1.
Summary of Significant Accounting Policies--(continued)
2003 will not have a material impact on the Company's financial statements, since goodwill
amortization for fiscal 2002 totaled $120,400.
Income Taxes
Deferred income taxes arise from differences in the timing of income and expense recognition
for financial and income tax reporting purposes. Statement of Financial Accounting Standards
No. 109 requires the Company to compute deferred income taxes on such differences using
enacted tax rates in effect in the years in which the differences are expected to reverse.
Valuation allowances are required to be established to reduce deferred tax assets to the amounts
more likely than not to be realized.
Per Share Data
Earnings per share are computed and reported on a dual presentation basis. Basic earnings per
share are computed by dividing net income by the weighted average number of outstanding
shares for the period. Diluted earnings per share are computed by dividing net income by the
sum of the weighted average number of outstanding shares and share equivalents computed.
The Company's common share equivalents consist of stock options issued to key employees
and Directors.
Basic and diluted earnings(loss) per share were calculated as follows (amounts in thousands):
Fiscal Years Ended
February 23,
2002
February 24,
2001
February 26,
2000
Net income (loss)--Basic and Diluted . . . . . . . . .
$
(9,089)
$
(1,378)
$
6,289
Weighted average number of outstanding shares
for Basic EPS . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,389
8,740
9,128
Add: incremental shares from stock option
exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
--
--
2
Weighted average number of outstanding
shares for Diluted EPS . . . . . . . . . . . . . . . . . . . .
8,389
8,740
9,130
In fiscal 2002, 2001, and 2000, options on 1,736,000, 1,427,000, and 1,097,000 shares of common
stock, respectively, were not included in the calculation of weighted average shares for diluted
EPS because their effects were antidilutive.
Fair Value of Financial Instruments
The fair value of the Company's financial instruments does not materially differ from their
carrying value.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
L I L L I A N V E R N O N
