Petsmart 2001 Annual Report Download - page 49

PETsMART, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Ì (Continued)
The components of the net deferred income tax assets (liabilities) included in the accompanying
consolidated balance sheets are as follows:
January 28, January 30,
2001 2000
(In thousands)
Deferred income tax assets:
Deferred rentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 7,400 $ 5,629
Reserve for closed stores ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,971 4,106
Employee beneÑt expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,406 5,722
Inventory reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 680 1,722
Net operating loss carryforwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42,650 2,244
Capital loss carryforwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53,322 53,374
Income tax credits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,688 Ì
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 707 1,245
Total deferred income tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 112,824 74,042
Valuation allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (92,335) (55,064)
Net deferred income tax assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,489 18,978
Deferred income tax liabilities:
Depreciation and amortization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,012) (3,240)
Inventory uniform capitalizationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,721) (5,994)
Total deferred income tax liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,733) (9,234)
Net deferred income tax assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 12,756 $ 9,744
Deferred income tax assets have not been recognized for equity losses in PETsMART.com, formerly an
equity investee, because the temporary diÅerences resulting from the equity losses are not expected to be
realized within the foreseeable future.
The Company records a valuation allowance on the deferred income tax assets to reduce the total to an
amount that management believes is more likely than not to be realized. The valuation allowances at
January 28, 2001 and January 30, 2000 are based upon the Company's estimates of the future realization of
deferred income tax assets. Valuation allowances at January 28, 2001 and January 30, 2000 were provided
principally to oÅset certain deferred income tax assets for operating and capital loss carryforwards.
Additionally, the Company recognized a valuation allowance for the entire PETsMART.com deferred income
tax asset for operating loss carryforwards. The valuation allowance against PETsMART.com net operating loss
carryforwards includes approximately $7,904,000 for which subsequently recognized tax beneÑts, if any, would
be allocated to reduce goodwill related to the Transaction with any remaining amounts recognized as a beneÑt
in the income tax provision.
As of January 28, 2001, the Company, excluding PETsMART.com, had foreign net operating loss
carryforwards of approximately $13,514,000 which expire in varying amounts between 2002 and 2007, state
net operating loss carryforwards of approximately $70,192,000 which expire in varying amounts between 2001
and 2015, and capital loss carryforwards of approximately $136,201,000 to oÅset future capital gains, if any,
which expire in 2004. PETsMART.com has net operating loss carryforwards of $98,995,000 and $48,098,000
for federal and state income tax purposes, respectively, which begin to expire in varying amounts between 2019
and 2020 for federal purposes and 2007 and 2008 for state purposes. The PETsMART.com tax loss
carryforwards may only be used to oÅset future taxable income of PETsMART.com.
At January 28, 2001, the Company's deferred income tax assets for net operating loss carryforwards,
including PETsMART.com and foreign losses, and capital loss carryforwards totaling $95,972,000 were
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