Petsmart 2001 Annual Report Download - page 45

PETsMART, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Ì (Continued)
investment using the cost method, as the Company lacks the ability to exercise signiÑcant inÖuence over
MMIH's operating and Ñnancial policies. During Ñscal 1999, the Company transferred assets of PETsMART
Veterinary Services, Inc. (""PVS''), a wholly owned subsidiary of the Company, to MMIH in exchange for an
additional equity investment of 4,821,679 shares or $25,424,000 of non-voting convertible preferred stock in
MMIH. In Ñscal 2000, the Company made an additional equity investment in MMIH of 163,158 shares or
$1,571,000 of non-voting convertible preferred stock and certain other contractual payments related to the
transfer of assets. As of January 28, 2001, the total equity investment in non-voting convertible preferred stock
was 4,984,837 shares or $26,995,000. The voting convertible preferred stock may be converted into common
stock at any time, at the option of the holder. The non-voting convertible preferred stock is convertible into
common stock upon the earlier of June 1, 2011 or an acquisition of MMIH. Prior to the transfer of PVS to
MMIH in July 1999, revenues related to PVS were approximately $27,289,000 in Ñscal 1999 and $53,904,000
in Ñscal 1998 and were recorded in net sales in the accompanying consolidated statements of operations.
Rental income charged to MMIH is recorded by the Company as income from leased departments within cost
of sales in the accompanying consolidated statements of operations (see Note 13).
Note 4 Ì Property and Equipment
Property and equipment consists of the following:
January 28, January 30,
2001 2000
(In thousands)
Property held for sale and leaseback ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,195 $ 2,947
Land ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,377 3,195
Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,535 16,445
Furniture, Ñxtures and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 131,309 106,389
Leasehold improvements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 150,525 132,206
Computer software ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,456 27,385
Equipment and computer software under capital leases ÏÏÏÏÏÏ 91,505 79,831
Buildings under capital leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55,821 55,821
476,723 424,219
Less: accumulated depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏ 201,395 164,085
275,328 260,134
Construction in progress ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,525 3,193
$278,853 $263,327
Accumulated amortization of equipment, computer software and buildings under capital leases approxi-
mated $75,484,000 and $63,215,000 at January 28, 2001 and January 30, 2000, respectively.
Note 5 Ì Notes Receivable from OÇcers
During Ñscal 2000, the Company provided loans to certain oÇcers totaling $4,395,000 to be used only for
the purpose of purchasing shares of the Company's common stock on the open market. These loans mature
Ñve years after issuance and accrue interest at 7.75% per annum, with principal and interest due at maturity.
The oÇcers are required to hold the common stock for a minimum of 12 to 18 months. The loans are
collateralized by the Company's common stock purchased by the oÇcers. The loans are full recourse and must
be repaid in full, including accrued interest, upon the earlier of the scheduled maturity date or an event of
default, including among others, the oÇcers' termination of employment. One oÇcer included in this program
terminated employment with the Company during Ñscal 2000 and the related note was repaid to the Company
by the former oÇcer in full, including accrued interest.
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