent auditors for 2003 were as
follows:

91,891,638 shares were voted for; 374,204
shares were voted against; 19,436 shares
abstained from voting; and no broker non-votes
were received.

(c) The votes for, against, abstaining and broker
non-votes in connection with the approval of
a proposed amendment to our 1995 Stock
Incentive Plan were as follows:

91,243,284 shares were voted for; 1,015,580
shares were voted against; 26.414 shares
abstained from voting; and no broker non-votes
were received.

(d) The votes for, against, abstaining and broker non-
votes in connection with the approval of a proposed
amendment to our Stock Compensation Plan for Non-
Employee Directors were as follows:

91,390,658 shares were voted for; 868,199
shares were voted against; 26,421 shares
abstained from voting; and no broker non-votes
were received.



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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 31(1) - Certification by Chief
Executive Officer Required by Section 302 of
the Sarbanes-Oxley Act of 2002.

3. Exhibit 31(2) - Certification by Chief
Financial Officer Required by Section 302 of
the Sarbanes-Oxley Act of 2002.

4. Exhibit 32(1) - Certification by Chief
Executive Officer Required by Section 906 of
the Sarbanes-Oxley Act of 2002.

5. Exhibit (32)(2) - Certification by Chief
Financial Officer Required by Section 906 of
the Sarbanes-Oxley Act of 2002.


(b) 8-K Reports:

During the quarter, we filed the following
report on Form 8-K:

Report on Form 8-K dated April 22, 2003 (date
of earliest event reported), furnished on
April 22, 2003, with respect to our earnings
release for the three months ended March 31,
2003.





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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 6, 2003 /s/ James W. Keyes
--------------------------------
(Officer)
James W. Keyes
President and Chief Executive Officer


Date: August 6, 2003 /s/ Edward W. Moneypenny
--------------------------------
(Principal Financial Officer)
Edward W. Moneypenny
Senior Vice President
and Chief Financial Officer





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