Petsmart 2001 Annual Report Download - page 44

PETsMART, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Ì (Continued)
The Company has accounted for the Transaction as a step acquisition and has allocated the excess of the
consideration paid over the underlying net assets acquired as goodwill. The following table summarizes the
Company's preliminary allocation of goodwill included within other assets in the accompanying consolidated
balance sheet as of January 28, 2001 (in thousands):
Purchase of common and preferred stock and transaction costs ÏÏÏÏÏÏÏÏÏÏÏÏ $ 4,706
Assets contributed for Series F Preferred Stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29,249
33,955
Less: PETsMART, Inc.'s interest in PETsMART.com net equity post
transaction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,276
19,679
Eliminate PETsMART, Inc. negative investment in PETsMART.com
pre-transactionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (11,775)
GoodwillÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7,904
The minority interest in PETsMART.com consists primarily of convertible voting preferred stock, which
is convertible at Ñxed conversion rates into common stock of PETsMART.com at the holder's option. The
holder is entitled to receive non-cumulative dividends when, and if declared by PETsMART.com's Board of
Directors at a rate of 8% of the respective issuance price per share per annum. No dividends have been
declared or paid by PETsMART.com. The minority interest in the losses of PETsMART.com recognized
from the Transaction Date to January 28, 2001 is approximately $300,000, and has been included in the
accompanying consolidated statements of operations.
The following unaudited pro forma Ñnancial information for the Company gives eÅect to the Transaction
including its impact upon amortization expense and the related income tax eÅects and the inclusion of the net
operating losses recognized by PETsMART.com in the consolidated income tax return of the Company, as if
the Transaction had occurred at the beginning of the periods presented:
Fiscal Year Ended
January 28, January 30,
2001 2000
(in thousands, except
per share data)
Net sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,248,554 $2,123,960
Loss before extraordinary item and cumulative eÅect of a
change in accounting principle ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (28,357) (29,427)
Loss per share before extraordinary item and cumulative
eÅect of a change in accounting principleÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (0.25) $ (0.26)
The pro forma results have been prepared for comparative purposes only and do not purport to represent
what the Company's actual results of operations would have been had the transaction occurred at the
beginning of the periods presented and are not intended to be a projection of future results or trends.
Note 3 Ì Investments
The Company has an investment in MMI Holdings, Inc. (""MMIH''), a provider of veterinary and other
pet related services. MMIH, through a wholly-owned subsidiary, Medical Management International, Inc.,
operates full-service veterinary hospitals and wellness clinics inside certain PETsMART stores, under the
name BanÑeld, The Pet Hospital‚, and other locations which are not aÇliated with PETsMART. The
Company's investment consists of common and convertible preferred stock. The Company's ownership
interest in the voting common and convertible preferred stock of MMI at January 28, 2001 and January 30,
2000 was approximately 20% and 19%, respectively, or $5,378,000 at cost. The Company accounts for its
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