Petsmart 2000 Annual Report Download - page 45

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The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The C ompany utilizes a cash management system under which a bank overdraft balance exists for the
Company’ s primary disbursement accounts. This overdraft represents uncleared checks in excess of cash
balances in bank accounts. The Company’ s funds are transferred on an as-needed basis to pay for clearing
checks. At January 30, 2000 and January 31, 1999, bank overdrafts of approximately $50,100,000 and
$63,200,000, respectively, were included in accounts payable and bank overdraft in the accompanying
consolidated balance sheets. The Company considers any liquid investments with an original maturity of three
months or less to be cash equivalents.
Merchandise Inventories and Cost of Sales
Merchandise inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-
out method based on moving average costs and includes certain general, administrative and distribution costs
relating to the processing of merchandise.
Total general, administrative and distribution costs charged to inventory during fiscal years 1999, 1998, and
1997 were $85,734,000, $56,764,000, and $52,255,000, respectively. General, administrative and distribu-
F-8
PETSMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
tion costs remaining in inventory at January 30, 2000 and January 31, 1999 were $21,744,000 and
$16,693,000, respectively.
Vendor Rebates and Promotions
The Company receives income from its merchandise suppliers in the form of rebates and promotions.
Agreements are made with each individual supplier, and income is earned as buying levels are met and/or
cooperative advertising is placed. Rebate income is recorded as a reduction of cost of sales and cooperative
promotional income is recorded as a reduction in store operating expenses. The uncollected amounts of vendor
rebate and promotional income remaining in accounts receivable at January 30, 2000 and January 31, 1999
were approximately $22,733,000 and $19,229,000, respectively.
Prope rty and Equipment
Property and equipment is recorded at cost less accumulated depreciation. Depreciation is provided on
buildings, furniture, fixtures and equipment, and computer software using the straight-line method over the
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