Petsmart 2005 Annual Report Download - page 82

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Minimum payments have not been reduced by sublease income. Future sublease income for operating and
capital leases as of January 29, 2006 was as follows (in thousands):
Sublease
Income
2006 ................................................................ $ 4,815
2007 ................................................................ 4,735
2008 ................................................................ 4,638
2009 ................................................................ 4,074
2010 ................................................................ 3,482
Thereafter ............................................................ 16,968
$38,712
Note 12 — Litigation and Settlements
Litigation
The Company is involved in the defense of various legal proceedings that it does not believe are material to its
financial position or results of operations.
The Company recognized gains of $8,500,000, net of legal costs, and $3,600,000 from legal settlements in
fiscal 2005 and 2004, respectively. In addition, the Company recognized a gain of $2,750,000 in fiscal 2005 related
to a Visa/Mastercard antitrust litigation settlement. These gains were recorded in operating, general and admin-
istrative expenses in the Consolidated Statements of Operations.
Note 13 — Commitments and Contingencies
Guarantees
The following is a summary of agreements that the Company has determined are within the scope of FIN 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebt-
edness of Others an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB interpretation
No. 34,” which are specifically grandfathered because the guarantees were in effect prior to December 31, 2002.
Accordingly, the Company has no liabilities recorded for these agreements as of January 29, 2006, except as noted
below.
As permitted under Delaware law and the Company’s bylaws and certificate of incorporation, the Company
has agreements to indemnify its officers and directors for certain events or occurrences while the officer or director
is, or was, serving at the request of the Company. The term of the indemnification period is for the officer’s or
director’s lifetime. The maximum potential amount of future payments the Company could be required to make
under these indemnification agreements is unlimited; however, the Company has a directors’ and officers’
insurance policy that may enable it to recover a portion of any future amounts paid. Assuming the applicability
of coverage and the willingness of the insurer to assume coverage and subject to certain retention, loss limits and
other policy provisions, the Company believes the estimated fair value of this indemnification obligation is not
material. However, no assurances can be given that the insurers will not attempt to dispute the validity, applicability
or amount of coverage without expensive and time-consuming litigation against the insurers.
As of January 29, 2006, the Company had letters of credit for guarantees of $39,659,000 for insurance policies,
$2,000,000 for capital lease agreements and $22,000 for utilities. The liabilities associated with the insurance
policies, capital leases and utilities were recorded in the consolidated balance sheet as of January 29, 2006.
F-23
PetSmart, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)