Petsmart 2000 Annual Report Download - page 52

proceeds was received by the Company as of the date of the transaction, while the remaining $1,213,000 was
received in March of 2000. In connection with the Transaction, the Company recorded a net loss of
$31,062,000, including $23,605,000 related to the excess of net book value over cash consideration and
transaction fees of approximately $7,457,000. Additionally, the Company has reflected the subsidiary’ s
$14,607,000 loss from operations, excluding the related tax effects, for fiscal year 1999 through the date of the
Transaction, in loss on disposal of subsidiary in the accompanying consolidated statement of operations.
NOTE 5 — MERGER AND RESTRUCTURING COSTS
During the fourth quarter of fiscal 1996, the Company acquired all of the outstanding equity interests of Pet
City Holdings Plc (“Pet City” or “UK subsidiary”), a pet food and supplies superstore retailer in the United
Kingdom. In connection with this transaction, the Company recorded merger and business integration
F-13
PETSMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
charges during fiscal 1997 of approximately $13,600,000, consisting of costs associated with reformatting,
refixturing, and remerchandising the acquired superstores to the format consistent with that of a PETsMART
superstore.
In the second fiscal quarter of 1997, the Company incurred charges of approximately $61,000,000 of which
approximately $44,900,000 was recorded as a separate restructuring charge during the quarter. Approximately
$30,000,000 was related to the costs of closing or relocating 33 stores, of which 31 were former acquired
stores, approximately $8,500,000 was related to the costs of discontinuing the Discovery Center department in
all superstores and the write- down or write- off of related fixtures, and approximately $4,100,000 was related to
the C ompany’ s previous acquisitions. The remaining charges of $2,300,000 included approximately $1,000,000
of anticipated costs associated with the Company’ s decision to complete the consolidation of distribution facilities
and approximately $1,300,000 represented the write-off of the Company’ s investment in certain entities
accounted for under the cost method which were impaired as a result of the Company’ s decision to exit certain
departments within Company superstores.
Of the remaining $16,100,000, approximately $9,400,000 of related charges were recorded as cost of
goods sold, $3,300,000 were recorded as store operating expenses, and $3,400,000 were included in general
and administrative expenses. The $16,100,000 of other one-time expenses were comprised of the write-down
or write-off of certain impaired assets, including discontinued Discovery Center merchandise, from cost to net
realizable value, reserves for litigation and other matters. The $3,300,000 of other expenses were reflected as a
component of store operating expenses and the $3,400,000 of one-time expenses were general and
administrative expenses consisting primarily of a change in estimated self-insurance costs due to adverse loss
developments in the Company’ s worker’ s compensation experience, expenses related to the preliminary stages
of a consulting project for the new management information system, certain costs of several litigation matters, as
well as expenses related to other miscellaneous matters.
During the fourth quarter of fiscal 1998, a $1,808,000 benefit was recognized as a change in estimate as a
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