Petsmart 2011 Annual Report Download - page 60

PetSmart, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements — (Continued)
Net sales in the United States and Puerto Rico were $5.8 billion, $5.4 billion and $5.1 billion for 2011, 2010
and 2009, respectively. Net sales in Canada, denominated in United States dollars, were $0.3 billion, $0.3 billion
and $0.2 billion for 2011, 2010 and 2009, respectively. Substantially all our long-lived assets are located in the
United States.
Financial Instruments
Our financial instruments consist primarily of cash and cash equivalents, restricted cash, receivables and
accounts payable. These balances, as presented in the consolidated financial statements at January 29, 2012, and
January 30, 2011, approximate fair value because of the short-term nature. We have short-term investments in
municipal bonds, which are recorded at fair value using quoted prices in active markets for identical assets or
liabilities as detailed in Note 5. We also have investments in negotiable certificates of deposit, which are carried
at their amortized cost basis as detailed in Note 5. From time to time, we have entered into foreign exchange
currency contracts, which are not designated as hedges and are recorded at fair value using quoted prices for
similar assets or liabilities in active markets, as detailed in Note 3.
Cash and Cash Equivalents
We consider any liquid investments with a maturity of three months or less at purchase to be cash equiv-
alents. Included in cash and cash equivalents are credit and debit card receivables from banks, which typically
settle within five business days, of $52.3 million and $48.9 million as of January 29, 2012, and January 30, 2011,
respectively.
Under our cash management system, a bank overdraft balance exists for our primary disbursement accounts.
This overdraft represents uncleared checks in excess of cash balances in the related bank accounts. Our funds are
transferred on an as-needed basis to pay for clearing checks. As of January 29, 2012, and January 30, 2011, bank
overdrafts of $53.8 million and $32.5 million, respectively, were included in accounts payable and bank overdraft
in the Consolidated Balance Sheets.
Restricted Cash
We are required to maintain a cash deposit with the lenders of our stand-alone letter of credit facility equal
to the amount of the outstanding letters of credit, or we may use other approved investments as collateral. If we
use other approved investments as collateral, we must have an amount on deposit which, when multiplied by the
advance rate of 85%, is equal to the amount of the outstanding letters of credit under the stand-alone letter of
credit facility.
Vendor Rebates and Cooperative Advertising Incentives
We receive vendor allowances, in the form of purchase rebates and cooperative advertising incentives, from
agreements made with certain merchandise suppliers. Rebate incentives are initially deferred as a reduction of the
cost of inventory purchased and then recognized as a reduction of cost of sales as the related inventory is sold.
Cooperative advertising incentives are recorded as a reduction of operating, general and administrative expenses
in the Consolidated Statements of Income and Comprehensive Income. Unearned purchase rebates recorded as a
reduction of inventory, and rebate and cooperative advertising incentives remaining in receivables in the Con-
solidated Balance Sheets were not material as of January 29, 2012, and January 30, 2011.
Merchandise Inventories and Valuation Reserves
Merchandise inventories represent finished goods and are recorded at the lower of cost or market. Cost is
determined by the moving average cost method and includes inbound freight, as well as certain procurement and
distribution costs related to the processing of merchandise.
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