Abercrombie &Fitch current year’s fourth quarter. This improvement was offset some- what by a higher general, administrative and store operating expense rate. interest rates. Net interest income in 2001 and 2000 was primarily from short-term investments. FISCAL 2002  The operating income rate for the fiscal year 2002 was 19.6% versus 19.9% in fiscal year 2001. The decline was attributable to a higher general, administrative and store oper- ating expense rate due to the inability to leverage fixed costs on a comp store decrease. The increased expense rate was partially offset by a gross income rate increase. FINANCIAL CONDITION The Company's continuing growth in net income affords it financial strength and flexibility. A more detailed discussion of liquidity, capital resources and capital requirements follows. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities provides the resources to support operations, including projected growth, seasonal requirements and capital expenditures. A summary of the Company’s working capital posi- tion and capitalization follows (in thousands): FOURTH QUARTER 2001 AND FISCAL 2001  The operating income rate was 27.6% and 19.9% for the fourth quarter and fis- cal year of 2001, respectively, compared to 28.2% and 20.5% for the same periods in 2000. The decline in operating income rate in these periods was primarily due to lower gross income per- centages resulting from planned promotional strategies executed in the fourth quarter of 2001. Lower general, admin- istrative and store operating expenses, expressed as a percentage of net sales, partially offset the lower gross income rate in the fourth quarter of 2001. For the year, higher general, adminis- trative and store operating expenses, expressed as a percentage of net sales, added to the decrease in operating income rate. The Company considers the following to be measures of  liquidity and capital resources: INTEREST INCOME AND INCOME TAXES Fourth quarter and year-to-date net interest income were $1.3 and $3.8 million in 2002 as compared with net interest income of $1.2 and $5.1 million for the comparable periods in 2001. The decrease in net interest income in the year-to-date period was a result of the Company’s strategy at the beginning of 2002 to invest cash in tax-free secu- rities due to the decline in short-term market interest rates. Previously, the Company primarily invested in the commercial paper market. The tax-free investments contributed to a lower effective tax rate of 38.5% and 38.4% for the fourth quarter and year-to-date periods of 2002 as compared to 39.0% for both of 2001’s compa- rable periods. Net interest income was $1.2 million in the fourth quarter of 2001 and $5.1 million for the 2001 fiscal year compared with net interest income of $2.5 million and $7.8 million for the corre- sponding periods in 2000. The decrease in net interest income for both the quarter and the year was due to the decline in market The increase in income taxes payable in the current year was due primarily to a change in the methodology being used to make estimated tax payments throughout 2002. This methodology Accrued expenses increased in 2002 due to the following: higher incentive compensation expenses, resulting from the Company’s improved financial performance; higher store expenses and gift card liability, consistent with the increase in store openings; and higher legal expenses. Accounts payable increased in 2002 due to both the increased level of inventory and timing of payments versus 2001. Additionally, in 2002, cash was provided from increases in accounts payable and accrued expenses and income taxes payable. Net cash provided by operating activities is the Company’s pri- mary source of liquidity and has grown steadily the past three years from $151.2 million in 2000 to $233.2 million in 2001 to $293.1 million in 2002. Current year net income adjusted for depreciation and amortization was the primary source of cash. 8 2002 2001 2000 Working capital $389,686 $241,616 $146,939 Capitalization: Shareholders’ equity $749,527 $595,434 $422,700 2002 2001 2000 Current ratio (current assets divided by current liabilities) 2.84 2.48 1.94 Operating cash flow (in thousands)  $293,146 $232,202 $151,189