Petsmart 2000 Annual Report Download - page 55

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($3,830,000) in prepaid and other current assets and deferred rents and other liabilities, respectively, in the
accompanying consolidated balance sheets. As of January 31, 1999, prepaid expenses and other current assets
include a deferred income tax asset of $6,387,000. The components of the net deferred income tax asset
(liability) included in the accompanying consolidated balance sheets are as follows:
January 30, January 31,
2000 1999
(in thousands)
Deferred rents $ 5,629 $ 7,958
Reserve for clos ed stores 4,106 9,940
Depreciation (3,240) 5,700
Employee benefit expense 5,722 3,425
Inventory reserve 1,722 1,324
Los s carryforward 2,244 31,809
Capital loss carryforward 17,920 —
Inventory capitalization (5,994) (2,888)
Other items , net 1,245 912
29,354 58,180
Valuation allowance (19,610) (2,715)
Net deferred income tax asset $ 9,744 $ 55,465
The valuation allowance relates to certain C anadian net operating losses and U.S. capital loss carryforwards
as of January 30, 2000 and to certain Canadian net operating loss carryforwards as of January 31, 1999. In
assessing the realizability of the deferred tax asset, management has considered all available evidence, both
positive and negative, in order to determine whether, based on the weight of that evidence, a valuation allowance
is needed. Based on the weight of available evidence, management believes that it is more likely than not that
some portion of the deferred tax asset will not be realized.
NOTE 7 — EMPLOYEE BENEFIT PLANS
The Company has a defined contribution plan pursuant to Section 401(k) of the Internal Revenue Code (“the
401(k)”). The 401(k) covers substantially all associates that meet certain service requirements. The Company
makes annual matching contributions up to specified percentages of associates’ contributions as approved by the
Board of Directors. During each of the three years in the period ended January 30, 2000, the Company’ s
contributions to the 401(k) were $1,558,000, $1,373,000, and $765,000, respectively.
NOTE 8 — BANK CREDIT FACILITIES
At January 30, 2000, the Company had a revolving credit arrangement with a bank, as amended, expiring on
April 17, 2000, which provides for borrowings up to $60,000,000 for working capital, including a sublimit of
$35,000,000 for letters of credit, subject to a borrowing base (see Note 15). Borrowings under this arrangement
bear interest, at the Company’ s option, at the bank’ s prime rate plus 0% to 0.5%, or LIBOR plus 1.0% to
2.0%. Among other things, the credit facility contains certain restrictive covenants relating to net worth, debt to
equity ratios, capital expenditures and minimum fixed charge coverage. Under the terms of the credit facility, the
Company is prohibited from paying any cash dividends without prior bank approval.
9/16/2010 www.sec.gov/Archives/edgar/data/86…
sec.gov/…/0000950153-00-000575-d1.… 55/70