Petsmart 2007 Annual Report Download - page 79

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We also recognized a charge to income to reduce the remaining equine inventory to the lower of cost or market
value and recorded operating expenses related to the exit of the equine product line, remerchandising of the store
space previously used for equine inventory and severance costs. The net effect of the gain on sale of the assets,
inventory valuation adjustments, accelerated depreciation, severance and operating expenses was an after tax loss of
$9.8 million for 2007. The inventory valuation adjustments and accelerated depreciation of certain assets were
recorded in cost of sales, and the operating expenses, severance and accelerated depreciation on certain assets were
recorded in operating, general and administrative expenses in the Consolidated Statements of Operations and
Comprehensive Income.
Note 18 — Selected Quarterly Financial Data (Unaudited)
Summarized quarterly financial information for 2007 and 2006 is as follows:
Year Ended February 3, 2008 (53 weeks)
First
Quarter(1,2)
Second
Quarter(1,2)
Third
Quarter(1,2)
Fourth
Quarter(1,2,3)
(13 weeks) (13 weeks) (14 weeks)(13 weeks)
(In thousands, except per share data)
Net sales ......................... $1,111,625 $1,116,681 $1,115,916 $1,328,434
Gross profit ....................... $ 338,479 $ 346,323 $ 331,529 $ 420,490
Operating income ................... $ 76,585 $ 84,736 $ 59,609 $ 130,583
Income before income tax expense and
equity in income from investee ....... $ 163,123 $ 76,004 $ 46,863 $ 116,203
Net income ....................... $ 106,707 $ 47,125 $ 29,452 $ 75,400
Basic earning per common share ........ $ 0.80 $ 0.36 $ 0.23 $ 0.60
Diluted earning per common share ...... $ 0.78 $ 0.35 $ 0.23 $ 0.59
Dividends declared per common share.... $ 0.03 $ 0.03 $ 0.03 $ 0.03
Weighted average shares outstanding:
Basic .......................... 133,316 132,262 127,431 126,134
Diluted ......................... 136,672 135,514 130,528 128,867
(1) The first quarter of 2007 included a pre-tax gain of $95.4 million, which is reflected in income before income
tax expense and equity in income from investee and an after-tax gain of $64.3 million which is reflected in net
income for the sale of non-voting shares in MMIH. During the second quarter of 2007, a new agreement with
MMIH was finalized which impacted license fees and utility reimbursements reflected in gross profit.
(2) Our decision to exit our equine product line during the first quarter of 2007 impacted operating income for the
full year as follows: $6.3 million in the first quarter, $3.6 million in the second quarter, $4.7 million in the third
quarter, and $1.4 million in the fourth quarter.
(3) The estimated impact of the additional week in the fourth quarter of 2007 was: net sales, $89.7 million; gross
profit, $34.4 million; operating income, $16.0 million; income before income tax expense and equity in income
from investee, $16.0 million; and net income, $9.8 million.
F-29
PetSmart, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)