N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
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GUESS?, Inc. and Subsidiaries
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N O T E 1 . S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S A N D P R A C T I C E S
GUESS?, Inc. (the "Company" or "GUESS?") designs, markets, distributes and licenses leading lifestyle collections of casual apparel
and accessories for men, women and children that reflect the American lifestyle and European fashions sensibilities. The Company
designs are sold in GUESS? owned stores; to a network of wholesale accounts that includes primarily better department stores, selected
specialty retailers and upscale boutiques and through the Internet. GUESS? branded products, some of which are produced under license,
are also sold internationally through a series of licensees and distributors.
Principles of Consolidation
The consolidated financial statements include the accounts of GUESS?, Inc. and its wholly-owned foreign subsidiary, GUESS? Europe,
B.V., a Netherlands corporation ("GEBV"), and its majority-owned subsidiary GUESS? Canada Corporation ("GUESS? Canada" formerly
named Strandel Inc.), a Canadian corporation. GEBV holds three wholly-owned subsidiaries: Ranche, Limited, a Hong Kong corporation
("Ranche"), GUESS? Asia, a Hong Kong corporation, and GUESS? Italia, S.r.l., an Italian corporation ("GUESS? Italia"). GUESS? holds a
60% interest in GUESS? Canada. Accordingly, all references herein to "GUESS?, Inc." include the consolidated results of the Company
and its subsidiaries. All intercompany accounts and transactions are eliminated during the consolidation process.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Investment Securities
The Company accounts for its investment securities in accordance with Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
SFAS 115 requires investments to be classified into one of three categories based on management's intent: held-to-maturity securities,
available-for-sale securities and trading securities. Held-to-maturity securities are recorded at amortized cost. Available-for-sale securities
are recorded at fair value with unrealized gains and losses reported as a separate component of stockholders' equity. Trading securities
are recorded at market value with unrealized gains and losses reported in operations. The Company accounts for its short-term investment
securities as available-for-sale.
Earnings per Share
Basic earnings per share represents net earnings divided by the weighted-average number of shares of common stock, par value $0.01
per share (the "Common Stock"), outstanding for the period. Diluted earnings per share represents net earnings divided by the weighted-
average number of shares outstanding, inclusive of the dilutive impact of Common Stock equivalents.
The reconciliation of basic to diluted weighted average shares is as follows (in thousands):
2 0 0 0
1999
1998
Weighted average shares used in basic computations
43,464
43,005
42,904
Dilutive stock options
355
361
15
Weighted average shares used in
diluted computation
43,819
43,366
42,919
Options to purchase 550,000, 467,000 and 1,036,000 shares of Common Stock at prices ranging from $17.64 to $27.31, $10.88 to $16.38
and $5.50 to $11.00 were outstanding during 2000, 1999 and 1998, respectively, but were not included in the computation of diluted
earnings per share because the options exercise prices were greater than the average market price of the shares of Common Stock.
