Stock-based employee compensation plans – As of February 29, 2004, the Company has four stock-based employee compensation plans, which are described more fully in Note 16. The Company applies the intrinsic value method described in Accounting Principles Board Opinion No. 25 (“APB No. 25”), “Accounting for Stock Issued to Employees,” and related interpretations in accounting for these plans. In accordance with APB No. 25, the compensation cost for stock options is recognized in income based on the excess, if any, of the quoted market price of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock. The Company utilizes the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 (“SFAS No. 123”), “Accounting for Stock-Based Compensation,” as amended. Options granted under the Company’s plans have an exercise price equal to the market value of the underlying common stock on the date of grant; therefore, no incremental compensation expense has been recognized for grants made to employees under the Company’s stock option plans. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock- based employee compensation. As reported in the Company’s Annual Report on Form 10-K for the year ended February 28, 2003, pro forma net income for the year ended February 28, 2002, was adjusted from the amount originally reported to properly reflect the increased expense, net of income tax benefits, primarily attributable to the accelerated vesting of certain options during Fiscal 2002. The accelerated vest- ing was attributable to the attainment of preexisting performance rights set forth in the stock option grants. The impact of the accel- erated vesting was not reflected in the Fiscal 2002 amount originally reported. The pro forma net income amount reflected above for Fiscal 2002 was reduced by $12.9 million for this matter. Basic pro forma earnings per common share and diluted pro forma earn- ings per common share for Fiscal 2002 were reduced by $0.15 and $0.16, respectively. Effective March 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143 (“SFAS No. 143”), “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses financial accounting and reporting for obligations associ- ated with the retirement of tangible long-lived assets and the associated retirement costs. The adoption of SFAS No. 143 did not have a material impact on the Company’s consolidated financial statements. Effective March 1, 2003, the Company completed its adoption of Statement of Financial Accounting Standards No. 145 (“SFAS No. 145”), “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds Statement of Financial Accounting Standards No. 4 (“SFAS No. 4”), “Reporting Gains and Losses from Extinguishment of Debt,” Statement of Financial Accounting Standards No. 44, “Accounting for Intangible Assets of Motor Carriers,” and Statement of Financial Accounting Standards No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” In addition, SFAS No. 145 amends Statement of Financial Accounting Standards No. 13, “Accounting for Leases,” to eliminate an inconsistency between required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Lastly, SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The adoption of the provisions rescinding SFAS No. 4 resulted in a reclassification of the extraordinary loss relat- ed to the extinguishment of debt recorded in the fourth quarter of Fiscal 2002 ($1.6 million, net of income taxes), by increasing sell- ing, general and administrative expenses ($2.6 million) and decreasing the provision for income taxes ($1.0 million). The adoption of the remaining provisions of SFAS No. 145 did not have a material impact on the Company’s consolidated financial statements. 48 2. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS: For the Years Ended February 29, February 28, February 28, 2004 2003 2002 (in thousands, except per share data) Net income, as reported $ 220,414 $ 203,306 $ 136,421 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 160 248 153 Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (16,582) (13,695) (25,609) Pro forma net income $ 203,992 $ 189,859 $ 110,965 Earnings per common share: Basic—as reported $ 2.13 $ 2.26 $ 1.60 Basic—pro forma $ 1.97 $ 2.11 $ 1.30 Diluted—as reported $ 2.06 $ 2.19 $ 1.55 Diluted—pro forma $ 1.90 $ 2.03 $ 1.25