Out in the marketplace, we accelerated the rollout of several exciting marketing initiatives as we...

• Expanded the launch of our Preferred loyalty card into Oregon, Washington, Northern California, Utah, Texas, Idaho and Florida.
• Expanded our neighborhood marketing focus by launching Kosher, Organic, Asian, and Hispanic platforms to better serve the diverse needs of our consumers
• Launched a new, aggressive pricing and promotion campaign under the banners of "Extreme Value Buys" and "Knock Down Prices."
• Completed dual-branding the Phoenix, Arizona market under the Albertsons/Osco banner.

As these exciting programs kicked in, we began to see concrete proof of their effectiveness:

• Return on invested capital improved for the first time since the American Stores Merger.
• Average shopping basket size improved across the Company as the average sale per customer trip grew 4%.
• Our "Customer First, Second to None" customer service program showed progress across the company as Customer Service Scores improved steadily on a company-wide basis.
• In Phoenix, Arizona, under the new dual-branded banner Albertsons/Osco, total market share grew and sales in drugstore categories accelerated between +10% and +130%.

Also during the year, we continued our relentless focus on cost control. By mid-year 2002, we had reached our first $250 million cost-out plateau ahead of schedule. By year end 2002, we had increased those savings to over $440 million, allowing us to stay ahead of schedule on our path to eliminate $750 million in cost by year end 2004! A new Strategic Sourcing focus was also launched to drive the cost-out mindset deeper into the organization. This ongoing expense rigor is critical to curb rising costs in our industry. In the future as our sales grow, we will leverage this strong cost control program to reinvest in the marketplace and enhance profitability.