Abercrombie &Fitch USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL The fair value of each option was estimated using the Black- Scholes option-pricing model, which are included in the pro forma results above. For purposes of the valuation the following weighted-average assumptions were used: no expected dividends in 2002, 2001 and 2000; price volatility of 53% in 2002, 54% in 2001 and 50% in 2000; risk-free interest rates of 4.3%, 4.7% and 6.2% in 2002, 2001 and 2000, respectively; assumed forfeiture rates of 15% in 2002 and 2001 and 10% in 2000; and expected lives of 5 years in 2002, 2001 and 2000. Weighted–Average Shares Outstanding (thousands): EARNINGS PER SHARE Net income per share is computed in accordance with SFAS No. 128, “Earnings Per Share.” Net income per basic share is computed based on the weighted–aver- age number of outstanding shares of common stock. Net income per diluted share includes the weighted–average effect of dilutive stock options and restricted shares. Options to purchase 9,218,000, 5,630,000 and 9,100,000 shares of Class A Common Stock were outstanding at year-end 2002, 2001 and 2000, respectively, but were not included in the computation of net income per diluted share because the options’ exer- cise prices were greater than the average market price of the underlying shares.  STATEMENTS The preparation of financial statements in con- formity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Since actual results may differ from those estimates, the Company revises its estimates and assumptions as new information becomes available. RECLASSIFICATIONS Certain amounts have been reclassified to conform with current year presentation. The amounts reclas- sified did not have an effect on the Company’s results of operations or shareholders’ equity. 3. ISSUANCES OF ACCOUNTING STANDARDS The Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets.” The standard was effective February 3, 2002 for the Company. SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition. It also addresses how good- will and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The adoption of SFAS No. 142 did not have an impact on the Company’s results of operations or its financial position in 2002. SFAS No. 143, “Accounting for Asset Retirement Obligations,” was effective February 2, 2003 for the Company. The standard requires entities to record the fair value of a liability for an asset retire- ment obligation in the period in which it is a cost by increasing the carrying amount of the related long-lived asset. Over time, the lia- bility is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related obligation for its recorded amount or the entity incurs a gain or loss upon settle- ment. Because costs associated with exiting leased properties at the end of lease terms are minimal, management anticipates that the adoption of SFAS No. 143 will not have a significant effect on the Company’s results of operations or its financial position. SFAS No.144, “Accounting for Impairment or Disposal of Long-Lived Assets,” was effective February 3, 2002 for the Company. The standard addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The adoption of SFAS No. 144 did not have an impact on the Company’s results of operations or its financial position in 2002. In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including indirect guarantees of indebtedness of others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34,” that requires recognition of a liability (at fair value) for guarantee contracts that have any of the following characteristics: 20 2002 2001 2000 Shares of common stock issued 103,300 103,300 103,300 Treasury shares (5,128) (4,198) (3,239) Basic shares 98,171 99,102 100,061 Dilutive effect of options and restricted shares 2,460 3,422 2,095 Diluted shares 100,631 102,524 102,156 Contracts that contingently require the guarantor to make  payments based on changes in an underlying, as defined by SFAS No. 133; Contracts that contingently require the guarantor to make payments based on another entity’s failure to perform under  an obligating agreement; Indemnification agreements;