Petsmart 2007 Annual Report Download - page 74

Canadian cases have not been consolidated. The Blaszkowski case was not consolidated. On October 12, 2007, the
defense group filed a Motion to Dismiss in the Blaszkowski case. The court has not issued a ruling on this motion;
however, on January 25, 2008, the court granted the plaintiffs’ motion to file an amended complaint. The defense
group expects to file a new Motion to Dismiss in the Blaszkowski case after the amended complaint has been filed.
We believe specific vendors produced the animal food identified in these lawsuits. We have tendered the
defense of the lawsuits and responsibility for the claims to the manufacturer(s) and distributor(s) of the animal food
at issue and intend to vigorously defend these actions. We cannot reasonably estimate the possible loss or range of
loss, if any, that may result from these cases.
We are involved in the defense of various other legal proceedings that we do not believe are material to our
financial statements.
Note 12 — Commitments and Contingencies
Advertising Purchase Commitments
We have advertising commitments of approximately $17.5 million in 2008.
Product Purchase Commitments
On May 31, 2007, we entered into a three-year product purchase agreement with a vendor, a portion of which is
denominated in Canadian dollars. Based on the terms of the agreement, we estimate the purchase obligation to be
$37.3 million, $41.8 million and $17.7 million for 2008, 2009 and 2010, respectively. If we do not purchase the
minimum requirements in a year, the shortfall in purchases is carried to the following year. If our purchases exceed
the minimums required, the surplus purchases are credited against the following year’s requirement.
Note 13 — Stock Incentive Plans
We have several stock incentive plans, including plans for stock options, employee stock purchases and
restricted stock. Shares issued under our stock incentive plans are issued from new shares, rather than treasury stock.
During 2006, our stockholders approved the 2006 Equity Incentive Plan which combined the remaining shares from
the 2003 Equity Incentive Plan and the 1997 Equity Incentive Plan and included an additional 2.5 million shares of
common stock authorized for issuance. We also have stock options outstanding under our 1996 Non-Employee
Directors Equity Plan, which expired on May 11, 2002. No further stock options may be granted under the 1996
Non-Employee Directors Equity Plan.
At February 3, 2008, stock option grants representing 6.3 million shares of common stock were outstanding
under all of the stock option plans, and 8.4 million of additional stock options or awards may be issued under the
2006 Equity Incentive Plan. These grants are made to employees, including officers and our directors, at the fair
market value on the date of the grant.
F-24
PetSmart, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)